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Acuscan, A Case Study

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In Basic Marketing, the goal is to satisfy the needs and wants of customers in order for them to buy your product offering. The company's marketing and sales team farm out and gather information as to where, when, and how the product can be advertised and sold. The unpredictability of the product being offered are numerous; logos can be changed, prices can be discounted or raised, and advertising can take on several forms with the purpose of saturating the consumers with information relevant to the product being offered (Perreault-McCarthy). This is the complexity of marketing mix and Apple, makers of iPod, made use of this rather simply and captured the market.

Marketing mix is made up of the four Ps, price, place, promotion, and price. All four are needed and are tied to each other. The marketing mix is not a proper mix if one of the Ps is missing. Managers must develop the marketing mix of the product and make a decision on the final course of the four Ps at the same time. The four Ps form a circle with the customer in the middle to emphasize the importance of one to the other (Perreault-McCarthy). The marketing team of Apples iPod hit it right on the button when the decision was made on iPod's marketing mix. It brought company much needed leverage in the market of electronics and entertainment.

Apple entered the digital music player business by introducing the iPod in October 2001. The original 5GB iPod featured a unique "Thumb Wheel" user interface for one-handed operation and a simple, easy-to-use operating system developed for mobile devices. The iPod provided 20-minutes of skip-protection, could transfer a CD in approximately 10 seconds, and can store up to a thousand songs in high-quality mp3 format. It also had the capability to be used as a portable hard drive to transfer files other than music to and from computers.

Though it wasn't the first mp3 player on the block, Apple's iPod revolutionized the music industry much like how Sony's Walkman did in the 1970's. It accomplished this by utilizing a 1.8" hard disk which made it physically smaller and therefore more portable than other hard drive-based mp3 players. Compared to then existing flash mp3 players on the other hand, the iPod's 5GB worth of memory easily dwarfed the competition's storage capacity which typically ranged from only 64 to 256MB.

Apple believed that the iPod's ideal compromise between size and storage capacity made it quite impressive, and they priced the product as such. The original 5GB iPod was retailed at $399, a price which retailers as well as the press criticized as too steep. Compared then to its nearest competitor with a portable hard drive - the $249 6GB Nomad Jukebox from Creative Labs, the iPod did cost considerably more. This prompted experts such as Technology Business Research analyst Tim Deal to suspect Apple's pricing scheme, "I question the company's ability to sell into a tight consumer market right now at the iPod's current price". Moreover, NPD Intellect analyst Stephen Baker anticipated that the device "may have trouble digging out a niche in the market" and posed the question "whether people want that robust of a feature set with that high of a price" (Fried).

Apple however remained confident in the midst of all the criticism of their pricing scheme. "We have very little doubt that every iPod we build, we can sell," according to Greg Joswiak, Apple's senior director of hardware (Fried). They aggressively sold the product in their Apple stores, through popular electronic outlets as well online retailers. As it came to pass, Apple read the market perfectly and iPod sales exceeded everybody's expectations as it became one of the most sought after and hottest gifts of the 2001 holiday season.

Since then, Apple has built on its success by continually upgrading the iPod. Apple extended its battery life (iPods can now last up to 15 hours on a single charge), improved its user interface (current iPods now feature Click Wheels as opposed to the original iPod's Thumb Wheel) and increased its storage capacity (a 60GB iPod capable of storing 15,000 songs is now available). Colored screens are also now standard on all full-sized iPods.

Apple has also successfully created two product line extensions. It first decreased the size of the mp3 player through utilizing a smaller 1" hard disk, thereby creating the smaller and cheaper iPod Mini. To further differentiate the iPod Mini from its big white brother, Apple made it available in silver, pink, blue and green metallic colors. US sales were so impressive that Apple, running low on stocks, had to delay the European roll-out from April to July 2004. Apple then came up with a Special Edition U2 iPod in October 2004 and it was launched complete with its own TV commercial featuring the band. On top of getting a special edition black case/red Click Wheel iPod with the band members' signatures laser engraved on the back, buyers got an added bonus in the form of a $50 discount on their download of U2's digital box set consisting of 400+ tracks via Apple's iTunes Music Store. This exclusive offer was truly innovative as it was the first of its kind for any online music service.

All of these innovations well thought of promotions and wide distribution has amounted to Apple's overwhelming success in the digital music player market. Since its entry, it has dominated the hard drive-based mp3 player market with its full-sized color iPods as well as its iPod Mini. Having sold 8.2 million units in 2004 alone (Graham), Apple owned an impressive 30% of the market by year's end (Gruener).

However in terms of volume in the same year, some 27 million Flash players shipped, almost three times more than the 9.8 million hard drive-based units released into the marketplace (Hartley). This volume disparity could be attributed to a number of factors, most notably pricing as most Flash players cost around $130 compared to the "cheapest" available iPod (the Mini) which retails for $249.

As Steve Jobs, Chief Executive Officer and Co-Founder of Apple Computer, noted during his keynote speech at the 2005 Macworld Expo in San Francisco, "iPod (value) market share last year: 31%; Flash mp3 players had 62%; wannabes were 7%. The iPod Mini went after the high-end of the Flash market. Now iPod market share is at 65%, Flash is at 29%, wannabes at 6 %"(Jobs). Not content to dominate the middle- and high-end of the portable music player market, Jobs also openly declared, "We'd like to go after the remaining 29%" (Jobs).

Apple noted that most Flash mp3 players had non-rechargeable batteries, tortured user interfaces, very small displays and no Click Wheels - and



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