“Apple Computer, Inc.: Think Different, Think Online Music”
1. 4 C’s Stakeholder Analysis •Customers Based on the background of “the era of the Digital lifestyle”, iTunes 3 target customers are; StakeholderStake in the projectPotential impact on ProjectGrowth percentage of online distributionPerceived attitudes and/or risks 12 – 24 yearsDownloaded an average of 12 tunes per month, housing libraries between 25 to more than 300,000 songs from the internetHigh59%•Unlimited library of songs and videos by genre, artist and album •Software design is attractive and easy to use Sound in industry standard Dolby Advanced Audio, allowing CD quality sound •Better data compression allowing users to store more files more quickly •There was no subscription fee but songs were not free •The teens and children felt exploited by the escalating prices of music 25 – 34 yearsDownloaded at least one music file from the internetHigh43% 35 – 54 yearsDownloaded at least one music file from the internetMedium24% Online music was growing to be the best phenomena in the United States. Statistics show that by July 2003, 65 million people in the USA had downloaded a song from the internet.
The growth rate by December 2002 was at 26% and by less than 5 months it had grown to more than 30%. Most consumers of this online music were children and teens. They felt exploited by the escalating prices of music from stores and sort to look for other free or cheaper means to own the music. (They do not have a dependable income). Today’s music industry targets the younger generation. They like to be ‘down with the latest releases (both audio and video)’, ‘the newest kid on the block’ and to be known to own it.
ITunes interface as shown in exhibit 7; have the top albums, top songs, latest releases and favourites and a free 30 second full quality preview of any song. This will seize the tedious search on the internet, but have a one stop shop for all their preferences. Based on this, the target segment 12 – 24 years was the most valuable. •Company ITunes fit Apple’s brand and capabilities because Apple’s brand already speaks for itself. It is associated with high level innovative products with end user capabilities from the time it began. Apple has for years tried to have products that are exclusive to Mac Computers.
Although the market segment does not allow them to do that 100%, they had to have alternative similar products for Windows PC users. Apple always developed products that would be used first by Mac users, to dwell in the amazing features and resources. They were loyal to their customers. ITunes was launched into the already existing market that Apple carried. Its vision was to be a major player in the digital integration. At the time of its launch, iTunes came with the best services and features to all its competitions. Apple continuous to maintain a high standard of its products. •Competitors Tunes CompetitorsWeaknessesOpportunities for iTunesStrengthsThreats for iTunes Peer to Peer Networks-Quality of downloads was poor -No guarantee of the file download was a full version -No guarantee of correct song or correct title -Trading of copyrighted files was technically illegal -RIAA strategy of legally attacking individuals made some reconsider using these services -The music for some networks were on rental basis-Provided CD quality sounds and better data compression -Guarantee of full version download and legal activities because the five largest music publishers licensed songs to iTunes. A ready market segment -The user owns the music -Networks were free, containing an unlimited library of songs and videos -Easy burning into CDs and MP3 players -Software design is easy to use and attractive -One can own songs in 5 minutes -Can create musical anthologies -Songs are stored directly on the Hard disk of all PC users, not limited to Mac users only. -Downloads costs about the same as a CD in the store, this can discourage the (12 – 24 years) target customers who do not have dedicated income and already think that the costs of a CD is expensive. -The song list is limited to about 200,000. This service is exclusive to Mac users, thus other PC users cannot access it. Buymusic. com-A range in cost for songs -Users had to go through end-use agreements before owning a song -One cannot navigate their downloads -Songs were not compatible to the popular ipod player-One cost for all songs -Site is consumer friendly -Songs are searchable by title, artist, album and genre before downloading -The ipod player is an Apple brand. -300,000 song library -Costs as little as $0. 79 -Downloads available as individual songs or albums -Downloads are not limited directly to the desktop, but other media -Extensive peripheral memory devices store Different content and usage rules based on the number of computer transfers, CD burns and portable music transfers -Services offered to the larger PC users (Windows technology)-The song list is limited to about 200,000. -Costs $ 0. 99, Buymusic. com offers a lower rate. This can be more attractive to the (12 – 24 year olds) customer target. -Mass transfers of downloads are limited to ipods. -Apple users are at 4% computer market, failing to convert Windows PC users. BuyMusic. Com has a larger audience offering the same service. Music Stores-A song/ album costs more -Stores were located in specific areas The consumer does not have control of the playlist -Tedious to look different at prices from one store to another physically-A song is cheaper than an album -Consumers select their own playlist -Online stores like iTunes were a click away and available to all internet users -Easy to look at different prices online-The music industry supports them 100%; therefore there are no legal issues. -Available offers of lowered price to purchase music -A much larger selection of music-The Music industry could develop copyright issues at any given time, thus legal issues with RIAA -The song list is limited to about 200,000. Community The other external organization/ stakeholder that could affect whether iTunes succeeds are; -Government e. g. if it introduces by laws regulating the use of ecommerce or internet based stores. -Suppliers e. g. The 5 music distributors decide to discontinue the sale of their license, not to grant exclusive distribution, increase their price cost of the license. -Recording Industry Association of America with continuous threats of copyright issues. -Lobby groups; airing concerns on explicit music and video content that is exposed/ accessible to children and teenagers (12 – 24 years, market segment).
The action of the following people can affect the perception of consumers at the media level and as a result, the Apple brand is compromised. 2. Positioning Map of iTunes 3. ITunes Marketing Mix •Product Brand•ITunes is a product from the Apple Brand. Apple is a major player in digital integration. Appearance•Attractive and user friendly interface as show in Exhibit 7. Quality•The quality of the songs is industry-standard Dolby Advanced Audio coding format producing CD quality sound. Packaging•Better data compression enabling users to store songs and allowing faster downloading speeds.
Support Service•Songs downloaded are legal with complete ownership •A large library with capabilities of searching songs by artist, song title, album and or genre. •A provision of 30 seconds preview Functionality•Exclusive to Mac users only •Price FinancingNarrow profit margin due to royalties Per song Royalties – $ 0. 70 Admin Costs – $ 0. 12 Profits – $ 0. 17 Total – $ 0. 99 List priceA single price for each tune, regardless of the genre, artist, album or hit. AllowancesAvailability of bonus tracks Place Location•Internet based website functioning as the interface for the online store Channel of motivation•One click shopping service Market Coverage•Available internationally, serving various customers at one given time •Promotion Media•Abundance of positive press •Apples stylish brand tones was continuous with many of the artists images Advertising•Attractive television advertising blitz with organic tones •Ilife bundled software suite •As the Strategic Director of iTunes, to create a barrier against the competition, I would: a. Launch a windows version without any more delays . Add an additional feature i. e. customer loyalty schemes tying customers to buy at iTunes only c. Customer management software tracking and monitoring consumers purchases & needs d. Buymusic. com was exclusive to Windows PC users that were the larger percentage of the computer market. I would propose to acquire buymusic. com and gain their larger market share. Integrate the announcement to consumers with the launch of the Windows version with Apple quality and branding. I would retain the Mac users and acquire new clients with the windows PC users.
This will give iTunes the exclusiveness they have been trying to gain. e. I would increase the brand equity by carrying out activities that would enhance the brand image i. e. targeting the 12 – 24 year olds f. To invest in strategic alliances with the 5 largest music publishers – so as to achieve exclusivity. This would imply that their competitors would have to buy from them or it locks them out that consumers can only buy from iTunes. However, one has to consider the cost implications and the positioning of the market, as exclusive distributors. 4.
From a Strategic perspective, Apple launched iTunes because •Computer products are technology based and have very short product life cycles. There are in an industry that always keeps changing. Because technology matures, it is prudent to come up with new ideas, resources and efficiency of processes. •Apple has always remained focused on product innovations. It has increasingly looked to developing and controlling its own software. Using Ansoff’s Product Development, Apple was able to offer its existing customers and use the current markets new products. Apple relegated to niche status and took the opportunity to tap into an already existing market. The use of computers and internet based services was in the increase rapidly. This was a good opportunity to expand their revenue source from additional products. Bibliography Jisc Infonet (2008) ‘Stakeholders analysis template’ Good practice and innovation www. jiscinfonet. ac. uk [accessed 5 June 2009] Database Marketing Institute (2009) ‘Managing Customer Segments’ http://www. dbmarketing. com/articles/Art134. htm [accessed 5 June 2009] Wikipedia (Modified 2009) ‘Stakeholders Analysis’ The Free Encyclopedia http://en. ikipedia. org/wiki/Stakeholder_analysis [accessed 5 June 2009] Product positioning Maps (2009) http://www. tcdcconnect. com/content/blog/wp-content/uploads/2009/03/create-val ue-from-positioning-map. pdf [accessed 6 June 2009] Harvard Business publishing (2007) ‘Mapping your Competitive Advantage’ Harvard Business Review http://hbr. harvardbusiness. org/2007/11/mapping-your-competitive-position/ar/1 [accessed 6 June 2009] 12 Manage (2009) ‘Stakeholder Mapping’ The Executive Fast Track http://www. 12manage. com/methods_stakeholder_mapping. html [accessed 5 June 2009] 2 Manage (2009) ‘Marketing Mix’ The Executive Fast Track http://www. 12manage. com/methods_marketing_mix. html [accessed 6 June 2009] Wikipedia (modified 2009) ‘Marketing Mix’ The Free Encyclopedia http://en. wikipedia. org/wiki/Marketing_mix [accessed 6 June 2009] 12 Manage (2009) ‘Product Market Grid’ The Executive Fast Track http://www. 12manage. com/methods_productmarketgrid. html [accessed 6 June 2009] Wikipedia (modified 2009) ‘Technology lifecycle’ The Free Encyclopedia http://en. wikipedia. org/wiki/Technology_lifecycle [accessed 6 June 2009]