Assignment 2 – MKT235

iPod:
A report on current customer perceptions, competition, brand extension and maintaining
marketing momentum in Australia.

Table of Contents

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Introduction...........................................................................................................................................3
Findings of interviews............................................................................................................................3
Consumer mind map.............................................................................................................................5
Position relative to competitors............................................................................................................6
Potential for brand extension................................................................................................................7
Recommendations.................................................................................................................................9
Conclusion...........................................................................................................................................10
Appendix.............................................................................................................................................12
Bibliography.........................................................................................................................................15

Introduction
The market for consumer’s electronic products is arguably one of the most competitive and rapidly
changing segments in the marketplace today. With that in mind it has become more important than
ever for brands within this market to interact their customers through what has previously been

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considered non-traditional forms of engagement. Over the last 10 years Apple Inc., formerly known
as Apple Computers Inc. has grown their iPod brand from relative obscurity to one of the most
recognisable brands in the world. Their iconic white headphones have become synonymous with
their brand and their brand with digital music players, so much so that the term ‘iPod’ has been
adopted into the modern lexicon to describe any device from the portable media player category.
Loosely associate social groups have formed around the brands consumption, these consumers are
attracted to iPods both for their function benefit as well as a means of self-expression to identify
themselves with other likeminded consumers and distinguish themselves from the wider
community. The market for digital media players is still maturing in many markets and competition
threatens to dilute it further and gain a significant portion Apples current market share. With the
iPod being widely regarded as the pioneer and driver of growth of this market, it is imperative that
they continue to develop and evolve their marketing strategies as markets mature, to ensure they
continue to grow and maintain their position as leaders in their category. The purpose of this report
is to:

 Collect data and identify current customer perceptions

 Identify the iPods competitive position relative to other manufacturers in its category
 Discuss the potential to extend the brand beyond what is currently offered
 Recommend strategies for maintaining their current marketing momentum in Australia

Findings of interviews
Of the 7 people initially sampled, 4 owned iPods and all of whom were under 30 years of age.
Although the sample size is not significant enough to draw any accurate conclusions, this is indicative
of the average iPod user in Australia and around the world with around 70% of iPod touch users in
the US being between 13-24 years of age (Morgan Stanley, 2008), and is certainly reflective of way
their product is marketed to and perceived by consumers.

In the mid 2000’s Apple launched a series of TV commercials which were

simple and iconic and which reflected the very nature of the product. The
target audience for these ads was younger generations and the musical
accompaniment, while not always well known, was known to members of
this segment. The primary objective being to subtly reinforce the brand
attributes without ruining the ‘cool’ factor.

When asked what they liked least about the product, most felt the premium price was of concern
however this did not impact on their decision to purchase an iPod over a competing brand. This

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would indicate that on a value for money basis consumers rank the Apple iPod above their
competitors and would most likely follow them to any reasonable price point. Apple rarely
discounts their products other than to correct fluctuations in currency conversions or on black Friday
– Apples once a year sale. Instead Apple has stretched the iPod brand with a number of different
line extensions that offer fewer features at a reduced price while still maintaining premium pricing
relative to their competitors.

“there are sneakers that cost more than an that”

(Steve Jobs on whether he thought consumers would pay $300 for the original iPod)

When asked which features they most liked on the iPod and how they compared to other devices
they had experienced, the following statements stood out:

 They felt it had a more appealing design

 It was easier to use
 Better quality and more robust and durable

The design has always been one of the keys to the success of the iPod, Apple has always understood
this and has taken a ‘less is more’ approach to the design of their products. Apple products are
some of the most well designed and constructed consumer electrical devices ever made, at any
price. Made more astonishing by how easy they are to use with consumers being able navigate
them almost instinctively out of the box. By removing the exclusionary features that other media
players had, Apple opened their product up to much larger consumer base and allowed them to
maintain the phenomenal growth rates they have enjoyed since the products release.

All of the respondents that owned iPods used them on a daily basis. A recent survey by Morgan
found that 49% of iPod owners also used them on a daily basis, with only 17% of those who owned a
competitive player also doing so. Likewise it also found that iPod users were more likely to play
games, listen to audio books or organise their contacts than owners of other devices. There seems
to be a direct link between increased usage patterns and iPod ownership, however correlation does
not imply causation. Anecdotal evidence would suggest that rather than facilitating usage through
superior design or other functional benefits, iPod owners tend to be more tech savvy than other
consumers use technology as an extension of them rather than as a tool.

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Consumer mind map

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Position relative to competitors

Supplier Power New Market Entrants

- Suppliers of raw materials for the manufacturing
of iPods are abundant and of little concern
- A booming Chinese economy allows Apple to
change suppliers without major consequence
- Apple has a strong relationship with
manufacturers which ensures strict QC standards of
products are maintained
- Suppliers of digital content (record labels,
producers, artists etc.) pose most threat to Apple as
they have the power to licence content exclusively
to other manufacturers
- Uncoupling digital media to iTunes and iTunes to
the iPod would dilute the importance of the reverse
razor model and potentially stunt growth
- Supply of illegal mp3s also poses a threat toCompetitive
iTunes
- Since the release of the Nano, some
manufacturers like Olympus and Rio have
discontinued their products as they are unable to
compete
- Apple has its own music store, new entrants
would find it difficult to establish the library of
licenced content Apple has access to
- Apple has a contract with Samsung – the worlds
largest producer of flash memory – to buy 40% of
their output. New entrants would find it difficult
to access the volume of materials required to
make a significant impact on iPod sales
- Apple has several patents and many more
pending for the iPod, new entrants would have to
develop their own unique proprietary technology
Rivalry

-- Various
Various competing
competing firms
firms such
such
as
as Samsung,
Samsung, Sony,
Sony, i-River,
i-River,
-- Apple has almost
Apple has almost 80%
80% ofof the
the
market share.
-- Law
Law suits
suits and
and counter
counter suits
suits
currently
currently pending
pending with
with other
other
manufactuers over patent
Buyer Power infringements.
infringements.
Product Development

- Bargaining power of consumers is high due to

the relatively inexpensive nature of mp3 players
and the ease at which they can substituted.
- iPod customers are less price sensitive than
users of other devices and will follow Apple to any
reasonable price point provided they see value
- Apple needs to continue to provide value with a
strong brand vision and by proactively developing
innovative and unique products
- Enormous potential for growth in developing
countries and in older demographics, Apple must
develop products that are suitable for these
consumers in order to maximise potential growth
- Countless substitute offering from other
producers, brand loyalty has ensured most users
stay with Apple
- Apple has so far managed to innovated its way out
of threats from substitute products
- iPhone mitigated the threat mobiles phones had
on replacing mp3 players
- Any new product that made the iPod redundant is
at this point beyond the imagination of consumers

Low Moderate High

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Potential for brand extension

A brand extension is a strategic move which can be utilised to extend the lifespan of a brand once it
has reached maturity. It is an essential way to sustain a brands growth, once other approaches have
been explored.[ CITATION Mun01 \l 3081 ] Apple could potentially use to this capitalise on its well-
developed brand image and ‘i’ prefix in order to market products with its brand name in different
product categories, currently not being services by the brand. Developing a new product can not
only be time consuming but can also require large amounts of capital expenditure to build
awareness of a product and its benefits. By leveraging on equity of an existing brand, companies like
Apple can reduce their financial risk and use the iPod name to enhance a consumer’s perception of a
new offering due to the already established associations in the mind of the consumer.

As product extensions may potentially dilute the parent brand image or cannibalise existing sales, it
is important to maximise the potential growth of the parent brand before undertaking any such
endeavour. Growth should be built by:

1. First, by increasing the volume of purchases by present customers of parent product (In
most markets Apple are still experiencing double digit growth figures with their current iPod
products)
2. Then by offering variations on current products and line extension to increase the brands
relevance and address the needs of more specific targets or situations [ CITATION Bel08 \l
3081 ]
3. By expanding into countries that offer high growth opportunities - India, China, Pakistan are
all markets that offer huge potential as their standard of living increase and they gain access
to more disposable income
4. Through innovations or by modifying the current competitive situation and creating new
competitive advantages or opening new markets and by doing so, creating a pioneer
advantage as Apple did when they entered the portable media player market[ CITATION
Bel08 \l 3081 ].

"The cure for Apple is not cost-cutting. The cure for Apple is to innovate its way out of its
current predicament."
(Steve Jobs 1997)

Before undertaking any significant exploration into extending the iPod brand into different
categories, it is important to consider the following:

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 The compatibility between the brand extension and the parent brand – This is the most
critical factor impacting on the success of an extension. The traditional product-based
model of compatibility compares similarities in product attributes, product categories and
consumer associations between parent brand and potential extensions, the theory being
that the closer the match between the parent brand and its extension, the higher the
probability of success[ CITATION MMC08 \l 3081 ]. Apple however have been able
successfully enter markets which were not inherently compatible from a product
perspective, instead leveraging on their track record of innovation to quell consumer
hesitation. Although Apple has had phenomenal success with their entry into new markets
in recent years, there are examples of products that did not meet consumer expectations. In
2005 Apple partnered with Motorola to produce the ROKR phone. From a technical
perspective the device was comparable to offerings from other manufacturers however it
failed to impress consumers who had come to expect more from Apple products
 Quality of parent brand experience – Refers to the experiences consumers have with the
parent brand, these include the expected/actual quality of the product, value and price
perceptions, purchase and consumption environment, and actual delivery of products
promoted benefits[ CITATION MMC08 \l 3081 ]. Any brand extension by Apple would
leverage on the direct experience consumers have had with their iPods and would hopefully
transfer these favourable associations over to a new product even before they interacted
with it.
 Marketing Support – This is one aspect that can play a significant role in the success or
failure of any extension that is under the control of a parent company. Apple has a
reputation of being able to create a buzz around its products that is the envy of tech
companies the world over. By not oversaturating the market place with too many products
too quickly, it is able to direct all of its marketing efforts into launching just a few flagship
products per year. By doing this they ensure that their products do not get lost in the sea of
their competitors offerings

Advantages of brand extensions

 Trust – New products can seek to capitalise on existing trust consumers place in the parent
brand, its quality, features, reliability etc. Extensions will benefit from positive PR about the
brand to create a convincing value propositions for consumers of the new brand

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 Consumer knowledge – consumers already have knowledge and exposure to the parent’s
brand, creating imagery and awareness then becomes less critical and greater emphasis can
then be placed on communicating the specific benefits of the new product. This generally
equates to a reduction in overall advertising costs as promotions for each brand have a
cumulative effect on the brand as a whole.
 Strengthen brand image – A parent brand in its mature stages of growth can become
energised with the release of an extension as it increases the frequency in which it is
associated with its positive attributes, reinforcing the perceptions consumers have about the
brand.
 Defensive strategy – Companies can use brand extensions as a means of defence against
competitors to protect their core business areas. By getting a foothold in a market early and
establishing themselves, it limits the threat of competitors using the market as a stepping
stone to attack more fundamental or profitable ones.
 Halo effect – Product extensions can provide a source of exposure to a new group of
consumers who would not normally be attracted to other products offered by the parent
company. In essence branding has gone full circle with new consumers being draw towards
parent company products because of their direct experience with newer brands

Recommendations
In order for Apple to continue its marketing momentum in Australia, we foresee two avenues for
possible exploration. Both are targeted at and cater to the unique characteristics and motivators of
those in the 14-19 and 20-29 year old age range, these being the two demographics with the highest
penetration in mature markets such as Australia.

Given Apples strong association with music, entertainment and youth culture one possible extension
could be a series of wholly owned outdoor music festivals. This type of category extension
introduces a product with a whole new range of features and appeals to not only current product
users, but those who may have been alienated by the parent’s brands original features. Festivals like
these have proven to be very successful in the past, the most notable example of which is the V
festival which was established in 2007 as an offspring of Virgin Music which has now grown to one of
Australia’s largest music festivals. Apple has already had some success with their ‘iTunes Festival’
which is a month long celebration of alternative live music which is streamed through their devices
via a dedicated application. Outdoor music festivals were one of the only sectors in the events

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industry not to have experienced a decline in growth in 2009 with 1 in 4 Australians attending at
least one outdoor music event in 2010. While events such as these require a massive capital
investment, which is unlikely to see a return in its first few years of establishment, it would offer the
following benefits:

 Complete control over all branding, promotion and media control of the event
 Enhanced visibility and positive reinforcement of Apple (iPod) position as a fun and
invigorating brand
 Exclusive content which they could distribute through iTunes or on Apple products
 ROI in the form of indirect product sales as well as revenue generated by the event

A second more conservative extension (from a compatibility perspective) could be to stretch the
current iPod brand by including different features that appeal to a broader consumer base. The
term ‘portable media player’ could be stretched beyond the current features consumers have come
to expect from such devices. Apple has already made a significant progress into the mobile phone
market, so much so as you make two of its competitors’ products redundant with one of their own,
thereby potentially doubling the effect one products has on total market capitalisation. Apple could
incorporate high end camera components into their next generation iPods and give them a familiar,
easy to use user interface. One criticism of the current high end camera and video editing market is
that unlike other consumer products, as digital technology and progressed, the same rate of change
has not been seen in there usability, something that has alienated many potential consumers much
in the way early digital music players did. By incorporating these features, the Apple iPod could
become a complete media hub for high quality video, photos and music, three of the most important
elements in capturing the human experience. If Apple could design and market a proprietary device
for capturing, organising and storing a person’s life story, then they could truly develop a brand who
associations are intrinsically linked to the most fundamental of human emotions and could potential
produce the world’s first global lifelong brand community.

Conclusion
‘The iPod Branding Story’ demonstrates how the combination of efficient PR, innovative design and
alternative methods of advertising organised consumers into loosely associated culturally unique
groups. By creating a vision for the brand, consumers shared this vision with them through the
consumption of their products but at the same time as a collective eroded the very foundations
these communities were based on. They have become brand campaigners, advertising to one
another as well as those outside the group, effectively generating PR that multiplies the value of

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their original marketing efforts. One of the problems with leveraging so much of a company’s
success on the equity of their brand is that unlike asset equity, brand equity is a construct that can
be eroded rapidly and without warning. Under Kapfners definition an audience needs to be present
in order for there to be equity in a brand, the danger of this being that any change in customer
perceptions towards the brand, justified or not, can have devastating effects on the parent
company’s ability to market goods.

Apple and the iPod brand is an exceptional example of market entry strategy that successfully
leveraged on the emotional attributes of the brand rather than the functional benefits of the
products in order to generate sales. Apple has always been synonymous with fostering creativity,
through whatever medium, and by building this strong emotive foundation has allowed itself to
extend the brand into different categories successfully. By taking this approach they have shown the
potential brands have to influence consumer behaviour and demonstrated that brands whose
attributes are strictly rooted in their functional aspects will always have a limited reach and appeal.

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Appendix

Marketing Research Survey

Project Name: “The iPod Brand Story”

Product/Category: iPod/Portable Media Device

Department: Brand Management

Project Manager: Tynan Callesen    

Date: 5/5/2011

Prepared by:

Document Owner(s) Project/Organization Role

Tynan Callesen Charles Sturt University

           

           

Product Description:

The Apple iPod is a line of portable media devices created and marketed by Apple Inc.    
 

Customer Questions:

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ID Question Selection Response/Comments

1 What is your overall 1. Poor      
perception of the product 2. Average
described above? 3. Good
4. Excellent
2 What do you like most      
about this product?
3 What do you like least      
about this product?
4 Which level of quality best 1– Low Quality      
describes this product? 2– Average Quality
3– Good Quality
4– High Quality
5 Select how you feel about 1– Not a Value      
the product described 2– Average Value
above. 3– Good Value
4– Excellent Value
6 How important are these 1– Not Important      
features as being a part of 2– Neutral
this product? 3– Important
 Capacity 4– Very Important
 Styling
 Sound Quality
 Usability
7 If do not already own and      
1– Not Interested
iPod, would you be
2– Indifferent
interested in buying it?
3– Somewhat Interested
Please select your level of
4– Very Interested
interest.
8 What would be your main      
reason for buying this
product?
19 Do you think this is a fair      
price for this product?
10 If offered a discount, 1– Unlikely      
would you be interested in 2– Not sure
buying this product? 3– Would Consider
4– Likely
11 How would you rate the 1– Poor Value      
value of this product? 2– Average Value
3– Good Value
4– Excellent Value

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ID Question Selection Response/Comments

12 Would you be likely to Yes      
select this product over No
other offerings from other
brands?

Under
Response/Comments,
please explain why or why
not.
13 Have you purchased a Yes      
similar product? No
14 What would be your most 1– Value      
important factors in 2– Best Performance
choosing this product? 3– Name Recognition
(Please select three.) 4– High Quality
5– Convenience
6– Price
7– Don’t Know
15 What is your age range? 1– 20-29      
2– 30-39
3– 40-49
4– Over 50
16 What is your income 1– 20K–29K      
range? 2– 30K–39K
3– 40K–49K
4– Over 50K

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