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Marketing Audit Report – Apple iPod

Executive Summary
Apple Inc. was started in 1971 and since then it has always been improving and has become a well known brand image. It has always been innovative, stylish, advanced, trendy, as well as simple in producing all its products. iPod is an excellent example which has simple looks but still is very stylish and a trend setter. It is the highest selling portable music player in the world with over 150 million units sold worldwide. iPod is the market leader in the product category of MP3 players and has created a niche for itself. The hype created by the teens, marketing and public relation strategies, and advertising has helped iPod gain the image and position of being ‘cool’ and the most wanted device. A small survey was conducted to analyze the views of different people and consumers on Apple Inc. and iPod in specific. This is the Marketing Audit report of the iPod which includes sections like introduction of the company, situation analysis, product lifecycle, market summary, SWOT analysis, product offering, competition, keys to success and critical issues, marketing strategies, marketing mix, and conclusion and recommendations. There are a few parts in the report which are similar to my MARK 936 report as both the companies and products are similar in both the subjects.

Introduction of the Organization
Apple Inc. is a brand focusing on consumer electronics and software based in America. Steve Jobs, Steve Wozniak, and Ronald Wayne established it on April 1, 1976 in California. The organization produces and markets different variety of products like portable music players, personal computers, mobile phones and also provides software’s, services, and peripherals. It is ranked at number 178 on the Forbes 2000 List (Forbes, 2008). Apple Inc. has based a unique position in the minds of consumers due to its products appeal and distinctive advertising campaigns. Many consumers are loyal and devoted to Apple Inc. as a company and a brand name (Wikipedia, 2008). The brand apple has high level of competition in all its product lines. For example, in the personal computers category there are many well-known competitors like HP, Sony, IBM, etc. In the portable music player category there are competitors like Microsoft Zune, Creative Zen, etc portable players that offer similar or advanced features when compared to the iPod. The mobile phone segment is a recent addition of the Apple product line, which is known as the iPhone. It is a revolutionizing concept and is a big threat to all its competitors like iMate, Nokia, Blackberry, etc. Apple Inc. is well known for its design and innovation present in its products and brand loyal consumers. This paper will mainly deal with the iPod product line of Apple Inc.
Situational Analysis
Apple has efficient management and spends a lot of revenue to train the employees. The CEO, that is, Steve Jobs is always involved with the company and works together to continue creating innovative products. Also, the company’s cash flow and audit is done on time. Apple has new accounting principles according to which the high revenue generating Apple TV and iPhone will be considered as deferred revenue in the account statements of Apple Inc. (Marsal, 2007). This way they will have better cash flow.
Product Lifecycle
iPod is currently in the middle of its growth and maturity stage. The product demand is increasing as the awareness of the product is spreading rapidly. This results in the increase of the sales and profits and also the competition. Apple is well known for providing new features in their products and this helps to market their product. During this phase of iPod in the Product Life Cycle, there are a lot of opportunities and threats which can affect the brand image and sales of the iPod.
Market Summary
Nonprofit 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. The study revealed that consumers who fall under the demographics of young age, high income and techno savvy are highly inclined to purchase the iPod. (Cnet News, 2005). In the year 2005, “There were 22 million adults who own iPods. In the US, this meant that 13 per cent of men had 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 between 29-40 have iPods; as do 11 per cent of those between 41-50. Just 9 per cent of 18-28-year olds and 6 per cent of those aged between 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.” (Macworld, 2005). Apple targets the iPod towards customers who need to listen to music on the go. It consists of people who belong to various professions, which include students, corporate workers, entrepreneurs and even housewives. iPod satisfies the need of different users by offering various types of iPod with distinctive features and different price levels. Moreover, it is ideal for people who like to carry their music library with them wherever they go and like to listen to it at any time of the day. Also, it can be used as a hard disk to store information. Moreover, teens have started associating and referring to music players as iPods. Teens consider iPod to be cool, and as a basic necessity to store their music in a cool way (Guglielmo, 2004). Overall, consumers value of the iPod is really high as the quality and features perceived of the iPod is way higher than the price of the iPod.
iPod was launched on October 23 2001, and since then the sales have increased and has beaten the records of highest selling portable music player. After 3 years of being in the market, iPod was the leader with over 90% share of the market in the category of portable players with hard drives, and 70% in the category of all music players (Wikipedia, 2008). iPod was considered as one of the fastest market capturing commodity, and Apple used several new retail outlets which includes stores like Wal-Mart to sell its line of iPods which contributed to 5% of its sales. In January 2007, 48% of quarterly revenue was made from iPod sales, in April 2007 it reduced to 32%, in October 2007 it reduced to 26%, in January 2008 it increased to 42%, and in October 2008 it drastically reduced to only 14.21% (Wikipedia 2008).
Initially, iPod was targeted to teenagers and travelers. 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. It formed a certain community, and anyone who did not belong to it was considered an alien. The ease of use, and the stylish looks attracted people of all demographics, and there was no specific target market defined. Moreover, the teens play a major role in the growth as they gave the iPod an image of being young and trendy (D’souza, 2005).
SWOT Analysis Strengths
With Apple Inc. being a very reputed company, people of all age, gender, income, and race desire to own it. This increase in its popularity has worked in its favor and has increased the sales every year. Moreover, due to its loyal consumers and supporter’s apple has become the most well known company around the world. This again has helped improve its sales and brand perception, which in turn has led to an income increase for Apple. The constant faith that people have shown in Apple has helped the company to gain new consumers as well as maintain the loyalty of their old consumers. Higher level of brand loyalty results in repurchases giving Apple the opportunity to provide new products and services. For instance, the iPod, that contributes to a new and innovative section that helps to buy into another set of the Apple brand.
Weakness
The iPod series of Apple has incurred many defaults. For example, the iPod Nano, is said to have a faulty screen, which break if, put in pressure or under an impact. And to this complaint the company has supposedly agreed to and is ready to replace all the defective objects. Also, there have been complaints regarding software issues, battery life, and even burning of the iPod. This has given the company a bad repute, as even earlier on there were a lot of problems detected in the battery life of the iPod and to this also the company has agreed to give consumers free battery cases. These incidents have proved to be hazardous to Apple that in turn also leads to one if its weaknesses. Furthermore, due to Apple generating more revenue from music sales than iPod units has put the company under a lot of stress from the music industry. This has led to a strain on the company to come up with a decision as to bow down to the music industry or to give in to them. Till now the company has remained firm about not agreeing to their terms. However, if in the near future the company does bow down to their demands it can be detrimental for them and could be taken as a shortcoming. Further on, in the year 2005, Apple announced that they were replacing IBM, a very old relationship of theirs as chip suppliers to Intel. According to some industry specialist this could be perceived as a weakness that would stand to confuse Apple’s loyal brand consumers.
Opportunities
Apple as a company has a lot of potential and prospect to develop. For instance, iTunes can be used to download legal songs. Therefore, all the cell phones and MP3 players should be made compatible with the iTunes. This will increase the sales of its legal music section. These new inventions and technologies have given a lot of opportunities to Apple to expand its horizons in developing a mobile phone format for its iTunes and music player technology. Inventions like the Podcasts are another source of revenue for the Apple Company. These can be easily downloaded from the Internet and installed on iPods to listen to when the listener desires. Opportunities like these have given a boost to the company to keep going. iPod can also target the corporate customers by having the use of PowerPoint presentation and maybe the recorder function built in.
Threats
In today’s fast moving industry, to remain on the top becomes very difficult and Apple is no exception. Every company around the world has a threat from competition and so does Apple Inc. Every day the world is changing and with it the technology is ever changing. There was a time in the market where people could not do without radios then cassettes and then CDs. And in the near future there could be times where people can do without tangible music players with the invention of wireless gadgets. Apple is very sensitive as a company to keep its secrets and to stay away from potential threats. This was proved when in 2005, a case was launched against some Bloggers who seem to have leaked information about Apple’s new products, the company became quite disturbed about this and the offenders were asked by the law to disclose how they got the information as the company suspected that their own employees were behind this leak. This shows that it does not matter how big the company is, threats that could affect their profits is not taken lightly.
Competition
Like any other technology based products iPod is vulnerable and therefore has competitors. iPod has developed into a very successful brand from its inception around six years ago. iPods competitors include Creative, SanDisk, Sony, Samsung, iRiver and Microsoft. Even though these competitions exist, they still do not even come close to the iPod. The iPod is so well ingrained in the market, that it has almost become unbeatable. This is because iPod has created a niche for itself, and has become a benchmark for music players. Consumers invariably end up comparing the other competitive products in the market to the iPod. Therefore, the competitors cannot afford to be simply good. They have to excel at uprooting iPod’s solid position in the market, or simply leave. Whether consumers shop at the Apple stores or at Wal-mart for a music player, the average consumer would end up buying the iPod, given its reputation in the music players market. Hence any other company would have to market their product aggressively in order to over ride the iPod’s position. In today’s market the competitors of iPod need be to smart. They need to come up with marketing strategies that would help break the niche created by iPods different products in the market. For example, one of the drawbacks of the iPod Nano is that its screen is too small to watch videos. Hence, the competitors should market on that aspect and come up with even bigger screen but unfortunately they make even smaller screens. This gives an upper hand to Apple Inc. Therefore, as mentioned before, the competitors cannot just be good they have to outshine by adding new features and offering something new to the customers in order to reach to the style and elegance that comes with the iPod. Even though iPod has reached its maturity stage in the product lifecycle, there are still new competitors trying to enter the market everyday to uproot the niche created by the iPod. Microsoft has launched its new product the Zune. And it is said to be the single most real competition for the iPod. It has a lot of similar features and in addition, it also offers some new features as well. Since iPod has reached its maturity stage in the product life cycle. It is still a threat to the upcoming competitors. The new competitors consider iPod as a major threat when compared to the others. For example, my space is coming up with a music player in competition with iPod. MySpace being highly popular around the world, it could prove to be a major threat to iPod. According to the article Silicon Valley / San Jose Business Journal, MySpace has a backing of the music industry which includes big labels like Song BMG, Warner Music Group and Universal Music Group, who are stating that “MySpace Music is different from Apple’s offerings in that MySpace is more focused on community and sharing versus straight-ahead sales of music or devices” (Das, 2008).
Product Offering
iPod product line can be differentiated in terms of storage capacity. The storage capacity and the size of the iPod are directly proportional to each other. The different models of iPod include the iPod Nano, iPod shuffle, the iPod touch and the iPod classic. The iPod classic comes with a 120GB of storage space that can hold up to 30,000 songs along with 150 hours of video and can even store 25,000 photos. The battery life can go up to 36 hours, so you can watch your videos as well as play games on it anytime, anywhere. The new iPod touch comes with 30GB of storage capacity that is packed with extra features which includes additional game playing features, built-in speakers which allows you to listen to your music with no headphones required. Moreover, with the new iPod touch, you can browse the internet and receive emails, and be updated with live traffic reports. The iPod touch with its unique style and advanced technology has a touch screen interface, which is not available in any other iPod. The iPod Nano now comes in nine different colors with a new design and storage capacity of 8GB and 16GB. It shares the same features like iPod classic but with little technological advancement like personal DJ, and motion sensor. The iPod shuffle is the smallest of the iPod models. It comes with a storage capacity of 1 and 2GB. You can store up to 500 songs and it comes with four different colors. It comes with a battery life of 12 hours and due to it being so small, you can carry it in your pocket, and it is simple to use. It also comes with a dock connector that helps you connect it quicker for charging or syncing with your Mac or PC.
Keys to Success and Critical Issues
According to Metroxing, 2004, the reasons behind the success of iPod are:
1) Initially, MP3 players were meant for people who wanted to listen to music on the go and also had a computer to load songs into it. The main criteria were to store many songs in the player and be able to listen to it whenever and wherever. All the Mp3 players were able to fulfill the criteria, but they designed the players cheaply except iPod. iPod emphasized on the fact of design, quality and looks. Also, a person had to be techno savvy to understand and be able to play the MP3 players, whereas the mission of iPod was to be user friendly and simple.
2) iPod is easy to sync with the computer using the Apple software called iTunes. Transferring music to the iPod is very easy and convenient. Least knowledge of computer is required to transfer songs in the iPod. Therefore, iPod is not limited to people who know how to use computers. Also, iTunes had an online store where users can purchase original and legal music files.
3) The popularity of iPod spread so fast that anyone who did not possess it was alienated. Therefore, it was a must have commodity for every individual. This is highly credited to the marketing and the public relation strategy of Apple Inc. Also, iPod has a lot of accessories from Apple, and other companies, which can be used for convenience, and to personalize the iPod. Therefore, every individual could personalize his iPod and be unique in his own way.
4) Having different types of iPod suitable for different groups of consumers was a wise decision taken by Apple and therefore, it increased the market share of iPod as a whole and not just one segment.
Critical Issues faced by Apple are:
1) There were issues written in many blogs about the iPod burning out when kept for charge. The temperature of the iPod would increase and it would start melting (Apple Defects, 2007).
2) Some of the iPods have the software problem where the iPod goes into sleep mode once the battery is low. It cannot be started again and remains always in the sleep mode (Fried, 2001).
3) The cost of the iPod is higher when compared to its competitors. Some consumers believe that the quality offered by Apple is equal to the quality of the other MP3 players. This false belief leads to the consumers purchasing the competitors player (Chartier, 2006).
4) iPhone which is a product of Apple is similar to the iPod touch, but has the functionality of the cell phone. Therefore, this resulted in product carnivore. This decreased the sale of iPod Touch drastically.
All this resulted in negative publicity, which dropped the sales of iPod by a certain percentage. But even though there were so many issues, iPod was still able to grab the highest market share and be the most popular and wanted MP3 player.
Marketing Strategy
The mission statement of Apple Inc. is revolutionizing and describes the various achievements and promises to continue excelling in all fields. The mission statement is “Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone.” (Apple,2008).
The overall marketing objectives of Apple in relation with the iPod could be to capture the maximum market share in the product segment of MP3 players and to be able to eliminate its competitors. Also, it could increase its sales by 10% more when compared to the present which would increase the revenue of the organization. Moreover, the availability of the iPod can be extended to more stores and places where it’s easily accessible for consumers to purchase. Apple follows a form of proactive marketing where the website sends emails to Apple iPod users with the latest offers, news, updates for the product, etc. Apple can also expand its brand awareness by advertising more and reaching to different segment of consumers and enlightening them about the different iPod types which are meant for various types of users. In between years 2000-2007, iPod has been the Star in the BCG Model of portfolio analysis as during these years the Market Growth Rate for MP3 players was high, and the relative market share of iPod was also high.
iPod’s initial target market was people who belonged to the age group of 13-30 of both genders, that is males and females. iPod created a niche for itself, and the product category of MP3 players is associated with iPod. The income level of the consumers is middle class and above who have interest in listening to music while they are on the move or want to store their music collection in a compact device which can play it.
The positioning of the iPod amongst the consumers is related to being trendsetter and cool. This image has been set by the teenagers who consider it a necessity. Apple Inc. has emphasized on the fact that the iPod is a lot cooler and user friendly in its advertisements, campaigns and commercials. The first advertisement of iPod was about a workaholic working on the computer in a gloomy environment. Suddenly, he starts listening to the iPod, and starts dancing and gets into the groove of the music. This advertisement showed that even a nerdy looking person can become cool by having an iPod. This leads to hype in purchase of the iPod. Also the influencing factors include Word of Mouth, and the stylish looks and appeal of the product.
Marketing Mix
Product
The iPod as a product has a lot of features that lets iPod consumers download their own choice of music as well as books and literature, which they might listen to or read. In addition, the iPod could function in your car and work with various mobile settings. The iPod 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 in the minds of consumers and gives the iPod an impression of being clear, strong and consistent. Apple provides one-year exclusive warranty to its consumers in turn garneting 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 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. Moreover, Apple even follows green marketing.
Price
According to the value principal, even though the price of the ipod is high when compared to its competitors, the benefits are higher. Therefore, the value of the iPod is very high in the eyes of the consumers. In addition, high value equals high quality. High quality makes the iPod superior to its competitors.
Promotion
Proper promotion techniques are essential for iPod as it can help the consumers understand the functions of the iPod, which will arise 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.
Place
iPod 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 available to consumers and make their purchase easier.
Conclusion and Recommendation
Since iPod is in the Maturity phase of the Product Lifecycle, there are many ways it can continue the journey from here. It could adopt the drop strategy where it would decline and fade out, or adopt the go strategy by bringing a change in the iPod Life cycle. The change could be Marketing modification or Product modification. A few suggestions are mentioned below.
1) iPod should create advertisements for all age groups. The position of iPod is ‘cool and trendy’. Many individuals have different style of living. For those consumers, iPod should create advertisements which focus on the music capabilities and functions of the iPod.
2) iPod 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.
3) iPod should hold events, competitions, fairs, etc for its iPod community members, where the consumers can meet and share their likes and dislikes. This way, the people who don’t belong to this community will feel alienated and would purchase the iPod thus increasing the market share.
4) Apple should provide bundle offers on the iPods. For example, on the purchase of an iPod, the price of the accessory is discounted. This way, the price conscious people will be attracted towards the iPod. Also, this bundle offer should be offered on older versions of the iPod so it does not harm the image of the brand. Also, a lot of accessories are being sold by third party companies. Apple can start making those accessories as it has a higher profit margin.
5) Product differentiation is a key factor iPod should have for all the products. iPod is well differentiated from its competitors, but the differentiation amongst different iPods is a little vague. Therefore, iPod should have pamphlets, advertisements, websites, etc differentiating the iPods, and helping consumers to choose the right one for them.
6) iPod Touch has lost 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.
7) iPod could introduce a new facility where a computer is not required to store songs, and consumers can directly purchase songs using their iPod. This way, people who are not techno savvy or don’t have a computer can still purchase an iPod to listen to music.

Reference List
1. Apple, 2008 “Invester Relations”, accessed date: 1/11/2008, http://phx.corporate-ir.net/phoenix.zhtml?c=107357&p=irol-faq#corpinfo2
2. Apple Defects, 2007 “Hot iPod reaches 170 Degrees”, accessed date: 18/10/2008, http://www.appledefects.com/?cat=7
3. Chartier, D, 2006 “On iPod pricing, competition and the value of a full package”, accessed date: 29/10/2008, http://www.tuaw.com/2006/09/18/on-ipod-pricing-competition-and-the-value-of-a-full-package/
4. Cnet News, 2005 “Who’s buying iPods?” accessed date: 30/09/2008, http://news.cnet.com/Whos-buying-iPods/2100-1041_3-5577396.html?tag=st.rc.targ_mb
5. Das, A, 2008 “MySpace to battle Apple’s hot-selling iPod?” accessed date: 8/11/2008, http://www.msnbc.msn.com/id/27592992/
6. D’Souza S, 2005 “An Old Lesson on Target Audience… the iPod Way”, accessed date: 20/10/2008, http://www.marketingprofs.com/5/dsouza40.asp
7. Forbes, AAPL – Apple, Inc. At A Glance, accessed date: 20/10/2008, http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=AAPl
8. Fried, I, 2001 “Apple confirms iPod Problem”, accessed date: 15/10/2008,

http://news.cnet.com/2100-1040-276763.html

9. Guglielmo, C, 2004, “Apple’s Jobs Taps Teen IPod Demand to Fuel Sales, Stock Surge”, accessed date: 3/10/2008, http://www.bloomberg.com/apps/news?pid=10000103&sid=a58iozj_2jXM
10. Macworld, 2005 “iPod owner demographic data, accessed date: 30/09/2008, http://www.macworld.co.uk/news/index.cfm?home&NewsID=12177
11. Marsal, K, 2007 “Apple becoming a bigger cash flow machine”, accessed date: 20/10/2008, http://www.appleinsider.com/articles/07/06/08/apple_becoming_a_bigger_cash_flow_machine.html
12. Metroxing, 2004 ”The Success of iPod is not because of Marketing”, accesses date: 24/10/2008, http://homepage.mac.com/metroxing/iblog/B1641024610/C1851367553/E410008464/index.html

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