THE IPOD REVOLUTION

Apple’s iPod has taken the world by storm. Nearly

ubiquitous, it has changed not only the way people listen to music, but it has
transformed its parent company Apple into an entertainment giant. More than
any other single product from Apple, the iPod has changed the company and the
world. Before its introduction, MP3 players were the realm of small companies
with limited budgets that were unable to provide content. After the iPod, the
entire industry has evolved and grown to the point where the largest computer
companies in the world have major interests in the digital music industry. Apple’s
strategy has been to release cool new products frequently, accepting and
capitalizing on the fact that computer products enjoy a short product life cycle.
Apple popularizes difficult technology by making it fun and intuitive, and
characteristically they wrap it all up in a super-hip package that makes consumers
of their products feel as if they belong to an exclusive community. The company’s
commitment in 2006 differs from their commitment in 2000 only insofar as the
addition of the words “portable digital music”: What’s important to understand
when trying to dissect the phenomenon that iPod has become is that consumers
are paying to be part of something that is cool. Apple’s strengths were well
understood thanks to their history of revolutionizing, and they practiced what
they preached; using style to change the habits of vast markets of people. Rather
than trying to compete with rival Microsoft on their turf. True, one of the great
opportunities of the late 1990’s was that consumers were signaling changes in the
way they listened to music. They wanted to be able to listen to a lot of songs on
the go, and they wanted to be able to listen to song lists of their own making, and
they were more and more invested in delivery technologies such as broadband
and services like Kazaa and Napster that would make it all possible. the iPod
marketing strategy made sense because it consistently advanced Apple’s
emerging goal of making the IPOD the hub of a digital lifestyle. It also aligned with
the company’s strategic goal of frequently releasing innovative new products in
an effort to stay ahead of a curve of consumers who quickly get tired of old
gadgets. As usual, it was a strategy that leveraged the benefits of existing
technology, and it made sense from the point of view that it was consistent with
what historically drove the company, that is bringing products to people that
were stylish and easy to use. iPod has become the standard against which
everything else is measured, and this dominance plays out both in the technology
of the core product and stylishness of the augmented product. Also, they have
managed potential risk associated with buyers by making it difficult to have
backwards integration since song downloaded to iTunes do not play on other MP3
players. This key attribute, which clearly represents an aggressive maneuver by
Apple, has been the source of much controversy and contention. It may even be
the source of an eventual reversal of Apple’s fortunes. Apple continues to
mitigate these risks by keeping it hard to substitute, and this gets to the heart of
the matter, that iPod symbolizes more than just another MP3 player. If Apple wins
all the chips, then iPod’s halo effect will help Apple outmaneuver such threats,
and future product offerings such as iPhone, which are being developed now in
response to the competitive onslaught, will gain a critical head start. As it stands
there is simply no substitute for an iPod. This is reinforced consistently across the
technology, advertising, promotion, and accessory ecosystem. In this sense,
buyers have strengthened Apple’s competitive position because at sales of over
100 million units, and 70% of the market15, iPod is the industry standard for MP3
players. In a mesmerizing feat of mental acuity, Apple helps consumers judge the
efforts of its competition against a standard they themselves invented. In order to
be part of the phenomena, buyers have shown that they will pay a premium, and
that for the most part, there are no ready substitutes. This causes a significant
problem for competitors when the global conversation about MP3 players
invariably leads to all things iPod. Any competing product will certainly be judged
against the gold standard of iPod, and because of Apple’s early entry and
subsequent early lead, MP3 players from today through forever won’t be strictly
judged by their technical merits, but rather on their value as a style accessory.
Thanks to iPod, any potential entrant has to now offer an augmented product that
delivers an entire package of benefits far and above the simple core attributes
most tech companies specialize in. they positioned the product’s physical
attributes in a way that was secondary to its contribution toward bettering the
consumer’s world. A tool for building high self-esteem, impressing your friends,
and being part of a semi-exclusive club, that by the way happens to be beautifully
designed and technically superior to the competition. What’s not to love?.... Of
course, they charge for this love, but they knew from the beginning where they
were going, and they didn’t get there by accident. Looking at the Christmas retail
season of 2001, three months after iPod's release, we see a story that practically
draws for us a perceptual map whose axes are price and technical capability.
From that we can backwards-engineer possible research findings, conclusions,
and recommendations. It is clear today that Apple is marketing different products
to different groups of people: the flagship iPod video which is expensive, the
Nano which is midrange and a shuffle which is inexpensive and small. This
segmentation strategy appears to make sense, since the market is
heterogeneous, the segments are identifiable and they are divisible. We believe
that in the beginning Apple’s segmentation strategy focused on narrow markets
and a unique niche because in 2001 it was early adopters who might be
interested in MP3 players. However iPod also created a whole industry, which
must now be characterized as having a broad scope, simply because of its
ubiquitous presence. It may be a unique niche—it certainly was at the time—
because they intentionally did not go for cost leadership. Infact, high price was
and is a feature of the product; that it remains more expensive than the rest
hammers home themessage that it contains some magic the others lack..