Apple's Marketing Positions and Strategies - Essay Example

IPod: literature review The popular music player ‘iPod’ has today become a family phenomenon. While the father and mother of the family enjoy pop music on their individual iPod touch, the elder child owns an iPod nano and the younger child of the family enjoys rhymes on his iPod shuffle. Although the product has witnessed tremendous growth since its introduction to become a household name, customers who have been using the device since a long period are believed to be unwilling to adapt to newer and sophisticated models that Apple churns out year after year. Given the love for their iPods, users acknowledge that they do not see any point in upgrading to a newer player in the foreseeable future. They reason that the player works and as such there is no necessity to consider opting for a new one. Although this sounds strange for a company like Apple, it may soon have to witness a problem with a product that is virtually credited with reversing its fortunes for the better. This iconic consumer device not only helped cement the company’s reputation in the market as a business entity aimed for innovation, but also helped chart its financial revival in the recent past. However, those days may soon come to an end if users begin to see too little innovation and very few reasons to consider a change. Moreover, the current rocky situation of the economy adds further to the uncertainty among consumer preferences and their willingness to spend on new products (David Kurtz, 2008). As a result, a section of the industry believes that iPod sales will witness a slight decline since its introduction into the market in 2001. The predominant reason behind this perception is that the section of people requiring a new iPod is shrinking by the day. In this context, the onus falls back onto Apple’s shoulders and it remains to be seen as to what Apple would do to counter this perceived phenomenon. There is no doubt that the iPod has indeed proven to be the growth engine, increasing sales from a mere $5 billion in 2001 to $32 billion by the end of 2008. In fact, the rate of growth for the product was hovering in the range of 200% between 2005 and 2007. However, this has reclined back to a mere 10% since 2008. Munster, the popular market research firm, has predicted that this figure is bound to hover in the range of 12% during the coming few years, with unit sales in the 50 million range, unless serious steps are initiated by the company to renew fresh demand for the product (Ashok Ranchhod, 2007). One may also argue that, while sales of Apple’s Macintosh line remain brisk, the decline in the demand for iPod could prompt the digital major to look to other businesses in a bid to make up for the difference created by the slide in music player sales. Market experts reason that even this may seem a daunting task given the lack of encouraging consumer spending due to the ongoing recession. However, the expectations from Wall Street have proved to suggest otherwise, with analysts predicting a rise in revenues by nearly 15% by the end of 2010, or nearly $40 billion (David Taylor, 2007). Many institutional investors have been selling their Apple stock. Oak ridge investments recently reduced the contribution of Apple to its portfolio by almost half. The company alleges that with the iPod reaching certain maturity, the relative public craze with the iPhone has assumed greater significance. One may argue in this context that the iPod is much cheaper that the iPhone, but the questions that remains to be examined is whether Apple still holds its belief and commitment to the music player and whether it is coming up with any major improvements in an effort to regenerate public enthusiasm towards iPods (William Pride, 2007). For its part, Apple has constantly maintained that it remains steadfast and is striving hard to keep the iPod going. The company has begun a new range of iPod players that rely solely on touch where the product closely resembles a fully functional iPhone sans the phone capabilities. In fact, the new iPod can play music, video, allow users to surf the web and play computer games. Beginning at $200, Apple has maintained that this version remains the most well received player since its introduction in July 2007. Interestingly, all versions of the iPod, except for the shuffle device, can play videos. Introducing new features such as the ‘Genuis’ through its popular online music store, iTunes, has helped group songs into related playlists. The painstaking work done to achieve such functionality has allowed Apple to keep nearly 70% of the retail market within the United States, placing it much ahead of its nearest rivals. Despite the speculation of a fall in growth rates, industry analysts do opine that this huge gap between Apple and its competitors is unlikely to narrow down anywhere in the near future. The industry foresees Apple as continuing with its innovation in adding new features, designs and capacities and becoming more competitive in its pricing. There is a growing opinion that Apple, by allowing Windows users to use the iPod by loading files through Microsoft’s operating system, is increasingly wooing users to switch to the Mac, thus contributing indirectly to the growth of sales of its other products. This change of taste amongst traditional Windows users has been labeled as the ‘iPod Halo Effect’ (David Taylor, 2007). The impact of this effect is clearly evident. Apple share in the PC market, which was a meager 3.2 % in 2003 has steadily climbed to 9.1% by 2008 (Hooman Estelami, 2009). The market research firm IDC says that the iPod may well be experiencing a decline, but it may not matter eventually. The iPod continues to attract Windows users to the Mac and remains an important strategy from Apple’s perspective. The combined result of recent sales figures for both the iPod and Macs have placed Apple computers in the fourth position among all PC vendors with a 4.5% share in the United States (Neale Martin, 2008). IDC acknowledges that this ‘halo’ effect will continue should apple continue with its quest for innovation. The confidence within industry for this contributing role of the iPod stems from the perception that its makers have been quite vocal about their development plans and this, as suggested by the sales figures, seems to be gaining momentum. In fact, market research analysts have begun to speculate a sense of correlation between Apple’s iPod business and its overall brand image. Alongside a strategy driven by innovation, Apple continues to maintain a specific retail motivation aimed at reaching out to new and potential customers. Through the establishment of new retail outlets in the United States, United Kingdom, Canada and Japan, Apple considers itself to be in a much better situation in maintaining better control and overview over the sale and marketing of its products. The lack of any solid proof to back the claim behind the belief for iPod’s role in the sales of Macs has provided further basis for investigating in this direction as part of the current research. Many research firms claim that the marketing campaigns and strategies undertaken to promote the iPod have certainly borne fruit in renewing Apple’s PC growth. Although such a conclusion can be arrived at through mathematical analysis, they argue that there is nothing of tangible value that can be derived out of such efforts. Sure, the strategy has worked for Apple, helping put it back on the path of double digit growth (Hooman Estelami, 2009). This unseen growth in the PC category has been witnessed across all of Apple’s related product lines such as the Macbook, Macbook Pro and even Macbook air. Howver, there is a general disagreement over attributing any particular product for Apple’s recent resurgence within the personal computing space. With the rise in iPod and Macintosh sales, Apple has registered profitable quarters since 2005. But industry watchers wonder whether this will remain sustainable. IDC believes this to be the case as long as Apple continues to do what it does best i.e. innovate. The reason given simple relies on the fact that if one comes up with new products and features, it is bound to give a new dimension, helping the company to remain ahead in the race. However, the reasons mentioned behind falling consumer preference for new products amidst lack of spending put such a perception to wider question. According to the Innovation Index, Apple is placed on top among the top 20 innovators in the world. Its best innovation – the iPod – which was the brainchild of Steve Jobs, combines the features of a sleek design, an easy interface, good performance and an wonderful user experience. Apple took on the pole position among innovators in 2005 and has held it consistently since then, largely due to the exponential growth of the iPod (William Pride, 2007). Until 2008, Apple sold more iPods than it did during the previous quarter. It broke the 100 million barrier in sales in 2006 and introduced the newer and better iPod touch in 2007. Despite a reduction in overall sales volumes, the company announced that its average sale price had definitely climbed up. As stated before, Apple is comfortably poised to experience increasing growth in iPhone sales and it is estimated to sell more than 15 million in 2010. However, it remains to be seen whether increased concentration on the iPhone will result in the cannibalization of the iPod segment (Neale Martin, 2008). Between 2003 and 2004, iPod sales increased by a staggering 470%. However, the period since then has witnessed a free fall.- In 2005, the growth was 280% and a mere 45% increase in 2006 over the preceding period. During the past couple of years, the market share has been relatively consistent at around 70% (Stephen Covey, 2008). A major portion of this study will be dedicated to determining the feasible ways in which apple can turn around its once renowned growth engine for the iPod. To this effect, it needs to be examined whether the overall MP3 player market is large enough and promised fast growth to accommodate relative increases in iPod sales by up to 30% or 40% every year. In an overall market size of 90 million MP3 players during 2008, Apple would have to sell nearly 65 million units to maintain its pace of 70% market share, amounting to a 20% annual growth rate compared to 2008 (Ashok Ranchhod, 2007). Anything less than these projected figures would contribute to further reduction in the growth margins of the iPod, casting doubts over its growth phenomenon. This could lead to reduced perception among consumers and result in a slowdown of iPod sales in the coming years. What can iPod do to reverse this trend? Can it drive consumer demand for more iPods? Can it create more space within the MP3 player market? What can Apple do to consolidate its position? Firstly, Apple introduced its latest touch version at much lower prices. Apart from considered to be the best iPod ever made, the iPod touch is also making consider an opportunity to upgrade from existing players. Most importantly, it has generated interest among potential buyers, who may not need the services of a much costlier iPhone. iPod shuffle is now offered at just $49 in a bid to induce first-time buyers, especially from the younger segment. Moreover, Apple is also looking to provide more value by testing newer versions of its iTunes online music store and also plans to include a wider array of songs. Through a strategic alliance with Nike, Apple released a pink model of the nano, aimed for people who spend considerable time at the gym. Apple further slashed iPod prices upon introducing the second version of the iPhone in 2008 (Neale Martin, 2008). Would Apple be willing to give away a free iPod shuffle for every purchase of a Mac? Could there be any alternatives in the pricing model for the iTunes store that could drive further sales of iPods? Is Apple looking at higher sales volumes or is it really gearing up towards a strategy aimed at improving the average sales figures? If Apple sells the iPod at a higher price, there would still be a healthy overall growth and this is exactly what investors desire for. But Apple does not seem to relinquish its firm grip on the MP3 market in the near future and continues to play a wider role in the market. References 1. David Kurtz (2008), Contemporary Marketing. New York: Cengage. 2. Ashok Ranchhod (2007), Marketing Strategies: A Contemporary Approach. London: Pearson Education. 3. David Taylor (2007), Brand Vision: How To Energize Your Team To Drive Business Growth. New Delhi: Wiley India. 4. William Pride (2007), Foundations of Marketing. Boston: McGraw Hill. 5. Hooman Estelami (2009), Marketing Turnarounds: A Guide to Surviving Downturns and Rediscovering Growth. London: Dog Ear. 6. Neale Martin (2008), Habit: The 95% of Behavior Marketers Ignore. New York: FT Press. 7. Stephen Covey (2008), The Speed of Trust: The One Thing That Changes Everything. London: Simon & Schuster. Read More