Marketing Expert's Corner

This article written in 2007

 

It's the height of the tech bubble, when new companies -- whose sole asset is a URL ending in .com -- are achieving stratospheric valuations.  But you're in charge of a 22-year old company that has solid ownership of the PC industry's number five spot.  You've got a cult following of ~5% market share, but almost complete incompatibility with the mainstream.  

Now your engineers are working on an MP3 player, initially a me-too product behind innovator and leader Rio.  Welcome to Apple in 1999. 

From this position, you end up owning the MP3 product category, selling over $10 B of them and garnering 70% market share.  You soundly trounce the likes of Sony and Microsoft, driving Rio out of the business.  Even during Christmas 2005 -- four years after your initial product -- you're able to triple sales over the previous year.  Pretty good stunt?  Miraculous marketing.  Company saver.

What you should learn from iPod Marketing

Nobody should expect to be Steve Jobs.  He's a unique wizard.  But we should all learn about the magical ingredients he uses, and the formulas that lead to insanely great marketing results.  Even though he's a consumer guy, there's a lot you can apply to B2B marketing:

Tightly focused strategy -- While everyone else was making an MP3 player that was better/cheaper/faster, Apple was making electronic jewelry that also played MP3s.  Never focusing on price, they brought to market more value, more style, and new ways of interacting with digital media.  And when it came to merging an MP3 player with a phone, they didn't lose focus...instead, they got cell phone manufacturers to make the device.

strategy that really matters -- Apple was fighting for its life, and it had to change the game.  iPod wasn't a digital walkman, it was a handheld client computer disguised as an MP3 player.  Apple was going somewhere its prime enemies -- IBM, Microsoft, and Intel -- wouldn't follow anytime soon.  Oh, and Apple made sure that iPod worked better with a Mac than with a PC, so they could make a desktop Mac into a server.  Both iPod and Mac sales benefited from this strategy.

Being that much better -- The hardware, the software, the packaging, the marketing.  Even the earphone plug on the iPod is better than anybody else has ever made.  It's a small thing -- maybe a 10 cent part rather than a 5 cent one -- but it makes a big difference to the perceived reliability of the player because the earphone wire doesn't break.  The iPod was smaller and more durable than its competitors.  On any one feature, the iPod has always been at least 10% better than the market expected...and the combination of all those 10% improvements proved to be a deadly advantage.  

Packaging and fit-and-finish really matter -- From the lack of a battery door to the perfectly tight cases to the quality of the cardboard boxes, everything about an iPod is smooth and solid.  Even though the lack of a battery door means customer irritation about battery life and replacement, the resulting solidity and durability is an obvious advantage.  The ultimate packaging -- the Apple stores -- yield the best cashflow of any retail outlet in the world.  This channel control meant Apple could see more complicated features, which in turn gave the customer another reason to come back to the store.

Always one step ahead of the market -- Apple raised the bar every 6 months.  New hardware, better software, newer applications.  Made their customers really want that new thing.  This is one of those weird situations where the best product actually won.  But it did not win because it was the best price-performance or bleeding-edge features.  Apple actually watched others do the real innovation, and rapidly cloned the most interesting features.  iPod won because it was the right balance of features, and it lived up to its marketing as the coolest thing.

An ecosystem of partners, content, and promotion -- With Big Things, you never succeed alone.  Apple wanted to change the way people used MP3 players, so they recruited Audible and others to help create podcasting.  They partnered with cell phone vendors, rock bands, radio personalities, content syndicators.  They've been second only to Disney when it comes to cross-promotion.  And when you consider the power of iTunes and the iPhone, the ecosystem Apple created has literally redefined the market around themselves.

iConic product design -- For 5 years, the iPod external design has been so obviously the same that it is instantly recognizable.  Except for the shuffle (almost a throw-away product variant), Apple did everything they could to keep the outside the same even as the insides and features expanded greatly.  This is "easier" with physical products, but can be done with software UIs as well.  So in their iPod UI they stuck with the Macintosh font style, and in the iTunes UI they consistently evoked the iPod brushed aluminum and LCD look.

Never letting commoditization happen -- The moment that the crowd of competitors came close, Apple improved the product.  They also litigated, threatened, and kept changing protocols.  They always charged a premium and didn't discount through the channel.  But they did cross-promote like crazy, giving people ways to get the product at a lower price through bundles.

Leveraging companion services -- iPod+iTunes have sold 2,000,000,000 songs.  At a dollar apiece.  As of 2007, iTunes now represents 10% of total music retailing, in third place in the US.  Meanwhile, former leaders Wherehouse and Tower are all but out of business.  This level of leverage even Microsoft is jealous of.

Enabling -- but not requiring -- change in customer behavior -- Apple never told users they had to change the way they consumed music, radio, or video clips.  They just showed how cool it would be to have a personal hand-held TiVo system.  And how great it would be to never listen to commercials again.  In my household and in my car, the radio hasn't been on for a year because of podcasts.  From here forward, radio will only be used for the Emergency Broadcast System (beeeeeeeeeeeeeeeeeep!).

Products with personality, approaching cult status -- Apple created a product with personality, and they encouraged cults.  Apple has always been good at creating products that became collector's items later on, and they've done that in spades with the special iPod production runs with unique colors, endorsements, etc.

iConic web site -- For 2005, Apple moved all other products off the home page.  They make hundreds of products that deserve attention, but it was more important for them to press their advantage with iPod, and to keep the customer's mind focused on it.  Of course, now that they have introduced the Intel Macs, the iPod is invisible...but that's precisely the discipline we can all learn from.  (Update:  in 2006, the Apple website lost this focus and became chaotic.  But click on the image to the left to see how it used to look in the glory days.)

Advertising consistency, simplicity, and uber coolness  -- From the first billboard and TV ads through the latest Nano beauty, the look and feel of the ads has been consistent, distinctive, striking, and strong, reinforcing branding effects.  For 5 years.  Internationally.  Learn from this.

Really easy to buy -- Through the web, through distributors, through partner bundles, through their own stores:  Apple really invested in their channels to make sure demand met supply.  With price points from $99-$499, iPod has become an affordable luxury, and it needed to be sold like one.  Apple has been rewarded with the highest retail store productivity in history -- $4000 a square foot.

Singular focus -- They really wanted it.  They really needed it.  Apple put all their attention behind this one thing.  Apple has hundreds of products and thousands of internal problems.  But the only product you really saw from 2004-2006 was iPod, and Apple put all its quality time on solving iPod problems and making the customer feel the product was perfect.

The Bottom Line

Apple has been able to create the market environment in which iPod rules.  This is what the best marketing does -- defines the battle, sets the rules of engagement.  It's not easy, it's not fast, and it's hardly cheap.  But with focus and time, it is wildly profitable.

There's one final lesson from the iPod story:  the most powerful marketing doesn't come just from marketing.  It emanates from every part of the company...as much a way of being and behaving as it is a way of thinking.  This powerful marketing comes from the top, even if that isn't where it started from. 

To quote what PC Magazine wrote about one of iPod's competitors:  "Pity poor Sony.  It invented the Walkman and then squabbled as Apple stole its lunch.  Sony's Networked Walkman finally supports MP3 files, yet it lacks so much else that it's not worth the price.  With ergonomics straight from a Klingon warship, balky software, and a poor display, this one deserves its place in the remainder rack." 

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