Marketing Strategy for Apple Ipod

Executive Summary

The focus of this report is on the Apple iPod that has created increasing demands in various outlets. The iPod allows consumers to download their favourite music but also books, movies and now even allows one to surf the internet.

In this reports you find an extensive analysis on how Apple has became such a huge company within its market and will show us how the popularity of the iPod has seemingly helped Apple to be become one of the most well known brands worldwide.

In order to do this, the main areas of discussion I am going to focus upon are the company itself. I will look at the firms’ internal and external Marketing environment in order to provide an insight in what position the firm is in. Furthermore, I will look at the competition they are facing and what affect this have upon their marketing strategy. I will also provide recommendations will be provided on how Apple can strengthen their position in the market.

Introduction

Established in April 1976, Apple, develops, sells, and supports a series of personal computers, portable media players, mobile phones, computer software, and computer hardware and hardware accessories. Rather than releasing multiples of little products to try and win over consumers through market saturation, Apple releases higher end, high quality, and user friendly products. They believe in bringing in simplicity and innovation to the mass market and for that reason have been extremely successful.

As of September 2007, the company operates about 200 retail stores in five countries and an online store where hardware and software products are sold. Its products include the Macintosh line of desktop and notebook computers, the Mac OS X operating system, the iPod music player and a portfolio of software and peripheral products for education, creative, consumer and business customers. [1]

Apple introduced its first iPod portable digital music player. The product has proven unbelievably successful; over 100 million units have been sold in the six years since its introduction. In 2003, Apple 's iTunes Store was introduced, offering online music downloads in integration with the iPod. The service quickly became the market leader in online music services, with over 3 billion downloads by August 2007. Steve Jobs announced that iTunes had reached 4 billion downloads during his keynote address at the 2008 Macworld Conference & Expo. [2]

Apple is recognized as an unparallel in computer designing and compatibility. The sleek and state of the art design of the Apple’s products snatch away the consumers mind quite easily than the rest.

The Apple iPod

The iPod is the fastest selling music player in history. Apple has sold over 100 million iPods since the player’s introduction in October 2001, [2] although sales have said to have started slowing; the company currently enjoys a Microsoft-like domination of the MP3 player market. From the early iPods to the new iPod touch, it has gone through a significant change and has opened the user’s world from the palm of their hands.

In January Apple reported the best quarter revenue and earnings in Apple 's history so far. Apple posted record revenue of $9.6 billion and record net quarterly profit of $1.58 billion. 42% of Apple 's revenue for the First fiscal quarter of 2008 came from iPod sales.[3] Another interesting statistic for this is that 40% of last quarter 's iPod sales went to first-time buyers, and just shows that the music player market is far from saturated as some have stated. [4]

This iconic product is considered by many to be a must have item. “The iPod is to music players what Kleenex is to tissue or Xerox is to copiers.”[5]

The Marketing Environment

Apple operate on a global level with 200 stores in 5 countries. Nowadays Apple is more commonly know for the iPod. The iPod has dominated digital music player sales in the United States and United Kingdom with many companies struggling to find a product to challenge the iPod.

Due to the ever-changing market, businesses like Apple need to monitor the ever-changing business environment and make sure they are going in the right direction. A business can then only plan where it is going if it knows where it is starting from.

Finding out where a business is at the moment involves looking at its micro and macro environment.

Micro-Environment Porter’s Five Forces

The microenvironment consists of those factors that affect the firm directly. This model helps to contrast the micro environment of a firm. (Refer to Appendix A)

What we know is that competition in the market is very intense A wrong move could have a harmful affect with your competitors moving ahead of you due to the intensity of the competition in the market. In relation to that, customers are in a strong position as they have more bargaining power and due to the fact there are many substitutes. With the Microsoft Zune 8 it makes it really difficult for new consumers to make a decision between the two. Often customers will pay due to the iPod reputation and its important Apple keep this high.

Macro-environment Pest analysis

To further analyse the external marketing environment, the macro environment we conduct a PEST analysis. Such external factors usually are beyond the firm 's control and sometimes present themselves as threats. PEST is the abbreviation for political, economic, social and technological. (Refer to Appendix B for full PEST analysis)

The Competition

In the PC market Apple face intense competition form the likes of Dell, Toshiba and HP. Whilst in operating system, Microsoft are the biggest rivals. In both these Apple do not have a great hold. However in the Mp3 market, which is more relevant, Apple have dominated the Market since the release of the iPod. With the competition current coming from SanDisk and Samsung.[12]

Its safe to say that although Apple is diversified more than most of its competitors, their differentiation is a biggest strength because they spend so much on R&D, which is what seperates them from their competition.

SWOT Analysis

A summary of Apples SWOT analysis is that Apple are in a very strong position because it has a powerful brand name and is recognised globally, coupled with its huge fan base of consumers gives them many strengths within the market. The fact that they are so popular in the mp3 market gets them a lot of attention within the media. Only Microsoft due to being Apples biggest competitor will get a large amount of media coverage. The iPod itself in terms of ease of use and innovative technology means that it is very difficult to match. Only the Microsoft Zune 8 can compare to the design and usability. Although may have been released to late in order to make real challenge against the iPod.

For Apple to overcome the potential threats, they must continue to be inventive and explore opportunities globally. R + D and product innovation are of the utmost importance. Apple must continue to improve and be innovative to remain market leaders, otherwise other companies may capitalise on any kind of drop in standards. Although one of the largest digital music sellers in the world, iTunes face a bit of competition from Amazon as well as Myspace, Apple have a target on their backs and only takes a company with good resources to challenge them.(for full SWOT analysis refer to Appendix C)

Marketing Objectives

Due to Apples secretive attitude, finding real evidence of real goals is difficult. What we can deduce however is that although iPod sales are starting to slow they still want to maintain high turnover and profit. That’s the major objective of any of its competitors. Also from research over various sources Apple are aiming hoping to:

• Improve brand awareness • Improve sales with the iPod touch. • Improve position in the mobile phone market, with the help of the SDK for the i-phone (Aiming to sell 10 million iphones this year

Improving sales of the iPhone and the touch, as they are the ‘in’ products which everybody wants, would help them gain a enormous amount of revenue and help spread the brand.

Marketing stratergy

I think Apples main stratergy is there appeal to their customers. What you find in general with many of their products more btter looking than the competitions. One thing we can see is Apple building on the popularity of the iPod. It appeals to the Mass market. Now appeal less as a computer company and more of a electronics company and seem more user-friendly.

Apple have a differentiation stratergy. Apple products are known to have a unique appeal, with its sleek designs a userbility. Due to this it gets a lot of attention from consumers and the media. Without much advertising or marketing on their part. They give something new and unique to talk about which everybody gets pulled in to.

With the iPod there not only selling a mp3 player, there selling a social chic. Everybody has one and everybody wants one.

Target Market

Target market • Apple Ipod focused particularly at those between the age of 12-25, consistent with their advertising. Bright colours and and a man dancing. • It will appeal to both males and females • People who have a passion or interest in music and/or literature • Technology enthusiasts

The iPod appeals to the mass market, everyone is a potential customer. Young or old. They have music, literature and podcasts all avaiable for the iPod owners. The simplicity and sleek design is what attracts people. Although the latest ones (the touch) are expensive, and may be aimed at higher and older earners.

Marketing mix

The marketing mix consists of four elements: Products, Price, Place and Promotion, better known as the 4p’s. The marketing mix can only be made when the target customer is known, which I have done above.
|Product |Price |
| | |
|This product allows consumer’s to download not only their |When initially launched into the mp3 market, Apple utilised pricing |
|favourite music but also books and photos. Nowadays with the|strategies in the form of psychological and skimming prices. Most of |
|latest versions of the iPod you can watch videos and surf on|the websites have the iPod touch at ‘£199.00.’ This makes consumers |
|the internet with one small device. Apple have introduced |think it is much cheaper than ‘£200.00’ but in reality it is only a |
|updated versions of the iPod starting from the first iPod in|pound less. The high price is on the basis of the companies |
|2001 to the iPod touch (refer to appendix D). These are |popularity, and the unique design of the ‘touch’. It will also attract|
|extension stratergies to increase the product life cycle of |an image of quality with their products. |
|the iPod. | |
| |[pic] |
|The fact that the is product differentiated making it unique| |
|will make product both functional and desirable to potential| |
|consumers. | |
| | |
|Promotion |Place |
| | |
|By promoting the iPod it will satisfy the needs of the |Apple has many distribution channels, from their online Apple Store, |
|customers. Consumers will gain better understanding of the |to their retail stores and many resellers around the world. Indirect |
|product and how it works. All in all advertising and |distribution where third parties are involved in the sales process are|
|promotions will bring more awareness to their products and |also used. These resellers will sell to the smaller firms who cannot |
|potentially more sales. |aford to buy directly from Apple. |
|Apple 's promotion strategy, was the surprise element that it| |
|attached just before they released the iPod. There was a |The iPod is available to purchase at most major stores within the UK. |
|heavy speculation and curiosity regarding the product and |From specialist electronic stores to supermarkets. Stores from Apple |
|everyone was watching out for it. It allowed fans and |retailers to Tesco sell the iPod. They are also available all over the|
|enthusiastic tech and entertainment media to spread the word|internet from places like Amazon to ebay. A countless amount of |
|of the gadget even before its release. Just when iPod was |retailers will stock the iPod such is its popularity |
|launched Apple advertised extensively for the iPod, this is | |
|where the infamous commercial showing a man listening to the| |
|songs on his iPod and dancing. A similar stratergy has been | |
|used throught the release as with increasing the popularity | |
|of iTunes. | |

Evaluation of the Apple Strategies

The overall position of Apple is profitable as sales have increased over the last years. Sales of the iPod have been increasing since it had been released. Although sales for this quarter have been said to be slow.

[pic]

Source: wikipedia[2]

This has been reflected in their strategies to expand through the introduction of newer more innovative designs and this is why they are market leaders in the mp3 market.

Apple has a lot of few different range ranges of iPod products, like the shuffle, the nano, the video and touch. All of which have different prices. This is a good strategy as it appeals to a wide mass market. The fact that Apple append very little on Advertising on their products compared to many of its firms, is down to the general buzz and interest of their products. There teasing with products entices the media and technology enthusiast tin wanting more. However this may not always be the case, for apple to consider more advertising may be important. The differentiation approach sets Apple apart from its competitors however Microsoft is challenging Apple. They have the money and resources to match. It would be fairly foolish to think that Apple is too strong in the market. They need to continue to invest a lot of money in R+D. With products like the iPhone and the Touch it can be said they are going in the right direction, in achieving innovative, unique designs.

I also think Apple have a huge opportunity in supporting the whole education system. It has the money and resources to do this. Possibly negotiating contracts with schools and universities, for pod casts even computers could put Apple in a challenging position in the computer market. Having agreements with universities, and schools can increase there popularity and awareness.

Conclusion

“Apple has nearly 250 stores worldwide and now derives 20 per cent of its revenue from them. And those numbers are growing. In the quarter to the end of September 2007, for example, Apple reported that its retail stores accounted for $1.25bn of the company 's $6.2bn revenues - a 42 per cent increase over 2006.”[14]

Since the release of the iPod, about half of Apple 's revenues come from music and iPods. Interest in the iPod and iPhone has made other apples products popular, like the Mac whose sales have increased. Apple has demonstrated how to create real, breathtaking growth by dreaming up products so original and imaginative that they have taken industries by storm. To maintain control in the mp3 player market, they need to maintain their quality and strategic marketing plans if they want to keep ahead. Apple leads the industry in innovation and many other things like design features. Sony, Microsoft, Creative are all right behind Apple. The battle of the MP3 players will surely be an excellent example of competition that breeds better products, with Apple taking the first step with the iPod Touch and iPhone.

The iPod was ground-breaking technology that was absorbed by mainstream culture, and now has become the epitome of portable audio. Companies such as Apple will need to be self-motivated if they are to stay ahead of the game. Differentiation and innovation is the key in maintaining their dominance.

Apple has a high competitive advantage because of its excellent product image. They use simplicity and lustrous designs to appeal to customers. The electronic market gets connected more and more with the entertainment market. With already the market leader in the digital sales market, it would not be surprising to see Apple move in to TV.

Appendices

Appendix A

[pic]

Source: Corporate Stratergy finntrack.com[8]

(Rivalry Calling the level competiton in the mp3 industry as intense is an understatement. The this case we have the like of Sony, Samsung and Creative, with many more in the whole market. Apple commands 70 percent of the MP3 player market.[10] However with concerns of the MP3 market being saturated, its puts more pressure on businesses to succeed. With the innovative designs like the iPod touch and the iPhone it shows why apple are leading the market.

(Threat of Substitutes Countless substitute products are available for the iPod whether they are actually better or even appeal more is a different matter, but the threat is still very high. The more differentiation th less like a switch to a substitute will occur. To date no company have come close to meet the popularity of the Apple products. Reason being the innovative designs and ease of use have convinced most customers to stick with Apple. Higher prices need to be justified by the differentiation of the product. Substitutes such as the Sony NW-(A806), Microsoft Zune 8 and many others, can still attract many customers but with imaginative designs like the iPod Touch leaves many companies playing catch up.

(Threats of new entrants Although it is possible, its unlikely. Start up costs would be very high so little chance new entrants would enter a very competitive market unless they have a very differentiated and innovative product. Existing firms have established themselves in the market and have created strong brand awareness.

(Bargaining Power of Customers

The bargaining power of customers is high due to the fact it is easy to switch to a substitute where quality or price, even both is better elsewhere. With so many substitutes of similar quality, its down to the business to make their products more appealing. Apple have done this with their strong vision to build innovative, unique products and have made their products easy to use. (Bargaining Power of suppliers Suppliers don’t have much power over larger corporations like Apple. With the booming chinese economy, Apple can change suppliers without any major consequences, if they are in disagreement over price and quality. However Apple have built a strong relationship with their suppliers, with strict procedures and this in turn helps Apple achieve it targets.

“Our business environment is competitive and fast-paced. Our suppliers must understand this dynamic and be agile and flexible in responding to changing business conditions.”[11]

Appendix B

|Political: |
|Governments with stricter laws on copyright |
|An anti-american agenda may be brought against them. Some people may choose not to use american products |
|Economical: |
|Inflation currently has increased in UK and the US and may affect current sales of ipods which have already slowed. |
|Global economy in a down turn |
|The exchange rate will also affect Apple as they are importing or exporting goods within the international market. |
|Social: |
|Again Anti-american agenda may cause potential customers to but from another company. |
|A generally aging british population, so many may be put off by the technology |
|As much as it is a iPod culture, it can go away as quickly as it came. People may find something else which is better and|
|more value for money. |
|Technological: |
|Many substitutes available from iRiver, Samsung and sony |
|Competition moving away from copy protection on songs. Such as amazon. |
|Peer-to-peer file sharing applications like Limewire and Kazaa are still extremely popular. Although this is a problem |
|with the music industry on a whole. This still however affects iTunes. |

Appendix C

Strengths: • The products itself appeals to both males and females • All the iPods starting from the very first have a great reputation amongst it customers for its userability. • Great technology underpinnings that allow the creation of powerful products. Allows them to attract a huge customer base due to their innovation and technology • Very user focused and always committed to a superb user experience, in all their products • Limited edition ranges, increases product life cycle. Limited editions ranging from U2 to BMW

Weaknesses: • High prices may push potential customers to competitors with substitutes at a better price. • Technology is changing at a faster rate than ever. For Apple to remain profitable, they must invest huge amount of money in their R&D to remain competitive. • Questions over reliability of the iPod [2]

Oppurtunities: • iPod was is revolutionary technology that has become part of mainstream culture, Apple can capitalize on that • To develop themselves in to other markets due to the reputation they earned from the iPod. • New designs may be available to boost sales and extend the product life cycle e.g. the iPod touch. • iPods have also gained popularity for use in education. Apple offers more information on educational uses for iPods on their website. [13]

Threats: • Very high level of competition, a lot of substitutes, possibly offering cheaper prices i.e. iRiver • Cheap fakes being made of the iPod and the iPod shuffle • Concerns of market being extremely saturated. • Competition, with the like of Amazon in digital sales [7]
Appendix D

[pic]

Sources: Wikipedia [2] and Mactracker Apple Inc. Model database

References:

1. http://en.wikipedia.org/wiki/Apple_Computer 2. http://en.wikipedia.org/wiki/Ipod 3. Apple Reports First Quarter Results(January 2008), [Accessed date: 14th March 2008]-http://www.apple.com/pr/library/2008/01/22results.html 4. Tim Conneally, (February 2008) Nearly 3% of America became iPod converts over the holiday, [Accessed date: 14th March 2008]- http://www.betanews.com/article/Nearly_3_of_America_became_iPod_converts_over_the_holiday/1204309531 5. Betsy Morris, (March 2008 ) What makes Apple golden, [Accessed date: 9th March 2008] - http://money.cnn.com/2008/02/29/news/companies/amac_apple.fortune/ 6. Q/A with apple employees and analysts(January 2008): Reading the runes for Apple [Accessed date: 5th March 2008]-http://www.guardian.co.uk/technology/2008/jan/10/apple.steve.jobs#swot 7. Jefferson Graham, (March 2008), Amazon takes on Apple with copy-protection-free music [Accessed date: 20th March 2008]- http://www.usatoday.com/money/media/2008-03-25-sony-music service_N.htm 8. Corporate strategy [Accessed date: 25th March 2008] -www.finntrack.com/corporate_strat.htm- 9. http://www.tutor2u.net/business/strategy/porter_five_forces.htm [Accessed date: 25th March 2008]- 10. Leander Kahney, (March 2008)How Apple Got Everything Right By Doing Everything Wrong [Accessed date: 27th March 2008]-http://www.wired.com/techbiz/it/magazine/16-04/bz_apple 11. Apple and Procurement [Accessed date: 29th March 2008]- http://www.apple.com/procurement/ 12. Jeremy Horwitz(August 2006) iPod maintains 75.6% share of U.S. MP3 player market [Accessed date: 31st March 2008] http://www.ilounge.com/index.php/news/comments/ipod-maintains-756-share-of-us-digital-music-player-market 13. iTunes U and mobile learning[Accessed date: 2nd April 2008] http://www.apple.com/education/itunesu_mobilelearning/ipod.html 14. John Naughton(March 2008) Core values that turned Apple into the best store in town [Accessed date: 4th April 2008] http://www.guardian.co.uk/media/2008/mar/30/marketingandpr.apple

Bibliography

David Jobber (5th Edition), Principles of Marketing www.apple.co.uk www.guardian.co.uk

References: 3. Apple Reports First Quarter Results(January 2008), [Accessed date: 14th March 2008]-http://www.apple.com/pr/library/2008/01/22results.html 4 7. Jefferson Graham, (March 2008), Amazon takes on Apple with copy-protection-free music [Accessed date: 20th March 2008]- http://www.usatoday.com/money/media/2008-03-25-sony-music service_N.htm 8