Marketing Plan for

iPod Touch

Research Paper
at Hof University Department of Business Administration German Indian Management Studies

Submitted to Prof. Dr. Stefan Wengler Alfons-Gopel-Platz 1 D-95028 Hof Germany

Submitted by Preetham Samuel 20 Kamraj street Coimbatore 641038 India

Hof, October 31st 2011

Table of Contents:
1 2 2.1 2.2 2.3 Introduction Market Analyses Market Description Market Segmentation Factors that affect consumer behaviour 2.3.1 Perception 2.3.2 Learning and Memory 2.3.3 Motivation and Values 2.3.4 Personality and Lifestyles 2.3.5 Attitudes 2.3.6 Individual decision making 2.3.7 Role of group factors 3 3.1 Company Analyses Introduction of Company 3.1.1 Highlights of the Company 3.2 3.3 Company Strategies Strategic Business Units 3.3.1 iTunes 3.3.2 Mac 3.3.3 iPhone 3.3.4 iPod 3.3.5 iPad 3.3.6 iCloud 3.4 3.5 3.6 4 Product Review Target Customers Swot Analyses Competitor Analyses

P.No

4.1 4.2

Relevant Market Players with Wi-Fi Connectivity 4.2.1 Comparison between iPod Touch, Sony PSP and Microsoft Zune HD 4.2.2 iPod Touch vs. Sony PSP: 4.2.3 iPod Touch vs. Zune HD 4.2.2 Inference

Development of marketing mix

5.1.3 Merits of Apple 5.2 Marketing Mix 5.2.1 Product 5.2.2 Price 5.2.3 Promotion 5.2.4 Place 6 6.1 Management Implication Assessment of current situation: 6.1.2 New Competitor: 6.2 7. 7.1 7.2 8. Recommendations for changes in the marketing mix: Conclusion Conclusion of most important insights: Expectations: Bibliography

Table and Figures

Tables: 1. Players with Wi-Fi connectivity 2. Comparison between iPod Touch, Sony PSP and Zune HD

P.No

Figures: 1. Age demographic pie chart 2. Steve Jobs 3. Macintosh 4. iPod 5. iPhone 6. iPad 7. Comparison of various Mac models 8. Current iPod models 9. iCloud icon 10. Total Apple revenue by product line 11. iPod sales 12. Relevant market 13, Market share of iPod and its Competitors 14. Apple Q1 2009 revenue breakdown 15. Apple Inc. revenue by category-Q1 2011 16. Samsung Galaxy S

1. Introduction
Research Problem:
To do a marketing analysis, company analysis and competitive analysis for Apple iPod Touch. How to improve iPod sales figures. What can be done to revive public interest in buying iPod Touch.

Research Objective:
To evaluate and optimize a marketing plan for my product. Assessment of the current market situation. To recommend changes in the marketing mix.

Structure of research paper:

The structure of this research paper can be classified into two important sections. Marketing analysis Marketing plan

2. Market Analyses
2.1 Market Description:
iPod is the market leader in the category of portable music players. Apple consumers are very
brand loyal and tend to associate themselves with the brand. One of the most innovative and technological advanced products has been the iPod. iPod is the market leader in the product category of portable music players and has created a niche for itself. Initially, iPod was targeted

to teenagers and travellers. Later it became a necessity for everyone who wants to listen to music. The target market grew as the hype of iPod spread like fire in the forest. Apple iPod touch 4G was introduced on September 8, 2010.Since then over 60 million units have been sold. The main target market for iPod touch is people aged between 13-25 years old. People who cannot offered an iPhone usually buy this product because it has many features similar to that of iPhone eg.Facetime, Retina display In a survey conducted in the US it has been proved that 66% of iPod touchs consumers earn about 25,000$ a year and 78% of iPhone's consumers earn above it.Only 28% of iPod touch's consumers have children compared to 46% of iPhone's consumers. This trend is seen in markets all over the world. Teenagers play a major role in the growth as they give the iPod an image of being young and trendy. Shifting demographics plays a major role in current market trends. For example due to ageing population in western countries people mostly prefer the iPhone over the iPod touch because the iPhone can do the job of an iPod. Consumers are every year attracted to buy newer version of the iPod touch because of the addition of several attractive features each year.

2.2 Market Segmentation:

Non-profit organizations Pew Internet and American Life Project conducted telephone interviews of a sample size of 2,200 people in order to define the market for iPod. In the US, this means 13 per cent of men have an iPod, as compared to 9 per cent of women. Interestingly, 16 per cent of African-Americans and English-speaking Latinos have music players, compared to just 9 per cent of non-Latino whites, the report explains. Age demographics reveal that 14 per cent of people of age group 29-40 have iPods; as do 11 per cent of those around 41-50.62 per cent of 18-28-year olds and 6 per cent of those aged around 51-59 have an Apple music player. Finally, 6 per cent of those 60-69 have them, while 1 per cent of those 70 and older have them (refer to the pie chart below).

Age demographic pie chart:

29-40 41-50 18-28 51-59 60-69 70 above

2.3 Factors that affect consumer behaviour

2.3.1 Perception There are several individual factors which are related to the iPod. Firstly, the sensory receptors like vision, touch and hearing. The iPod looks simple yet classy, stylish and attractive. The screen size was large enough for people to see the songs list and other functions. The materials used to build the iPod are of high quality and smooth to touch (Varian, 2007). The wheel has touch sensing ability for voice controls. The word iPod has the initial i which is makes it sound light and attractive. Also, the product is a digital music player which plays all the favourite tracks of the owners. Behavioural pricing is used

as the quality is high of the iPod and therefore the pricing is high when compared to its competitors. Also, it provides a feeling of being young and trendy, and a certain belonging to a culture or group which the iPod has created. The form of advertising was mainly targeted to the young audience. There could be many reasons for it like the younger consumers are more likely to use the product and be brand loyal for a longer period. Also, the younger consumers will be more attracted towards the stylish looks and giving it a young and trendy look. When considering semiotics, portable music players were referred as iPods and were associated with it even though they were from different brands.

2.3.2 Learning and Memory: Positive Reinforcement plays an important role as the consumer of iPod joins a community and has a sense of belonging to it. Also, he is considered to be young, trendy, stylish and attractive by the society which can help boost his image and morale. Moreover, the consumer can listen to his favourite music on the go which is a bonus. Also, there is a form of observational learning (vicarious learning) as many people buy the iPod because they see many famous celebrities, models, actors, loved ones owning an iPod and sharing their playlists and songs with each other. Also, many designers are creating luxury accessories for the iPod to personalize it (Costello 2008). According to the Associative Network below, it can be seen that the portable MP3 players have been associated with the iPod. That is why often, people refer the product category of MP3 players as iPods and consider it as a point of reference for it.
2.3.3 Motivation and Values:

The goal for the motivation process is the need to listen to music while on the move, and also, to be trendy, young and belonging to the iPod community. The drive is the pressure created by the people around the consumer which exposes the iPod to him. The want is the final purchase of the iPod when the consumer is satisfied as he has achieved his goal. iPod is purely related to hedonic needs as iPod is a need for excitement. In detailed, it also displays need for affiliation as the iPod owners can exchange music, playlists and even iPods with each other and form a community. Also, it can display need for achievement partially as Apple is considered as a luxury brand and iPod is considered a luxury technological product. Moreover, iPod belongs to two bands in the Maslows hierarchy,

Self-actualization and belongingness. The reasons for that are firstly, iPod owners are mostly people who are on the move, and would like to listen to their favourite music as a hobby or to entertain themselves. And the sense of belongingness is associated with the iPod as it has created a community and every iPod owner is a part of it. Also, a certain type of channel is created in the community called Podcast; name derived from iPod broadcast, which has news, favourite T.V. shows, music, albums, talk shows etc. relayed on the portable music player, primarily iPod (PC Mag, 2008). iPod cannot be considered as a materialistic possession as the need to purchase an iPod is to listen to music. Moreover, it is for personal satisfaction and entertainment. Therefore, Non-materialists are highly inclined to purchase it. 2.3.4 Personality and Lifestyles: iPod has a personality focused on simplicity, emotions, imagination, lifestyle, innovation, and passion. Unique song lists and playlists along with the exclusive accessorizing iPods show individuality and the need for belonging to the community of iPod could portray social acceptance iPod has two major archetypes that is Queen Being and Actress. Queen being has the characteristics of relaxing, comforting, and sociable which are similar to that of iPod that is it helps relaxing, comforting, and is very sociable device. Actress has traits of glamorous, dramatic, and involved and similarly users of iPod are highly involved with the product, and consider it a trend setter. 2.3.5 Attitudes: According to Functional Theory of Attitudes, iPod is related to Utilitarian Function as it involves Rewards and Punishments. The rewards of owning an iPod are listening to quality music whenever and wherever, storing and possessing huge music collection in a device that can fit into ones pocket, and to belong to a community. Punishments for not owning one could be alienation, discomfort and maybe purchasing a competitor brand. Since iPod is a product of high involvement, standard learning hierarchy is applicable to it. According to which initially the consumer has the phase of cognition where he has a belief about iPod. Later that belief is converted to the feeling he builds up for the iPod, and finally he decides to purchase it or any actions related to the iPod. There is no restoring required for the Balance Triad as the Consumer who loves music will love iPod as the primary function of the iPod is to play music.

2.3.6 Individual Decision Making: The decision making process can be individualistic or collectivistic. If the decision-making is individualistic, then it is highly experiential perspective as the individual buys the iPod completely because of the products appeal. It includes extended problem solving as it is a product of high involvement and the decision to purchase the iPod consists of a certain risks. The decision of purchasing the iPod has Opportunity Recognition as the Actual state remains the same, where the consumer is using the CD player and buying several CDs, but the Ideal state is uplifted where the consumer can carry all his songs in one device which can fit in the pocket. Thorough External search is done by visiting the company website, blogs, reviews, catalogues, friends, and family. Moreover, a lot of search is done to buy the product as it is a high involvement product and valuable information is needed to make decision on the purchase. The only perceived risk involved is the price involved, as it is expensive when compared with its competitors. 2.3.7 Role of Group Factors: When purchasing an iPod, consumers can approach a group of friends or family for help. The main reference group will be the family, following with friends and colleagues. Many offices have the culture of sharing the iPod playlists with each other and sometimes even sharing the iPods. Moreover, people with the similar taste for outdoor activities, love for music, etc. would associate with each other and seek advice from each other. The opinion leaders can influence the decision of the consumer before the purchase, and depending on the views and loyalty of the opinion leader, he will advise the consumer. In addition, in the household decision-making, it is always the young ones who make the decision first for buying the iPod as they are more techno-savvy, and then later the other family members follow the decision. Furthermore, peer pressure can also influence the decision as iPod is considered a trend setter and if an individual does not own it, he is alienated.

3. Company Analyses:
3.1 Introduction of Company:

Apple Inc. (NASDAQ: AAPL; previously Apple Computer, Inc.) is an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. The company's best-known hardware products include the Macintosh line of computers, the iPod, the iPhone and the iPad. 3.1.1 Highlights of the Company: Apple was established on April 1, 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, to sell the Apple I personal computer kit. The Apple I went on sale in July 1976 and was market-priced at $666.66.

The Apple II was introduced on April 16, 1977 at the first West Coast Computer Faire. It differed from its major rivals, the TRS-80 and Commodore PET, because it came with colour graphics and an open architecture.

Lisa introduced by Apple in 1983 was the first PC sold to the public with a GUI. In 1984, Apple next launched the Macintosh. Its debut was announced by the now famous $1.5 million television commercial "1984". It was directed by Ridley Scott, aired during the third quarter of Super Bowl XVIII on January 22, 1984, and is now considered a watershed event for Apple's success and a "masterpiece".

Macintosh On August 15, 1998, Apple introduced a new all-in-one computer reminiscent of the Macintosh 128K: the iMac. On October 23, 2001, Apple announced the iPod portable digital audio player, and started selling it on November 10. The product was phenomenally successful over 100 million units were sold within six years. In 2003, Apple's iTunes Store was introduced, offering online music downloads for $0.99 a song and integration with the iPod. The service quickly became the market leader in online music services, with over 5 billion downloads by June 19, 2008. Mac Pro, MacBook and MacBook Pro were all introduced in the year 2006. MacBook Air was introduced in the year 2008 In Macworld Expo on January 9, 2007, Jobs announced that Apple Computer, Inc. would from that point on be known as Apple Inc. The event also saw the announcement of the iPhone and the Apple TV. The iPod Touch was also introduced on September 5, 2007. iPod iPhone

MacBook Air was introduced in the year 2008 After years of speculation and multiple rumoured "leaks" Apple announced a large screen, tablet-like media device known as the iPad on January 27, 2010 .

iPad

In October 2010, Apple shares hit an all-time high, eclipsing $300. In June 2011, Apple unveiled the iCloud online storage and syncing service for music, photos, files and software. Briefly in July 2011, due to the debt-ceiling crisis, Apple's financial reserves were greater than those of the US Government.

3.2 Company Strategies:

When shoppers sleep outside of stores just to be one of the first to buy an iPhone, it's obvious that Apple is a company that enjoys fanatical brand loyalty. The following are the 10 important strategies that Apple follows to woo its customers. A Store Just for Apple: Apple has historically been troubled by big-box sales staffers who are ill-informed about its products, a problem that made it difficult for Apple to set its very different products apart from the rest of the computing crowd. By creating a store strictly devoted to Apple products, the company has not only eliminated this problem but has made an excellent customer-loyalty move. Complete Solutions: Apple's products complement and complete each other. Buy an iPod, and you can download music via iTunes. For the average user, most Mac programs are produced by Apple. This sort of control over the entire user process, from hardware to software, strengthens customer loyalty. Apple users generally don't have to stray to find products and solutions they want. Varied Products: Many consumers may not be ready to buy an Apple computer, but they're willing to give gadgets like the iPod or iPhone a try. By selling products with lower entry costs, it creates an opportunity for new users to be introduced to Apple. If these users enjoy their gadgets, they're more likely to consider buying an Apple computer in the future. Media Fodder: Media outlets, especially bloggers, love to write about Apple. Why? Because Apple makes it so easy. With leaked rumours about new developments, its very own expo and mysterious shutdowns of its online store, Apple gift wraps news stories that are just begging for speculation and hype. By perpetuating this cycle of media frenzy, Apple keeps its customers excited about buying new Apple products now and in the future.

Education Sales: By selling its products to schools and universities, Apple turns classrooms into showrooms. If students go through school using Apple products, they become comfortable with the interface and familiar with the superior performance the brand offers. By creating this early exposure, Apple captures customers before they even know that they are customers. Products That Deliver: Apple carefully considers what consumers are looking for, so its products are a result of both extensive research and strong design. This meticulous planning is a large contributor to Apple's high customer-satisfaction rates. It's plain and simple: Robust and easy-to-use products not only make your customers happy, but also make them want to buy more products from you in the future. Outsourcing Unpleasantness: With Apple products, the average consumer's interaction with the company is likely to be low. Unless something goes wrong, you don't have any reason to speak with an Apple customer-service representative. With a phone, interaction becomes multifaceted. You have to consider billing errors, quality of wireless service, contracts and a number of other factors that often lead to customer frustration. With the iPhone, Apple was wise to stick with building a good product and letting AT&T handle the service. Consistency: All of Apple's products have the same basic architecture. Because of this consistency, customers who already own Apple products have a good idea of what they'll be getting before they make a purchase. They know that it will be easy to adapt to new hardware, and this makes them more open to making a repeat purchase. New Innovations: Although the architecture of Apple products is consistent, its portfolio is not. The company offers consumers a number of different ways to enjoy its products. By giving customers an opportunity to employ Apple in their living rooms, pockets and offices, Apple makes it easy to stay loyal to a brand they already like. Attractiveness: From packaging to aesthetic design to user-interface experience, Apple makes its products accessible and attractive. Bright colours, a smiling icon and slicklooking hardware remind customers every time they use Apple products that what Apple offers is appealing.

3.3 Strategic Business Units

Apple treats every product as its own business unit. Even though all Apple products fit into each other in some way, every Apple product has to stand alone in generating revenue. 3.3.1 iTunes: iTunes is a media player computer program, used for playing, downloading, and organizing digital music and video files on desktop computers. It can also manage contents on iPod, iPhone, iPod Touch and iPad. iTunes was introduced by Apple Inc. on January 9, 2001.iTunes can connect to the iTunes Store to purchase and download music, music videos, television shows, iPod games, audiobooks, podcasts, movies and movie rentals (not available in all countries), and ringtones (only available on iPhone and iPod Touch 4th Generation). It is also used to download application software from the App Store for the iPhone, iPad and iPod Touch. 3.3.2 Mac: The Macintosh or Mac, is a series of several lines of personal computers designed, developed, and marketed by Apple Inc. The first Macintosh was introduced on January 24, 1984; it was the first commercially successful personal computer to feature a mouse and a graphical user interface rather than a command-line interface. Current Macintosh products are Mac mini, iMac and Mac Pro in the desktop segment .MacBook Air and MacBook Pro in the laptop segment. The Mac mini and Mac Pro in the server segment. Mac market share has increased substantially in 2007.If measuring market share by installed base, there were more than 20 million Mac users by 1997, compared to an installed base of around 340 million Windows PCs. Statistics from late 2003 indicate that Apple had 2.06 percent of the desktop share in the United States that had increased to 2.88 percent by Q4 2004. As of October 2006, research firms IDC and Gartner reported that Apple's market share in the U.S. had increased to about 6 percent. Figures from December 2006, showing a market share around 6 percent (IDC) and 6.1 percent (Gartner) are based on a more than 30 percent increase in unit sale from 2005 to 2006. The installed base of Mac computers is hard to determine, with numbers ranging from 5% (estimated in 2009) to 16% (estimated in 2005). Mac OS X's share of the OS market increased from

7.31% in December 2007 to 9.63% in December 2008, which is a 32% increase in market share during 2008, compared with a 22% increase during 2007. Comparison of various Mac models

3.3.3 iPhone: The iPhone is a line of Internet and multimedia-enabled smartphones marketed by Apple. The first iPhone was unveiled by Apple CEO Steve Jobs on January 9, 2007, and released on June 29, 2007. The 5th generation iPhone, the iPhone 4S, was announced on October 4, 2011, to be released on October 14, 2011, two days after the release of iOS 5.0, the Apple operating system for handheld devices. An iPhone can function as a video camera (video recording was not a standard feature until the iPhone 3GS was released), a camera phone, a portable media player, and an Internet client with email and web browsing capabilities, can send texts and receive visual voicemail, and has both Wi-Fi and 3G connectivity. The user interface is built around the device's multi-touch screen, including a virtual keyboard rather than a physical one. Third-party as well as Apple application software is available from the App Store, which launched in mid-2008 and now has over 500,000 "apps" approved by Apple. These apps have diverse functions,

including games, reference, GPS navigation, social networking, security and advertising for television shows, films, and celebrities. 3.3.4 iPod:

iPod is a line of portable media players created and marketed by Apple announced on October 23, 2001, and released on November 10, 2001. The product line-up currently consists of the hard drive-based iPod Classic, the touchscreen iPod Touch, the compact iPod Nano and the ultra-compact iPod Shuffle. iPod Classic models store media on an internal hard drive, while all other models use flash memory to enable their smaller size (the discontinued Mini used a Microdrive miniature hard drive). As with many other digital music players, iPods can also serve as external data storage devices. Storage capacity varies by model, ranging from 2 GB for the iPod Shuffle to 160 GB for the iPod Classic. All of the models have been redesigned multiple times since their introduction. The most recent iPod redesigns were introduced on September 1, 2010. Apple's iTunes software can be used to transfer music to the devices from computers using certain versions of Apple Macintosh and Microsoft Windows operating systems. For users who choose not to use iTunes or whose computers cannot run iTunes, several open source alternatives are available for the iPod. iTunes and its alternatives may also transfer photos, videos, games, contact information, e-mail settings, Web bookmarks, and calendars to iPod models supporting those features. Current iPod models:

3.3.5 iPad: The iPad is a line of tablet computers designed, developed and marketed by Apple Inc. primarily as a platform for audio-visual media including books, periodicals, movies,

music, games, and web content. Its size and weight fall between those of contemporary smartphones and laptop computers. Apple released the first iPad in April 2010, and sold 3 million of the devices in 80 days. During 2010, Apple sold 14.8 million iPads worldwide, representing 75 percent of tablet PC sales at the end of 2010. Like iPhone and iPod Touch, the iPad is controlled by a multitouch displaya departure from most previous tablet computers, which used a pressure-triggered stylusas well as a virtual onscreen keyboard in lieu of a physical keyboard. The iPad uses a wireless local area network ("Wi-Fi") connection to access local area networks and the Internet. Some models also have a 3G wireless network interface which can connect to HSPA or EV-DO data networks and on to the Internet. The device is managed and synced by iTunes running on a personal computer via USB cable. In 2011, it is expected to take 83 percent of the tablet computing market share in the United States. 3.3.6 iCloud iCloud is a cloud storage and cloud computing service from Apple Inc. announced on June 6, 2011 at the Apple Worldwide Developers Conference (WWDC). The service allows users to store data such as music files on remote computer servers for download to multiple devices such as iPhones, iPods, iPads, and personal computers running Mac OS X or Microsoft Windows. It also replaces Apple's MobileMe program, acting as a data syncing centre for email, contacts, calendars, bookmarks, notes, to-do lists, and other data.

iCloud icon

3.4 Product Review:

Apples earning and sales information for the year 2011

Sales of $28.57 billion up 82 percent year-over-year

Net profit of $7.31 billion up 125 percent year-over-year 20.34 million iPhones sold 142 percent unit growth over the year-ago quarter 9.25 million iPads during the quarter, a 183 percent unit increase over the year-ago quarter

3.95 million Macs during the quarter, a 14 percent unit increase over the year-ago quarter

iPods saw a 20 percent unit decline from the year-ago quarter, selling 7.54 million units

Cash flow from operations of $11.1 billion, an increase of 131 percent year-overyear.

Here is Apples revenue, broken out into product lines, courtesy of Macworld:

3.5 Target Customers:

Middle/Upper income folks who are willing to pay a bit more for a better user experience. People who like to have fun with technology. Music enthusiasts and fans ages 12-35. Professionals in media and design.

3.6 SWOT Analyses: Strength: Strong brand name Effective marketing strategy Experienced Personnel Good financial position High market share High quality products Strong supplier relationships

Weakness: Higher costs than competitors

Over pricing Limited customer base in markets like India

Opportunities: Change in consumer lifestyles Entering new markets Expand customer base Strategic alliances & joint venture

Threats: Growing power of suppliers to set the price Financial slowdown Changing consumer patterns Competitor's actions Market slow growth or decline Products entering decline stage

4. Competitive Analyses:
4.1 Relevant Market

4.2 Players with Wi-Fi Connectivity:

4.2.1 Comparison between iPod Touch, Sony PSP and Microsoft Zune HD: Technical Parameters
Navigation

iPod Touch 4G
Touchscreen, 3buttons

Sony PSP

Microsoft Zune HD

Analog stick/d-pad, 15 buttons Headphone jack, dock connector Yes 4.3 TFT LCD 480 272 30 24 Component,composite, 4 10

Touchscreen, 3 Buttons Headphone jack, dock connector No 3.3 OLED 480 272 30 Unknown HDMI, composite 8.5 33 (Wi-Fi off)

Audio Out

Headphone jack, dock connector

Speaker Screen size (in) Screen type Resolution (px) Frame rate (Hz) Colour depth (bpp) Video out Video battery life (hr) Audio battery life (hr)

Yes 3.5 TFT LCD 960 640 30 24 Component,composite 6 40

4.2.2 iPod Touch vs. Sony PSP: The Sony PSP unlike its competitor iPod Touch lacks touch interface. The Sony PSP can be mainly used for playing games and hearing songs. It lacks a web browser to browse the internet. The Sony PSP scores over the iPod Touch only in the gaming front but it seems this does not seem to be enough to attract consumers. Also some users report issues with some games played with the PSP. iPod Touch with its motion sensor games and free distribution of some of its games through iTunes has almost killed of the market share of Sony PSP. Consumers every year are losing interest in the Sony PSP and replacing their old PSPs with iPod Touch. iPod Touch also has a better screen resolution, video and audio battery life. All this tips the balance in favour of the iPod Touch. 4.2.3 iPod Touch vs. Zune HD A look at Microsoft's Zune HD shows some of the issues. People buy ecosystems. As people migrated from the Walkman era, a digital music player was enough. For some, that

is still enough, but the value has dropped from hundreds of dollars for a 5 GB player to less than a hundred. Better video for films, TV, and YouTube was the way to add value two years ago. Now it's games and apps, and most buyers who only really want to listen to music would like an app or two. The Zune HD would have been competitive two years ago, but the App Store changed the market. An 8 GB iPod touch at $199 will undercut the lowest price Zune HD ($220) and have enough memory for many music collections and apps. The best Microsoft can hope for, even though Apple will charge higher prices for its 16 and 32 GB models, is that Zune users will buy the HD. 4.2.2 Inference: From the above table we can see that the iPod touch fares much better than its competitors. Hence, almost 75% of the market share is held by iPod (iPod Touch, iPod Nano, iPod Shuffle, iPod Classic) in the PMP (Portable Music Player) segment. iPod Touch currently has a huge market share.50% of iPod market growth is attributed to iPod touch. Competitors are currently struggling in the market to compete with iPod. Competitors are trying to capture a huge market share by introducing new products with attractive features. Competitors are also pricing their products much lesser than what the iPod costs to boost sales Advertising campaign Promotions

Market share of iPod and its competitors

5. Development of marketing mix

5.1 Marketing strategy: Apple has been so successful in these last years thanks to his fresh, imaginative way to think and do its business: a winning combination of exceptional products, great style and design, great strategy, innovative marketing, sleek and enticing communications.

Apple owes its overwhelming success in the last years to the iPhone and to the smart iPod and iTunes product combination, a combination of a great hardware piece with great style, great software, great performance, user friendly interface, with a good e-business service. The iPod + iTunes halo effect and new great Mac computers and Mac OS software did the rest in increasing Apple revenue stream. In the 5 years between 2003 to 2008 the Apple share value increased 25 times, from $7.5 to $180 per share. At July 2008 prices, before the US Financial Crisis, Apple stock market capitalization was $160 billion. In January 2010 Apple shares topped the $210 mark. But even the best companies with the best products have bottleneck factors which often avoid full exploitation of the opportunities. 5.1.1 iPod Marketing Strategy: The iPod launch in 2001 was an absolute failure. The reasons are Probably it was a product ahead of its time. One factor certainly was that internet connections were very slow in 2001. Broadband was very rare both in the US and Europe. Apple probably also did mistakes in the original Communication Strategy for the iPod, investing too little and not properly in advertising the iPod. In fact the main factor on which Apple relied about the iPod was the buzz created by word of mouth. 5.1.2 iPod + iTunes concept: The iPod + iTunes business idea was not conceived inside Apple. It was proposed to Apple by a music lover and Engineer named Tony Fadell, who was later hired by Apple. Fadell

had approached other companies before Apple, including Microsoft, and Microsoft had turned away Fadell and discarded the project, as "uninteresting". Microsoft executives turned down Fadell and the iPod + iTunes business idea saying: "This will not make any money". At Apple things for Fadell went differently. He was listened to in the meeting. Two weeks later Steve Jobs called back Fadell, he said to him: "Ok, I put you in charge of the development of these products and of the business concept; I give you a team of 30 brilliant guys, designers, programmers and hardware engineers". The iPod was developed by Tony Fadell and his team in just 12 months. The name iPod was proposed by Vinnie Chieco, a copywriter who was called by Apple to figure out how to introduce the new player to the public. After Chieco saw a prototype, he thought of the movie "2001: A Space Odyssey" and the phrase "Open the pod bay door, Hal!. 5.1.3 Merits of Apple: Even though the iPod + iTunes concept did not originated inside Apple, the merit of Steve Jobs and of the Apple Executives was in the ability to listen, catch on the business idea, build a team around Tony Fadell, make a smart development process, and finally coming out with an excellent product, beautifully styled by Jonathan Ive.

And the merit of Steve Jobs and Apple was also in tirelessly development and improving the product, year after year, adding more functions - colour display, photo viewing capability in October 2004, video playing capability in October 2005, improving battery life, improving the user interface, slimming down the player size, increasing the storage capabilities, introducing new models as the iPod Mini, cheaper and smaller in size and in storage capabilities, the iPod Nano having flash memory storage instead of hard disk. Apple also kept improving the iTunes counterpart, and made numerous deals with reluctant record companies. It should be noted that, since the second generation of iPods in 2002, the iPods were made compatible not only with the Mac operating systems but also with Microsoft. We should ask ourselves: how many iPods would have been sold if the iPods had been compatible only with Mac operating systems? Apple finally introduced in September 2007 the iPod Touch, utilizing the revolutionary touch interface initially developed for the iPhone. With the iPod Touch Apple did away with the click wheel which was prevalent among other iPods and which was also a hallmark of iPods until then. Apple was taking a considerable risk because it was

introducing touch interface in its products for the first time. Steve Jobs once referred to the iPod touch as "training wheels for the iPhone". Using the experience gained from manufacturing the iPod Touch, Apple had perfected its technology for manufacturing the iPhone. This was a very good strategy followed by Apple as it helped Apple see how the consumers were reacting to its touch interface and new features like accelometer. It also helped Apple to learn from its mistakes it made with the iPod Touch. Since the public reaction to the iPod Touch was a huge success Apple had no problems with introducing its revolutionary smartphone iPhone. 5.2 Marketing Mix: Apple iPod Touch is currently in the growth stage where more and more people are aware and purchasing the product, increasing product demand. Other iPod products like the Nano, Shuffle are matured and have started declining. Sales are growing rapidly and profits are rising quickly for iPod Touch, however competition is increasing, as competitors are more aware of the tactics of Apple iPod Touch i.e. using new features to market their product. During this stage, there are also opportunities for wider distribution, which will result in higher sales. 5.2.1 Product The iPod Touch as a product has a lot of features that lets consumers download their own choice of music as well as books and literature, which they might listen to or read. In addition, the iPod Touch could function in your car and work with various mobile settings. The iPod Touch positioning is done in such a way that they can be either kept with prestigious products or with high quality music players in department stores. This helps in increasing the image of the iPod Touch in the minds of consumers and gives the iPod Touch an impression of being clear, strong and consistent. Apple provides one-year exclusive warranty to its consumers in turn guaranteeing them of the quality of the iPod. The efficient service and high quality ensures brand loyalty and repeat purchases making it ahead of its competitors. The packaging of iPod Touch is done in such a way that it can be easily recognized in between its competitors. The low cost, attractive packaging includes cables and manuals and displays the iPod in a very stylish manner.

5.2.2 Price Apple iPod Touch uses cost base method to derive its prices. They will add a 65% profit margin to the cost of the product to gain efficient revenue.According to the value principal, even though the price of the iPod Touch is high when compared to its competitors, the benefits are higher. Therefore, the value of the iPod Touch is very high in the eyes of the consumers. In addition, high value equals high quality.

5.2.3 Promotion Proper promotion techniques are essential for iPod Touch as it can help the consumers understand the functions of the iPod, which will raise the need to buy it. Appropriate advertising campaigns with suitable frequency exposure in television, magazines, billboard and newspaper are required to focus on the target market, keeping the cost into consideration.

5.2.4 Place iPod Touch is distributed with both the methods that is direct and indirect distribution. In direct distribution apple has its stores where customers can go and purchase it. In the level one form of indirect distribution, Apple uses intermediaries to sell its iPods. The role of individual intermediaries is to make iPod Touch available to consumers and make their purchase easier. In India Apple products are available at iStore and iPlanet.

6. Management Implication
6.1 Assessment of current situation:
As discussed earlier iPod Touch is currently the market leader in the category of Portable Music Player (PMP).iPod Touch alone enjoys a market share of almost 50%.In the year 2010 iPod Touch sales went up over 130% year-on-year (YOY). The iPhone every year eats into the market share of the iPod. This can be seen by comparing Apple Q1 results in 2009 and 2011.

The figures above shows clearly that iPod market share keeps decreasing as the iPhone market share keeps growing. The reasons attributed to this are that iPhone can do exactly the functions of the iPod. People no longer need to purchase a separate player to hear good quality music as the iPhone more than just substitutes for the iPod for this purpose. Also another reason is iPhones are offered by major mobile network operators with good distribution networks, iPod sales rely on smaller distributors who simply cannot reach a very large audience. Especially after the recession in 2008 people in western countries have tightened their purses and do not want to go in for a separate product to hear quality music, instead they go in for the iPhone which serves two purposes at once and helps save money by doing so. As the need for the iPod keeps decreasing its market share also keeps decreasing automatically. The main target segment i.e. teenagers prefer iPhone over the iPod these days because it serves two important functions 1. To serve as an communication device 2. To serve as an entertainment device All the benefits of having an iPod have eroded since the introduction of the iPhone. Despite this the iPod Touch has been able to grow because the iPod Touch costs only half the price the iPhone. iPod Touch appears interesting to consumers who prefer it as a gaming + music device. With Apple giving away hundreds of games and applications free to its iPod Touch customers, it creates a separate market segment for itself unlike other iPods. iPod Touch has currently no strong competitors in its category currently. All of iPods competitors have failed to attract significant amount of consumers to its products. Manufacturers like Microsoft and Sony have shown very dismal sales year after year. Also manufacturers are not showing any keen interest in developing a viable alternative to the iPod Touch because they feel that the PMP has been saturated because of the advent of smartphones like iPhone and Android OS based phones which could do the job of a PMP. 6.1.2 New Competitor: Attempting to more completely take on Apple, Samsung has planned to release the Galaxy Player. The touch screen device would essentially be like its Galaxy S smartphone without the cellular capability: just like the difference between the iPhone and the iPod touch.

8, 16, and 32GB versions of the device would be made available, which would run on Android 2.2 "Froyo." The form factor would follow one similar to the iPod touch, and include a 4-inch LCD screen, Bluetooth capability, and front and rear facing cameras. The release of the Galaxy Player has been confirmed to come during CES 2011, enthusiast blog Samsung Hub reports. Samsung did not specify a retail release date. Samsung's success with its Galaxy Tab tablet -- the only device in the category other than Apple's iPad to sell in considerable numbers -- may be fuelling its desire to take on the Cupertino company on yet another front. No company has yet been able to make a serious dent in its dominance of the digital music industry. It won't be easy for Samsung: the company has only dabbled in music devices, and it lacks an integrated solution like the iTunes and the iPod. Several other companies, most notably Sony, Creative and Microsoft, have tried to compete with Apple but none have managed to make a dent in one of Apples key businesses. As well as being the debut of the Galaxy Player, Samsung also plans to show two other Android powered portable music devices: the YP-G50 and the YP-GB70.

6.2 Recommendations for changes in the marketing mix: iPod Touch is now in the growth phase of the product life cycle. Since all other iPods have started to enter declining stage of the product life cycle Apple needs iPod buyers to move to the new platform, and the more that move, the more developers will cluster around the iPhone and iPod touch. More than 100 million iPods have been sold over the last two

years, but the future is in mobile computing, not in playback devices for music and video. The suggested changes in the marketing mix are mentioned below 1. Apple instead of focussing on a particular age group (teenagers) should focus on other age groups as well. Apple should create advertisements which show how the iPod Touch can really be an integral part of their lives. 2. Applications targeting different age groups can be developed to attract new consumers. 3. Customised iPod Touchs like the Nike + iPod can be introduced to attract new consumers and boost sales. 4. iPod Touch is the market leader in the product category of MP3 players. Therefore, it should try and introduce new product lines related to it and skim the market share. The brand loyal consumers will purchase the new product also. 5. Apple should hold events, competitions, fairs, etc. for its iPod Touch community members, where the consumers can meet and share their likes and dislikes. This way, the people who dont belong to this community will feel alienated and would purchase the iPod Touch thus increasing the market share. 6. A cheap iPod touch is needed for the games market. At $169, the iPod touch would cost the same as Nintendo's DSi and Sony's PSP 3000, so when parents look at handhelds, they don't think of the iPod touch as "expensive and fragile" but as "costs the same and with much cheaper games and more of them". Many will be willing to pay the extra for more memory and upgrade to the $199 model. This low cost model will do much to kill the PSP market in North America and Europe, adding 5+ million iPod touch sales a year. 7. Apple should make the iPod Touch easily and cheaply available to markets like India to boost sales.

7. Conclusion
7.1 Conclusion of most important insights: The iPod Touch is currently is the market leader in the category of PMP since its debut at September 5, 2007. The iPod Touch is one of the most prized products of Apple. It sparked the creation of one of the most sought after product of the 21st century, the iPhone. It could be said that the iPod Touch was made to test the technology made for the iPhone. iPod Touch has created a niche of its own, and formed a community which includes all iPod owners sharing music files, podcasts, videos, etc. This aspect must be highlighted in the marketing strategies, as the people today are in search of belonging to a group and want to get rid of the isolated world they are in. Apple needs to keep innovating to stay ahead and keep competition at bay. Apple with its new revolutionary touch technology and motion gaming experience took the MP3 player to a whole new level. Adding web browsing and other internet related applications to an MP3 player completely added a new dimension to an MP3 player, also iPod Touch is considered to be a trend setter and one of the most wanted items for the teenagers. iPod Touch has set the benchmark and none of its competitors are able to break it, but competitors like Samsung are threatening to make a dent at the PMP market by following the same strategy of Apple (introducing a PMP which is similar to its Galaxy S model phones). Apple needs to keep innovating to stay ahead and keep competition at bay. 7.2 Expectations: The marketing strategies used by Apple Inc. to promote iPod Touch are not sufficient as the competitors are rising. There are many aspects of iPod which are yet to be explained to the remaining market. These aspects can be shown by applying different marketing strategies explained below. The advertisements for iPod Touch mostly consist of teenagers and people who are stressed and want to comfort them by listening to music. This target market is very limited as travellers, people exercising and playing sports, working, walking, doing any form of outdoor activity, and also people indoors can be users of iPods. If advertisements targeting these groups are shown on television and newspapers, it can increase the sales of the iPod. Apple is well known for not keeping discount offers or bundles. This can be positive and negative. The positive is the brand image is not hurt and therefore, it shows high price=high quality. But there are a lot of people who buy products only

when there is a discount offer or a sale going on. To attract such customers, Apple should provide seasonal sales. Apple should concentrate more on emotional appeal of the consumers. The iPod accessories are introduced by 3rd party and not by Apple itself. This way, apple is losing on a big chunk of market which can generate heavy revenues for the company as many consumers like accessorizing their iPod according to their likings. iPod Touch is also slowly losing its sales and value due to the introduction of iPhone. There should be some variation between the two as the consumers could get confused while purchasing. It can also harm the brand image as consumers feel Apple is innovative and there is not much difference between the two except the cell phone factor. iPod Touch could introduce a new facility where a computer is not required to store songs, and consumers can directly purchase songs using their iPod Touch. This way, people who are not techno savvy or dont have a computer can still purchase an iPod to listen to music. iPod Touch is considered to be a trend setter and one of the most wanted items for the teenagers. This image must be enhanced to even adults owning an iPod and associating with it. It is also meant for people who like to be simple, and that is why the design of the iPod is simple. But this aspect is forgotten by the consumers and should be revived. Apple has done something smart by introducing the iCloud which helps synchronize information across all apple products (other iPods not included) reducing the burden of the consumer, Apple is projected to be the leader in PMP category until 2015. Apple has to keep innovating to maintain its No.1 position in the market.

8. Bibliography
Book Philip Kotler, Gary Armstrong (2010): Principles of Marketing Management, Pearson Education 2010. Internet: Apple (2011): iPod Touch; in: www.wikipedia.org Samsung (2010): Samsung to release iPod touch competitor at CES 2011; in: http://betanews.com/2010/12/27/samsung-to-release-ipod-touch-competitor-at-ces2011/ Apple profits (2011): Apple reports record Q3 sales, profits for third quarter; in: http://www.macgasm.net/2011/07/19/apple-reports-record-q3-sales-profits-forthird-quarter/ Apple (2011): Apples Business Unit Strategy; in: http://www.macgasm.net/2011/07/19/apple-reports-record-q3-sales-profits-forthird-quarter/ Apple (2009): Apple Company Strategies; in: http://www.focus.com/briefs/11effective-strategies-apple-uses-create-loyal-customers/ Apple (2011): Consumer Behaviour Report; in : http://ibummed.com/uncategorized/consumer-behavior-report-apple-ipod/ Apple (2011): Comparison of portable media players; in: http://en.wikipedia.org/wiki/Comparison_of_portable_media_players Apple (2009): Apple Marketing Strategy; in: http://www.vertygoteam.com/apple_marketing_strategy.php Apple (2009): 2010 will be the year of iPod Touch; in: http://lowendmac.com/nash/09tn/year-of-the-ipod-touch.html Apple (2011):Marketing Audit Report; in:
http://ibummed.com/uncategorized/marketing-audit-report-apple-ipod/