- The Big Picture - http://www.ritholtz.com/blog -

Apple aiming for the sweetspot ?

Posted By Barry Ritholtz On January 17, 2005 @ 7:50 am In Finance,Web/Tech | Comments Disabled

Since we’ve been discussing the impact of Apple lately, I thought it worthwhile to point to a graphic [1] depiction of Apple’s marketing strategy, as conceived by future Wired comtributor Paul Nixon [2].

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 [3]

Check out the full size graph here: [4]

Nice work, Paul

Apple’s Tipping Point: Macs for the Masses [4]
Paul Nixon
Nixlog, January 12, 2005

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.


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/01/apple-aiming-for-the-sweetspot/

URLs in this post:

[1] graphic: http://www.nixlog.com/apple/

[2] Paul Nixon: mailto:nix@nixlog.com

[3] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/apple_tipping_point_lrg.gif

[4] here:: http://www.nixlog.com/apple/apple_tipping_point_lrg.php

Copyright © 2008 The Big Picture. All rights reserved.