Apple Ipod Case

Marketing Management

2007

Apple iPod

Case Study

Table of contents

1 ANSWER TO QUESTION 1 1

1.1 HOW WOULD YOU DEFINE THE MARKET FOR THE APPLE IPOD? WHICH ARE THE RELEVANT EXISTING AND FUTURE COMPETITORS? 1

2 ANSWER TO QUESTION 2 1

2.1 HOW WOULD YOU DEFINE APPLE’S COMPETITIVE ADVANTAGE? 1

3 ANSWER TO QUESTION 3 2

3.1 HOW IMPORTANT IS CUSTOMER LOYALTY FOR APPLE? 2

3.2 WOULD YOU RECOMMEND A STRICT EXIT STRATEGY FOR ITUNES, IF THE PROFIT PER TRACK OF 10 CENTS WILL GO DOWN TO ZERO EVEN NEGATIVE? JUSTIFY. 2

4 ANSWER TO QUESTION 4 3

4.1 DEVELOPMENT OF A PERCEPTUAL MAP 3

4.2 WOULD YOU LIKE ADDITIONAL DATA? 4

5 APPENDIX 6

6 REFERENCES 9

Table of Tables

Table 1 Marketing questionaire of portable Mp3 players ranked for importance 3

Table 2 Score table for iPod according to ‚Importance’ 6

Table of Figures

Figure 1 Perceptual map 1 : Price vs. Portability 7

Figure 2 Perceptual map 2: Price vs. battery endurance 7

Figure 3 Perceptual map 3: Price vs. Special file formats 8

Figure 4 Price determination according to Van Westendorp 8

1 Answer to Question 1

1.1 How would you define the market for the Apple iPod? Which are the relevant existing and future competitors?

The market for MP3 players was relatively young in 2004. The first iPod was launched by Apple in 2001, but there were several competitors in the market.

Apple holds a market share in selling MP3 players by August 2004 of 66%, totaling 10 million MP3 players. Therefore Apple holds the lion’s share of the market for MP3 players. With the highest quarterly revenue in a decade as well as large profits Apple is on the roll.

The relevant existing competitors in 2004 are:

- Dell,

- Sony,

- Virgin Electronics and

- Samsung.

Because of growing market expectations, many additional imitators will enter the market within the next time with over 100 iPod substitutes.

In addition Microsoft is also aggressive promoting an alternative song format to Apple’s AAC.

At first sight:

The first impression of this case study shows that the iPod story seems to be a great success for the Apple Company.

2 Answer to Question 2

2.1 How would you define Apple’s competitive advantage?

Apples’ competitive advantage could be summarized into an extraordinary marketing expertise, that make possible to offer an unique experience to a community of enthusiastic customers.

We can divide the sources of Apple’s competitive advantage in two groups:

Company-related

• Highly known brand associated with a trendy and inventive image

• High customer loyalty

• Innovation and very high quality of products

• Good distribution channels (Internet, own retail stores in different countries, distribution partner)

iPod-related

• Product features (outstanding quality and ease of use, low weight, cutting-edge design, compatibility with Windows format)

• Iconic status

• Accepted Pricing (Premium) by loyal customers

• iTunes on-line music exchange website

3 Answer to Question 3

3.1 How important is customer loyalty for Apple?

Customer loyalty is indispensable for any company, but it is a particularly sensitive issue for Apple. Apple’s early evangelistic marketing path created much more than a product, it formed a lifestyle approach to innovation and technology. This product lifestyle approach delivers not only user friendly and physically attractive products, but targets persons who identify themselves as individual thinkers or revolutionaries. This image created an exceptionally strong Apple brand and community, leading many journalists to dub Apple product users as “fanatics” .

The fanatical involvement of even non-traditional Apple users in the context of customer loyalty can be well illustrated in the battle with Real Networks online store for an open market. Real Networks, a competitor to Apple’s online iTunes store, cracked the fair play code that prevents iPod users from downloading at competing online music stores. The reaction from iPod users was harsh - they pointed out that Apple solely had developed the iPod concept, and that Real Networks’ reverse engineering of Apple’s code constituted a technology rights infringement . Windows and Apple Mac users found themselves together fighting for innovation and idealism. Many outsiders were amazed at the speed and extent at which Apple was able to bring even non-traditional users into the Apple community.

Should Apple invest into each customer to increase customer loyalty?

If this means whether Apple should invest at all, then our answer is a clear �yes’. But it should be clear from our last answer that brand loyalty