How Apple Company marketed iPod with Network Effect
Apple Inc. released a portable media-player in October 2001 and named it iPod. iPod’s popularity established the brand’s name in the industry and led to the successes of successive Apple products like iPad and iPhone. However, when iPod first came out, it was not the first hard disk-based portable audio player on the market. So how did Apple company market their product in the existing-product market?
The answer is Apple used Network Effect as we learned in class. Before iPod came out, there were several mp3 players on the market. Diamond Rio PMP300 (1998) with a 32 MB storage, well-recognized as the first mp3 player, was sold at $250. Creative Labs Nomad (1999), a 32MB portable was sold at $499. Personal Jukebox PJB-100 (1999) with a 4.8GB storage by Remote Solution, was listed for $799. The first generation of iPod has a 5GB storage and was sold at $399. Considering its storage solution with its price, it was quite cheap comparing to its competitors at the time. Unlike Apple’s Macintosh computers, iPod is an affordable luxury, one that young professionals and young students can afford. Aside from its cheap price, celebrity endorsement also helped iPod gained popularity. Many professional musicians, moviemakers, and singers preferred Apple products and made iPod a fashion icon. In addition to that, Apple also provided a series of add-on products and services, such as iTunes Music Store that offers legal song downloads.
Selling iPod with a relative cheap price soon help Apple attracts a large initial customer group. One year and a half later, Apple successfully sold more than 1 million units of iPod, reaching its tipping point. From that point on, sales raised phenomenally and Apple gradually took over the majority market share of the digital portable audio player market.
iPod marketing is not the only place Apple uses network effect. For instance, iTunes Music Store and App Store uses indirect network effect to attract users while Apple devices’ Facetime function uses direct network effect to attract users. Apple made good use of network effect to promote their products and increase their customer adoption rate.
Source 1: http://windowsitpro.com/windows/ipod-success-apple-takes-network-effect-microsoft
Source 2: https://ashwinmalshe.wordpress.com/2011/10/16/apples-network-externality/
Source 3: http://anythingbutipod.com/2008/03/10th-anniversay-of-the-mp3-player/