Case Study: How Apple Dominated MP3 Markets

Apple iPod Silhouette Ads

(EDITOR’S NOTE: This blog piece was written in 2009, so it’s pretty old. It was written in response to Apple’s domination of MP3 players with its iPod. I have republished it because I think it provides fantastic insight into how Apple executes its product strategy.)

Of the market of portable MP3 players the iPod dominates its category with an astonishing estimated 65+% market share. (To put this into context, your average market leader struggles to hold 50% of the market.)

And Apple’s i-Pod was not the first portable hard drive based music player. Nor was it the first MP3 player on the market.

The very first iPod was released in October of 2001 and could hold up to 1,000 songs. Since the Apple (iTunes) Store didn’t exist at the time, a user loaded their CDs onto their computer then synced tracks across to their iPod. By April 2003, Apple had released its third generation iPod (the 2G was same as the first, but compatible with Windows), which offered an increased capacity of 7,500 songs, plus Apple enabled purchase of music through the launch of its iTunes store. By the end of 2004, over 10 million iPods had been sold; fast forward to September of 2012, and more than 350 million iPods had been sold since the product’s launch in 2001.

Exemplary use of a Product Differentiation Strategy.

Even though Apple was not the first MP3 player to market, it was the first to use a USB/firewire interface that enabled rapid and easy file transfer. And while competitive models were black, Apple was white. And while competitive models were ugly, the design aesthetics of Apple’s i-Pod set it apart. Having a different product to competitors meant it was hard to compare prices and allowed Apple to price at a premium.
There are some smart product strategists at Apple.

Know your Target Market.

Apple has identified youth as its target market is and it doesn’t let its attention wander.

Apple doesn’t target baby boomers, although it gets some of them buying its product. Nor does it target businesses which are typically dominated by Microsoft although it gets some of them too.

Apple computers target the youth home computing market and every aspect of their product (hardware and software, and more recently content). And, if the first rule of brand is that no brand can mean all things to all people, Apple gets it very right. The strategic rule is always keep your focus narrow.

Apple knows what that target market likes (and doesn’t like).

Today’s youth like listening to (and mixing their own) music, watching their own movies, surfing the Internet and creating their own communities. They like products that look cool, and they are technically savvy. And they don’t respond to advertising.

Apple matches its product mix tightly to its core target market.

Stock standard on any new Mac is software to download your digital pictures or movies, or mix your own music, or edit your films, or surf the Internet. These aren’t optional extras – they’re standard because this is what youth wants. Apple aims to please its target market.

Build your Brand through PR not Advertising.

Apple launched its product through publicity and adopted brand maintenance two years later through advertising.

The now famous silhouette advertisements were first launched in October 2003, some two years after the first launch of the i-Pod and once the product was dominating its field. Apart from being cool, the advertising specifically reminds us that the product is different. The ear phones are white… the competitors have black.

Self-Cannibalisation means Competitors Play Copycat.

Apple cannibalises itself before a competitor has a chance to catch up.

The real secret to Apple’s i-Pod success lies in its product development and life cycle management strategy.

Unlike so many manufacturers, Apple deliberately cannibalises itself. In other words, well before a competitor has the opportunity to launch a me-too (or copy) product, the existing i-Pod is made redundant by Apple and superseded by a newer model.

When it comes to product development, there is generally a 12-18 month development cycle. It takes time to develop, prototype, tool, manufacture, test and launch a product – even if it is a copy. By the time the imitator floods the market, Apple has moved on to the next thing.

Here is a very simple product proposition that is immensely powerful: What cool young person wants to buy redundant or obsolete technology? The short answer is none.

It is Apple’s product strategy that always keeps Apple on the front foot, and its imitators left further and further behind.

Want more?

Check out more of my posts on brand and strategy.


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