When Sony introduced its Walkman in the late 1970s, it quickly became a popular way for music lovers to play cassette tapes with their favorite songsanywhere they went. Competing players quickly emerged, but Sony kept its lead by improving its Walkman and then offering models for CDs when that medium came on the market.

In the late 1990s, the new MP3 format offered quality music from a digital file that played on a computer or portable player. Diamond Multimedia's Rio was the first MP3 player. The Rio was innovative, but users had to download music from virus-ridden websites such as Napsteror use special software to "rip" CDs to MP3 format. Many music buffs liked the idea of having songs at their fingertips, but getting the digital files was just too complicated. Further, music companies filed lawsuits charging some with illegally downloading MP3 music files. All of this slowed the initial adoption of MP3 players.

Attitudes quickly changed when Apple offered an innovative marketing mix that addressed these customer needs. The online iTunes store offered legal downloads of songs at a reasonable price without the risk of viruses. Apple's free iTunes software made it easy to organize digital music on a computer and transfer it to Apple's iPod. The iPod was stylish and easy to use. Apple's ads generated awareness and interest of the new concept among customers with the promise of "a thousand songs in your pocket." Even skeptics who ignored the ads couldn't help but notice the distinctive white iPod cords dangling from the ears of a friend who was "in" on this cool new product. That prompted a lot of product conversations and on-the-spot iPod demos. Testimonials on blogs, online consumer reviews, and posts on social media also helped spread the word.

Apple also reinvented the cell phone market when it introduced the iPhone. More than just a cell phone that also played music, the iPhone's colorful touchscreen display, web browsing, and music player wowed consumers. Soon iPhone owners customized their phones with software applications ("apps") from the iTunes store that let them play games such as Angry Birds and Minecraft: Pocket Edition, watch YouTube videos, or check Facebook or Snapchat on their iPhones.

These days most American consumers already own a smartphone, and growth has slowed. So Apple looks to international markets for new growth opportunities. Here it finds consumers with different needs. For example, in India, where consumers have less disposable income, Apple lowers prices and provides interest-free loans. Chinese consumers are influenced a great deal by what their friends buy. So Apple's strategy focuses on getting opinion leaders and celebrities to use the iPhone.

The iPhone's success created opportunities for other Apple products. Once someone owns an iPhone, he or she pays more attention to Applelingering at a store display, watching an Apple ad, or asking friends about their iPad. A positive iPhone experience raises a customer's expectations and trust in the entire Apple product line; many iPhone buyers went on to buy a Macbook, iPad, or Apple Watch, and maybe subscribed to Apple TV and Apple Music.

Apple's iPod and iTunes were innovative, but over time consumer attitudes on how to buy and listen to music changed. Many were happy just to "rent" music rather than buy and "own" a digital file. Streaming music services from Pandora and Spotify offered customers subscriptions to large music catalogs. Soon there were similar services from Google, Amazon, and Apple.

By the time Apple Music launched, consumers had more choice among streaming services. Customers with economic concerns often chose the free advertising-supported option from Spotify. Others wanted more information before deciding. While researching, they might have found that Spotify didn't carry Taylor Swift's music catalog, and that Tidal had exclusive access to some music from Kanye and Beyonc. Decisions, decisions. More chose Spotify, which had a head start, but Apple Music made up ground to emerge as the number two player in the United States.

Looking ahead, the iPhone may be key to a big opportunity for Apple: delivering targeted advertising to customers' iPhones. In the "online ad delivery" market, Apple competes with Google, Facebook, and Amazoneach of which collects and analyzes data that predict customers' needs and interests to deliver advertising they might care about. Accurate predictions allow marketing managers to direct the right promotional messages to customers at the appropriate stage in the consumer decision process.

Making predictions requires customer data, and the iPhone knows a lot about its owner, including which apps are used and what they are used for, online searches, and the Page 112questions customers ask Siri, the iPhone's intelligent assistant. The iPhone also tracks a customer's location. All of these data can help Apple deliver targeted, timely promotion for brands. Let's look at an example.

Say Peet's Coffee & Tea wants to target loyal Starbucks customers like Mallory Moog. It wants to encourage Mallory to try Peet's in hopes that she changes her coffee habits. Apple knows Mallory uses the Starbucks app three to four mornings a week to buy a Caff Mocha. When Mallory gets within a block of a Peet's Coffee & Tea storeand only if it's morningPeet's sends Mallory's iPhone a text message with a coupon for 50 percent off a Peet's Caff Mocha. The text conveniently includes a link with Apple Map directions to the nearby store.

Apple faces strong, fast-moving competitionall seeking a piece of Apple's pie. To stay ahead, it must continue to innovate in music, wearable technology, computers, phones, and advertising delivery. Success will continue to be based on its ability to anticipate customer needs and exceed customer expectations.

APPLYING CONCEPTS FROM CHAPTER 5 RESPOND TO THE FOLLOWING QUESTION:

What else could Apple do to enhance the launch and subsequent sales of Apple Music? Offer some specific strategy suggestions and justify each by referring to concepts from this chapter.