We, at Apple Corporation are about to launch our new iTunes project, which is a software-based online digital media store. Three major target groups that we are aiming at with our product are: people who are willing to listen to music all through the day and who are actively following the latest music releases, people who enjoy listening to music, though do to listen to it on minute-to-minute basis, and people who do not usually listen to music, though take pleasure in listening to their favorite songs from time to time.
The members of the first group, which we would like to call „fonders”, are young people who watch various music channels and tend to follow the music news. This is the most powerful and promising segment of the market, because these people will be for sure interested in our innovative proposition. Our competitors for this group could be Roxio’s Preeplay. This company requires a monthly fee that allows unlimited download and this factor can attract many young customers, for whom price matters.
The second group – the „likers”, are people of more mature age, who listen to music in order to relax. These people usually are very selective as to the play list and are willing to have all the songs they like on their computer more than on a player. These people will be easily attracted because they would not mind to pay for the iTunes as well as they would also be thrilled by Apple’s innovation. Our competitor in this group is Audio Lunchbox that is well known within people ages 30-40. Audio Lunchbox offers to purchase subscription plans, or use a la carte service, additionally a customer receives fifty free downloads. Another competitor for this group would be Peer-to-Peer Network that offers great download resource and is very easy to use.
Third group – the „newcomers”, are usually between the ages of fifty and seventy. For them music is not always a part of the lifestyle. Though, they listen to music and would be willing to download songs familiar to them and those that they associate with the past. Thus, for these people the variety of suggested play list would be a very important factor. Music shops are the main competitors for us in this group because most of these people are rather old-fashioned and still prefer purchasing CDs.
However, the main competitor that is a threat to all our market segments is BuyMusic.com, a company that had copied our ideas and furthermore suggests similar products for a lower price. Indirect competitors of the company include Brick-and-Mortar Stores that are backed by the music industry, E Commerce stores and Online Radio. Though, these competitors all lack innovation, are overpriced and do not offer download options similar to Apple.
No matter how tough the market is Apple has a unique selling proposition that is that individual iTunes might be purchased directly from the website without subscription and music can be downloaded straight to the players or hard drives (Hennessy). What is an even stronger advantage is that Apple’s iTunes have a very favorable image, enabling people to legally „own and not rent songs” (Hennessy). Thus, we see that it is only the product itself, which would satisfy the needs of the customer but it is also company’s name and company’s positive image that spreads onto the product and makes it desirable.
ITunes positioning has evolved over the years. Today, as Apple products become more and more popular and affordable the iPod with iTunes became something of a necessity and not luxury. In fact, while at first iTunes were available for download only by Wi-Fi users, in 2008 Apple carried out a software update which allowed 3G and EDGE users to access iTunes’ smaller than 10MB. Consequently, we see that the strategic goal of Apple had been achieved making it one of the main players on the digital music arena.
2) Four P’s analysis
Product- iTunes – a digital media player application, used for downloading and organizing music files. Additionally iTunes enables one to download music videos, television shows, applications, iPod games, audiobooks, various podcasts, and films.
Place – iTunes are available globally, though it must be mentioned that options offered vary from country to country. For example, films and movie rentals are not available in all countries, and ringtones are available only in the USA.
Price – all iTunes are sold for the same price with no subscription fee. In early 2009 two new prices were introduced: now in the USA music may be priced $0.69, $0.99, or $1.29. Also, complete albums are available for a flat rate, no matter how many songs are in it, and albums on sale are usually at half-price.
Promotion-the three above target group have one characteristic in common-they like to be able to listen to good music any time they want, thus Apple tries to promote its products in the way to suit the needs of these groups. There is also a weekly promotion in which one to three songs are available to download for free to logged-in users. Additionally, free downloads are available on Tuesdays, and stay free until the following Tuesday. Furthermore, some songs stay free of charge because their offers chose so. This, in fact, encourages brand loyalty. ITunes were mostly promoted with silhouette commercials used both in print and on TV. The TV advertisements have used a variety of songs from mainstream and unknown artists, and some commercials have included silhouettes of specific artists including Bob Dylan, Caesars, U2, Eminem, Wynton Marsalis, and Jet.
For its iTunes Apple uses an Advanced Audio Coding (AAC) format. Songs with DRM are encoded at 128 kilobits per second (kbit/s), and previews of thirty seconds are available free, prior to buying a song. Apple had come up with a way to restrict the use of music downloaded from the website. This has helped to sustain digital rise and also had helped the reputation of Apple, presenting it as a responsible company.
6 Ms method contains the analysis of mission, means, message, moment, media, and measurement. The mission of the iTunes campaign was to once strengthen the position of Apple on the digital music market and make the company the market leader. Apple had employed significant funds into the marketing of the iTunes, introducing such new techniques as textured backgrounds, 3D arenas, and photo-realistic lighting on the silhouette characters in the advertising.
ITunes were introduced in the rise of digital music era, in fact iPod was one of the first mp3 players on the market. Thus, we see that Apple managed to read the market correctly and realized that it would be interested in the product. If iTunes were introduced later in the decade success would not be probable. The message of the campaign was that iTunes and all Apple products in general make the life happier, brighter and more convenient. Apple used various media sources for the campaign, most successful of them being television commercials, print ads, posters in public places and wrap advertising campaigns, all of them connected by a distinctive, consistent style.
The return, of campaign was that in the first week upon its launch iTunes sold over one million songs (Hennessy). Thus, we see that Apple had managed to design a campaign with a clear objective, a well-defined target and an appropriate message, which were most importantly delivered at the right place and at the right moment. I believe, this is Apple’s main key to success.
3) Apple’s value chain is comprised of nine steps: content, advertising, production, publishing, hosting/bandwidth, promotion, searching, catching, and listening. It is important to remember that each step in the value chain adds value in distinctive ways, has its own sets of challenges, risks and opportunities. When it comes to Apple computers the entire offer reaches the customer at once, and the entire value chain is preassembled. The recent change of supplier of the Macintosh to Intel had improved the system performance while diminishing the value in terms of price for the consumer (Moore, 2005).
Apple had been in the PC industry for many years, though being innovative and willing to catch up with the competitors Apple entered digital music market. Apple was not interested in dominating th computer industry, furthermore, on the computer arena the competition was very tough, partly because many people still beleive that when it comes to computers it is better to by a regular one, which will be easy to use. Consecuently, to diversify its products Apple has made digital entertainment the center-point of its strategy and had created a vast market for its stylish and expensive machines (The Seed of Apple’s Innovation, 2004).
Certainly, there is a synergy between iTunes and iPod. Currently, iPod is a major control point in the iTunes value chain, because it is a channel that connects iTunes to the portable player through its proprietary DRM technology, FairPlay. Thus, while the iPod was at first marketed as an MP3 player supporting the unauthorized digital music value chain, today it is sold as the exclusive device for iTunes. This perfectly meets the needs of customer making it possible for them to always have the songs they like on their favorite iPod (Apple, 2002).
IPhone is Apple’s latest step on the road of innovation. This product for months already has rocketing sales. However, it cannot be overlooked that iPhone, including such a wide range of functions, may soon overthrow all other Apple products. For example, the sales of iPods can plummet because those owning an iPhone would be not interested in the product. Today it is hard to predict, what would be Apple’s new product, though it is obvious that the company is planning to advance in digital music industry.
1. Hennessy, J. Apple Computers, Inc. Kellog School of Management.
2. Moore, G. A. (2005), Strategy and your stronger hand, Harvard Business Review. Retrieved from http://hbr.harvardbusiness.org/2005/12/strategy-and-your-stronger-hand/ar/1 on May 27, 2009.
3. The Seed of Apple’s Innovation. 2004. The Business Week. Retrieved from http://www.businessweek.com/bwdaily/dnflash/oct2004/nf20041012_4018_PG2_db083.htm on May 28, 2009.
4. Apple (2002). „Apple Announces iTunes 3“. Apple. Retrieved from http://www.apple.com/pr/library/2002/jul/17itunes.html on May 28, 2009.
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