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Apple's Brand - Dissertation Sample

16 Mar 2017Dissertation Samples

The Importance of Apple's Brand Image in Attracting Customers to the iPod

Abstract

Apple’s portable music player, the iPod, is one of the most successful products of all time, with over 20 million units sold since its launch in 2001. (Coopers, 2006) However, despite this undeniable success, analysts are still divided over why the iPod was, and remains, so much more successful than similar, and often cheaper, offerings from its competitors. Both the branding and marketing underlying the product have been cited as reasons for its success, and thus this research will examine the relative effect of each. In order to achieve this, both primary and secondary research will be used, looking at the reasons for the growth of the iPod, the importance, and development, of the Apple brand name, and the main reasons customers buy an iPod. All these questions are being answered as they have arisen from the in depth literature review, which examines both the key factors underlying the success of the iPod, and the theory underlying the relative strength and usefulness of both branding and product innovation.

Introduction

“How did iPod make a large fortune? By spending a small one. With an iPod and iTunes ad budget of over $200 million since 2001, Apple has outspent Sony, iRiver, and Creative combined by more than 20 times, according to TNS Media Intelligence. The TBWA/Chiat/Day--designed ad campaign has managed to turn the human silhouette, a cubic box, and even the colour white into symbols of Apple.” (Lustgarten, 2005)

 Given that Apple was, until a few years ago, viewed as a company that primarily made computers for very technologically minded people, it’s massively successful move into the personal music player market has amazed many branding analysts, and the “i” brand is now held up as a marketing paradigm, alongside eBay and Amazon. However, not all analysts are agreed on the origin of this success:

“Apple spends a fraction of what Sony plans to (but due to its) product innovation, Apple does not need to spend money telling us that the iPod is ‘like no other’, we can see it for ourselves. It advertises itself, with word of mouth and glowing press reviews reinforcing the brand's differentiation. Importantly, iPod innovation was not a one-hit wonder, but a series of ‘episodes’ Each has packed a punch that combines superior functionality, ease of use and aesthetic appeal. The first iPod offered a step-change in storage capacity, the iTunes Store made online music-buying much easier and iPod Photo has expanded the device's functionality, and so the list goes on.” (Taylor, 2005)

Other brands, too, are showing that product innovation, not advertising, is increasingly becoming the key to success. One would probably struggle to remember Samsung's branding, or any of its advertising, yet its success in selling plasma-/LCD-screen TVs, DVD players and mobile phones has come by offering innovative products that match or surpass Sony's at more affordable prices. Samsung's startling progress is shown by its ranking as the world's 20th most valuable global brand, just one place behind Sony, despite being much less recognised by consumers. Indeed, given the high level of price consciousness, and iPod usage, amongst students, I feel that the question of Apple’s brand image is highly relevant, and thus should be investigated further.

Literature review

The success of the iPod: Key factors

Cooper (2006) is an excellent starting point for looking at the factors underlying the success of the iPod player. The article comments that over 20 million units of iPod have been sold since its launch in 2001, and as a result the portable audio player has created an entire economy of accessories and imitators, single-handedly grabbing the music industry and pulling it into tomorrow. He also quotes Jeremy Horwitz, editor in chief of iLounge, a leading online iPod authority, who says marketers can take away some critical lessons from the iPod.

His primary lesson is that timing and execution are everything, especially relevant as a lot of experts were initially sceptical of the iPod's success because it was late into the market. However, Apple timed the launch and marketing to coincide with the point where customers were beginning to be more accepting of the concept of an MP3 player, and also where the product was far superior to anything else on the market. (Apple Computers Inc, 2006)

Penenberg (2005) also addresses an important success factor: the threat of piracy facing the music and film industry in the digital era. Peer-to-peer (P2P) networks such as ‘BitTorrent’ and ‘eDonkey’, already used by tens of millions of people around the globe, are making it easy to share content, including large music and film files, by breaking up each giant file into tiny pieces.

By the end of 2004, about 60 percent of Internet traffic was P2P activity, more than half of it video files, according to CacheLogic, a P2P company based in Cambridge, England. However, Apple is the one encouraging example here: Apple’s success with the iPod and iTunes online store shows that people will pay for copy-protected music if it is convenient and priced fairly. This is an example of a potential success factor outside of marketing and technology: rather than seeing the Internet as a threat, Apple has seen it as an opportunity, and made it as accessible to consumers as possible.

Another interesting find is that Samsung, the world's largest supplier for flash-memory chips, has specifically targeted Apple, in an attempt to turn it into its biggest customer for its NAND-type flash memory. According to a report by market research firm iSuppli, Apple's success with the flash-based iPod Shuffle has prompted South Korea's Samsung to offer Apple a deep discount and be willing to dedicate 40% of its flash-memory manufacturing capacity to seal the deal. (Hasseldahl, 2005) This is a good example of how success has bred success for Apple: the successful launch and marketing of the original iPod has made it easier for the company to launch more models based on the same technology and branding

A final useful article focuses on the impact of the iPod’s popularity on accessories providers, something that has been facilitated by Apple’s willingness to let third parties develop accessories Accessories providers have flooded consumers with over 400 accessories for portable music players, and in fact, the accessories market is actually outpacing the market for players, with the number of available add-ons doubling since 2004. (Kohler, 2005) And even more important for retailers, accessories are pulling in more revenue with even more attractive margins. It is no secret consumer electronics are greedy for gadgets that offer more and more functionality and style in smaller and smaller packages. According to Kohler, the iPod's success was a combination of excellent product design, smart marketing and great timing.

At launch, the product itself boasted an unprecedented amount of memory, a simple interface and an elegant design; and just as important, iTunes was launched as a vast source for legal, accessible digital music content. Add to this plentiful and compelling advertising, and obviously, the precedent set here has more to it than just functionality. (Kohler, 2005)

The iPod has style: it makes a statement that people are willing to pay for. Thanks to slick design, smart well-designed marketing campaigns and plenty of advertising, consumers are lusting after for iPod. As such, accessories to this market are not just about functionality: it is about self-expression, with millions of dollars being spent on iPod cosmetic upgrades. The key factor here is Apple’s willingness to allow other manufacturers to make the accessories, thus adding extra innovation and strengthening the brand, whereas Sony keeps a monopoly on accessories for all its products.

Attracting Customers: Branding versus Product

Kohli, Harich and Leuthesser (2005) have produced one of the most recent pieces in this area, with a piece of research focused on branding strategies for new products. They found that meaningful brand names: those that suggest a positive attribute or benefit of the product, are typically evaluated more favourably on overall liking and are easier to recall than non-meaningful brand names. The study reported here is the first such investigation of evaluation of brand names over repeated exposure, and of particular interest are differences in the extent to which meaningful versus non-meaningful brand names benefit from repeated exposure. Results of the study show that meaningful brand names continue to be evaluated more favourably than non-meaningful names, even after repeated exposure, but those evaluations of non-meaningful brand names may improve at a greater rate than those for meaningful brand names. This is of particular relevance to Apple, as its brand name did not have a traditional link to music players, so its large expenditure and repeated exposure could have helped counter this.

In a similar vein, Klink and Smith (2001) studied the findings of some prior research, which suggested that a brand's extendibility is constrained by the degree of perceived fit between the brand and extension product categories. However, the authors cite many examples of brands that have been extended successfully into ‘perceptually distant’ domains. Drawing on theories of consumer information processing and product adoption, the authors identify three background traits of prior work that may help explain the discrepancy between prior research and marketplace observation: limited extension information, failure to account for consumers' new product adoption tendencies, i.e. earlier versus later; and single exposure to proposed extensions. In this study, the authors find that the effects of fit disappear when attribute information is added to extension stimuli and are applicable only for later product adopters. The authors also find that perceived fit increases with greater exposure to an extension, as was the case with Apple’s branding of the iPod, and the subsequent extensions of the ‘i’ brand into the market leader it is today.

A useful conceptual model for looking at product launches is provded by Guiltinan (1999), who looked at a typical new product development process and the role of the launch stage in maximizing the chances of profitably achieving acceptance in the target market. He claimed that a launch plan can include strategic decisions, such as relative innovativeness, mass versus niche targeting, and lead versus follow, as well as tactical decisions, including the types of communication and distribution activities to emphasize, introductory pricing, branding, and when to announce new items and delete old ones. Given that other literature offers limited decision-making guidance to managers on how to prioritize and integrate the various strategic and tactical options, Guiltinan’s work is quite unique and presents a conceptual framework that suggests that the strategic and tactical challenges posed in various product launch situations depend in large measure on the specific type of buying behaviour to be influenced.

Depending on the degree of product innovativeness, managers may establish one of three types of desired demand outcomes: trial and repurchase, customer migration, or innovation adoption and diffusion, and the degree to which the desired demand outcome is realized is shown to be dependent on buyers’ perceptions of the new product's relative advantage and of its compatibility with buyers’ values and experiences, which was particularly important for the iPod, as many customers had no idea what to expect.

Guiltinan (1999) claims that perceptions of the product on these characteristics are initially influenced by the launch strategy and, given an understanding of these perceptions, managers can then select launch tactics designed to clarify or leverage relative advantages or to demonstrate or enhance compatibility to the target market, in Apple’s case, by developing iTunes, and numerous accessories The framework also demonstrates how the linkages among launch strategy, launch tactics, and the demand outcomes are impacted by the product-market environment, the technological dynamics of the industry, and the firm's resources and capabilities.

Research Questions

1.    Has the iPod’s success been driven more by its brand strength, or by the underlying product? 

This question is driven by the disagreement between Lustgarten (2005) and Taylor (2005) on whether business success is driven by the quality of the branding, or the underlying product and innovation. This question is of critical importance in assessing the importance of Apple's brand image in attracting customers to the iPod as, given the undeniable innovativeness and success of the iPod; it determines whether this success is more due to the branding or the innovation.

2.    To what degree has the Apple name influenced the success of the iPod, and vice versa? 

This question arises due to the work of Kohli, Harich and Leuthesser (2005), who suggested that a brand name with no obvious connections to the product may suffer, and also Klink and Smith (2001) who claimed that prolonged exposure to a brand extension, particularly a successful one, may cause customer perceptions of the brand to shift. In the case of Apple, it has lead to consumers viewing the brand as being associated less with computers, and much more with music and music players, despite computer sales still accounting for the majority of Apple’s business (Apple Computer Inc., 2005)

3.    What are most customers’ primary motivations for buying an iPod product or accessory?

This question has perhaps the greatest potential of any of the three to show to what extent Apple's brand image attracts customers to the iPod, as it can potentially explain the average iPod customer’s buyer behaviour patterns, according to Guiltinan (1999). For example, if the research resulting from this question leads us to conclude that a customer’s primary motivation in buying the iPod is as a fashion accessory, then we can conclude that Apple’s brand image, and the image it has built around the iPod, has successfully attracted customers. However if, as I suspect and as a large amount of the research claims, customers choose the iPod due to its technological innovativeness, then this may show that Apple’s brand image has not been quite such a key factor in the iPod’s success

Research Design

It is important to answer the first question is such a way that it is clearly mutually exclusive from the third question, (Bryman and Bell, 2003) as there is potential for confusion between the development of the iPod as a product line and a brand in itself, as opposed to individual customer reasons for buying the iPod. The first question focuses more on Apple’s approach to marketing the iPod, including what they found to be the most successful marketing methods, using the ‘5P’ framework of marketing to define the potential dimensions that Apple measured, and looked to exploit.

Answering the first question will largely be a case of using deductive reasoning, and looking closely at other research on similar topics. The most useful research strategy for this investigation would be to conduct a more in depth review of the literature around the iPod, including attempting to gain access to Apple’s original customer research, branding strategy and design brief at the time of product launch. Equally useful would be to gain access to Apple executives, or to examine previous interviews conducted with them, to help determine whether, and if so how, their marketing strategy for the iPod changed over time.

The second question is a standalone question designed to measure how the iPod brand developed over time, emerging from the traditional image of Apple Computers, into its own distinctive identity, and how it has helped the Apple brand develop over time. As such, it is important to identify where the Apple brand was positioned when the iPod was first launch, and thus whether it was positioned to support the iPod, or whether, conceptually, it should have hindered the launch. Within this, it is important to bear in mind the launches of the ‘iMac’ and ‘iBook’, which were arguably the start of the ‘i’ brand line, and whether these brought Apple into a more favourable light with consumers.

In order to answer this question, it will be necessary to examine customer research data from the time of the launch, and previous to it, in order to determine customer perceptions of Apple as a company at the time. It could also be useful to look at Apple’s overall branding and marketing strategy at this time, to see if the company felt it needed to alter its brand image in order to ensure success. This question can offer great insights into the influence of the Apple brand on the iPod’s success, as it can show whether the brand was in a position to support the iPod at time of launch and, if not, how it developed the capability to support the iPod over time.

The third and final question is designed to be answered by direct assessment of consumer behaviours, as it examines buyer behaviour directly. It has the greatest potential to uncover whether it is branding and image, or product and technology, that attract customers to the iPod, and to the accessories, but only if it can be shown to produce some statistically significant data.

As such, this question will need to be answered using detailed primary research, through iPod user surveys, directed both at students, who are traditionally more price conscious, children, whose iPods may well have been bought by their parents, and professionals, who have disposable income, but many competing spending priorities. It is possible that this question will reveal different answers for each group, thus it is important that a statistically large sample is taken from each group, to ensure that meaningful conclusions can be drawn.

Conclusions

    Whilst the iPod’s success is undisputed, there is still disagreement over the root cause of this success. This research hopes to cast new light on the key factors in the success of the iPod, and thus hopefully contribute to the understanding of what makes a successful product in general. The main hypothesis is that the success of the iPod can be primarily attributable to either Apple and the ‘i’ labels brand strength, or the fact that the underlying product filled a key niche in the market at the correct time. However, it is likely that there will be no clear cut answer to this research, and that it will be shown that different demographic groups have different reasons for choosing the iPod. Nevertheless, clear cut conclusions should be obtained for some demographic groups, and the research will likely make a contribution to the understanding of the relationship between branding and product innovation, and how the two can combine to create a successful product, with a strong brand.

References:

1.    Apple Computer Inc. (Accessed 16th February 2006) www.apple.com

2.    Bryman, A. and Bell, E. (2003) Business research methods. Oxford: Oxford. University
3.    Cooper, S. (2006) Age of the iPod. Entrepreneur, Vol. 34, Issue 1, p. 17.
4.    Guiltinan, J. P. (1999) Launch Strategy, Launch Tactics, and Demand Outcomes. Journal of Product Innovation Management; Vol. 16, Issue 6, p. 509.
5.    Hasseldahl, A. (26th August 2005) Business Week Online.
6.    Klink, R. R. and Smith, D. C. (2001) Threats to the External Validity of Brand Extension Research. Journal of Marketing Research; Vol. 38, Issue 3, p. 326.
7.    Kohler, M. Z. (2005) Booming iPod Biz Broadens Accessories Opportunities. Twice: This Week in Consumer Electronics; Vol. 20, Issue 15, p. 44.
8.    Kohli, C. S. Harich, K. R. and Leuthesser, L. (2005) Creating brand identity: a study of evaluation of new brand names. Journal of Business Research; Vol. 58, Issue 11, p. 1506.
9.    Lustgarten, A. (2005) IPOD. Fortune; Vol. 152, Issue 9, p. 154.
10.    Penenberg, A. L. (2005) Peer-to-Peer: The Problem is the Solution. Fast Company; Issue 101, p. 58.
11.    Taylor, D. (2005) ‘Wow’ factor lies in products. Marketing (UK), 2nd June 2005, p. 33

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