Since we’ve been discussing the impact of Apple lately, I thought it worthwhile to point to a graphic depiction of Apple’s marketing strategy, as conceived by future Wired comtributor Paul Nixon.

I’m not sure I agree with Paul’s statement that "until January 2005,
Apple had no iPod that served the mass market
" givent he enormous sales
numbers the Pod has rung up. But the broader point of targeting the new devices
at truly mass entry level (i.e., cheap) is valid.

click for larger graphic

Apple_tipping_point_lrg

Check out the full size graph here:

Nice work, Paul

Source:
Apple’s Tipping Point: Macs for the Masses
Paul Nixon
Nixlog, January 12, 2005
http://www.nixlog.com/apple/

Here’s what Nixon
had to say about Apple’s latest marketing move:

"With the launch of iPod Shuffle and Mac
mini they have finally converged two product paths with the mass market
in mind. This will not only drive more iPod sales (via the Shuffle),
but also fulfill the promised "halo" effect of the iPod products as PC
users jump to the Mac mini. Over the course of 2005, Apple will
continue to dominate and grow its MP3 player market share, while
steadily growing its PC business through the Mac mini. As with the
original iPod, the Mac mini could build slow, but serious momentum in
the market place. Within a one to two year timeframe, the Mac mini
could bring Apple to a tipping point in which a combination of factors
create strong double digit market share in the mass-PC market, as
Windows-based PC’s continue to suffer from viruses and adware and users
are drawn to the elegant and affordable simplicity of the Mac mini.

These things do not happen by accident. The graphic below
illustrates extreme patience and foresight from Apple to bring users to
the platform by innovating increasingly towards the mass market over
time without sacrificing the middle or high-end markets. In the end,
the iPod continues to be the vehicle that drives Apple’s ultimate goal:
Switching. In many cases the biggest hesitation to switch was price.
With the Mac mini this concern is now moot. We could very well be
witnessing the early fruits of a five to ten year business strategy
from Apple that has been in the works since the first iPod. If it works
– Apple will go down in history as a company that patiently built its
brand equity through high-quality products and design — and then, when
the time was right and audience the largest, brought their superior
computing experience to the masses. — Paul Nixon

Here’s the breakdown:

• The Sweet Spot: Inside the Mass Market Psychological Price Barriers ($100 for MP3 players, $500 for personal computers)

• Price: Reflected by market segments

• Market Opportunity: By number of potential buyers at a given price point.

• Mass MP3 Market: Price breaks-through psychological $100 mass market barrier. Simplicity and price make purchase less risky for mass market

• Mass Computer Market: Price breaks-through psychological $500 mass market barrier. Simplicity and price make purchase less risky for mass market.

•  iPod "Halo" Effect: As the number of PC users purchasing iPods continues to increase — perhaps exponentially with the new Shuffle — the Mac mini presents the first real low cost, low risk opportunity to become a switcher with minimal cost and overlap of current PC equipment.

• PC Users Switch: Low Mac mini price coupled with great design and decent specs increases temptation for PC users switch.

•  "Too Cool To Resist" Effect: Low Mac mini price coupled with great design and decent specs increases temptation for current Mac owners to buy Mac minis as back-up machines, test machines, media hubs, second or third Macs for the house, etc.

•  High-end Market: Market: High-end. Wants: Design, features and performance regardless of price. Most storage space. Best features. Best performance. Type: Early adopter. Must be first to own. Trendsetters. Results: Higher price, fewer buyers.

•  Middle Market: Market: Middle. Wants: Sensible balance between design, features and performance within reasonable price range. More storage space. Better features. Better performance. Type: Upper mainstream buyers. Group between mass market and early adopters. Make educated purchases. Results: Lower price, more buyers. Solidifies brand in the marketplace.

•  Mass Market: Market: Mass. Wants: Low price, even at the expense of performance and features. Basic utility outweighs performance. Cool design can inspire impulse buy if the price is right. Type: Mass market buyers. Typically seek most utility for the dollar. Lower the price, the better. Results: Lowest price, most buyers. Expands brand in the marketplace.

 

Category: Finance, Web/Tech

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

3 Responses to “Apple aiming for the sweetspot ?”

  1. brian says:

    couldn’t anyone construct a graph/ic like this for any decent consumer electronics company? Sony does this (Qualia/Wega/Walkman), so does dell et al.

  2. Rajesh says:

    Looks like Apple is beginning to get under Dell’s skin – quote from an interview with Kevin Rollins (Dell CEO):

    “It’s interesting the iPod has been out for three years and it’s only
    this past year it’s become a raging success. Well those things that
    become fads rage and then they drop off. When I was growing up there
    was a product made by Sony called the Sony Walkman – a rage, everyone
    had to have one,” he said. “Well you don’t hear about the Walkman
    anymore. I believe that one product wonders come and go. You have to
    have sustainable business models, sustainable strategy.”
    http://hardware.silicon.com/desktops/0,39024645,39127101,00.htm

    By my research Sony sold 340 million walkmans (http://www.scena.org/columns/lebrecht/040726-NL-walkman.html) and, of course, served as an anchor for other product introductions. And walkman sales only tapered off during the early 90s after a 15 year run. I suspect Apple would be very happy with that kind of “fad”. Not sure if Rollins is on top of this one (or is it sour grapes?)

  3. Rajesh says:

    Are too many people just ticked off with Apple’s music related successes? From a Reuter’s piece on online music (http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh64096_2005-01-18_15-03-44_l18719119_newsml):

    A study from market research firm Shelley Taylor & Associates
    blasts music stores for confusing navigation and locking users
    into proprietary formats and music players.

    “(Apple and iTunes) need to watch their back and continue to
    develop, especially since they’ve never been good at the
    e-commerce and shopping,” Taylor said. She cited several key
    Fnac features that are lacking in iTunes, including discounts
    for buying multiple tracks and the ability to download music
    videos and purchase concert tickets.

    The lack of features similar to Fnac might be valid, but the claim of Apple “never been good at the e-commerce and shopping” makes me wonder: WTF? Let me see if I read Apple’s latest numbers right:

    Apple iTMS has sold 230 million songs and is selling 1.25
    million a day. Source: http://macminute.com/2005/01/12/keynote-ipod-itunes/
    Apple’s revenue from retail stores was $547 million last quarter
    (Source: http://www.macnn.com/news/27645) which leaves
    $2.943 billion in revenues unaccounted for.

    OK let me guesstimate an overwhelming $2 billion was through other sources (iPods purchased from resellers, education sales, HP deal etc.) That leaves a conservative estimate of $900 million in goods sold through Apple’s online store. For comparison, analysts estimate Amazon to report $2.42B in sales for last quarter (http://finance.yahoo.com/q/ae?s=AMZN). Half the size of Amazon? All in all not bad e-commerce that. So Shelley, what is the basis of your claim that Apple sucks and has always sucked at “ecommerce and shopping”? Maybe it’s something other than just the numbers – is it the ease of use? ;)