iPod: Creating an iconic brandStrategic Brand Management Topic 5 Marelize Coetzee

IntroductionApple iPod is a cultural and social phenomenon with over 50 million iPod owners. They reached this state of market domination through shrewd product innovation and clever marketing The launch of the iTunes music store cause iPod sales to skyrocket, leading to a iPod economy of 3rd party accessories and add-ons Memorable creative advertising helped drive the popularity of the iPod Apple had a history of developing innovative technology, but was continuously overtaken by competitors who offered similar products. The key question was: which strategy would Apple have to follow to stay ahead of their competitors? Lets investigate

1976: Steve Jobs and Steve Wozniak started Apple Computer Company. 1976 - 1998: They developed several computers, but struggled in the market with a market share of less than 5% and inconsistent financial performance.

History

Steve Jobs and Steve Wozniak with their first computer, Apple I

Digital Musical Explosion

Key Issue: Turnaround in Apples story to success came with the digital musicexplosion of 1999. Consumers got used to Napster, popular software that enabled users to swop digital music files on via internet, which was an overnight hit and lead to download of millions of songs. The Recording Industry Association of America, filed copyright infringement lawsuits against Napster, and in 2001 it was shut down. At this stage Apple was focussed on developing the relationship between computers and video They developed FireWire, which was used to transfer large files between digital equipment and computers, iMovie which was used to manage digital movie files, and iPhoto for management of photograph files. Key issue: Realising that music was a natural extension of these programmes, Apple invented ITunes in January 2001, which allowed users to manage their music files and play it on computer.

iPod development Tony Fadell, an independent contractor designed the iPod, presented it to the Apple Company during May 2001, and got hired to bring it to the market. The key aspect of the design was to keep it as simple as possible, and use a large hard disk with the ability to store 1000 songs. The most striking feature was the mechanical scroll wheel which allowed users quick access to their music The first iPod was launched in November 2001, and was a huge hit Key issue: 28 April 2003 was a breakthrough date for Apple, as they launched the iTunes Music store with the third generation iPod. iTunes Music downloads could only be listened on iPod, and iPod could only play music downloaded from iTMS.

Key Issue: With the iTMS, Apple successfully identified and fulfilledthe key customer needs that Napster created via iTMS Apple allowed owners to OWN the music and songs that was downloaded, IPod and iTMS enabled PORTABILITY, and it was the 1st legal digital music store to offer music from all 5 major record holders. ITMS CAUSED IPOD SALES TO SKYROCKET! Key Issue: Between January 2004 and October 2005, more than 6 improved versions of the iPod was produced and sold- this continual upgrading and innovation was credited with helping the company maintain leadership in the digital music market.

IPods marketing plan

Key Fact: Apples marketing plan expanded with the IPods line. Apple used a new theme showing actors as black silhouettes against a solidcolour background, listening to their bright white iPod and signature white headphones. These advertisements were displayed everywhere: print ads, buildings, bus stops, Apple stores, newspaper collection bins, billboards, and television, which evolved the iPod to become part of the American mainstream. Hollywood celebrities promoted iPods which made the product more desirable to the public, and the iPod became an ICON.

iPod economy

Key Issue: iPod created a largeaftermarket industry, when people started buying third party accessories for example: docking stations, speaker systems, and iTrip and iPod cases. This is referred to as the iPod economy.

Expansion of distribution channels

Key Issue:In an effort to make iPod available to a wider audience,Apple pursued a variety of distribution strategies They got the product onto the shelves of major electronics retailers like Best Buy stores and Circuit citys and Radio Shack They made iPods available at airport vending machines They used their own Apple Stores, which created a halo effect and cross selling, with client looking for an iPod, but leaving with an iMac computer This halo effect drove Apples retail computer market share in the US up with almost 2% in 2005.

Innovative uses for the iPod Duke University gave IPods to every member of the class of 2008, to use as an effective part of teaching and learning. Podcasting became popular in 2004 allowed the creating of audio content and sharing it on the Internet. The listener can listen to the audio recording at his own convenience. People could subscribe for free podcasts on iTMS.

Economics of the iPod The razor model describes how companies like Gillette sells handheld razors for little profit, but sells razor blades for large profits. Key Issue:Apple turned the razor model on its head. Profits on iTMSs were quite slim, while profits on the iPod exploded (By June 2005 iPod has earned more than $390 million in profit). Apple had attempted to reinvent the entire music business via iTMS in order to sell more iPods, in which they have succeeded.

Competition (iPod killers)

Key Issue: The sales of MP3 players grew to 20 million units in 2004,and were expected to grow with 45% per year until 2010. From a design point of view the iPod could easily be duplicated. Makers of MP3 players copy the iPod format and also came up with cutting edge designs. In 2005 a new iPod killer appeared the cell phone, with mobile phones turning into a go-anywhere musical jukebox. In 2006 SanDisk (a MP3 player manufacturer) target iPod with attack ads insinuating tat iPod users were mindless trend chasers or iSheep. This propelled SanDisks sales to number 2 digital music player sales in the USA. Zone by Microsoft was launched in 2006, also a combination of media player and download store.

Conclusion iPod has truly become an icon becoming known as the Walkman of the 20th Century In August 2006 more than 58 million iPods had been sold, and iPods halo effect increased Apples market share in retail computers by more than 2%. IPod changed the way people listened to music and new video and photo features changed the way people interacted with those media as well. Key Issue:The question facing Apple is how to maintain its dominant position in the digital music market? The European Union is putting legislative pressure on Apple to open its closed system and allow any format to be played on the iPod. This could significantly erode Apples dominant market. Hopefully customer loyalty and a steady increasing appetite for Apple products could prove sufficient to overcome these obstacles, but only the future can tell

ReferencesKeller K.L. (2008), Best Practice Cases in Branding: Lessons from the worlds strongest brands, Pearson, Prentice-Hall, New Jersey, Case 7. http://www.apple.com/pr/products/ipodhistory/ accessed 15 August 2012