Apple iLounge

Challenge.

“Our goal is to successfully combine the experience of a record store or a cafe with the accessibility of online

distribution for digital media.” - iLounge developer.

Apple iLounge

Situation.Apple iLounge

Apple.Apple iLounge

The Situation.

Today, Apple Macintosh is one of the worlds largest computer manufacturers, currently claiming about 10 % of the computer users world wide.

Apple are known to innovate in style, design and functionality, the brand have a unique “cool” non-comparable in the electronics world.

The company is also spearheading the digital audio and video revolution with its portable music players and iTunes online music store.

In recent years the ipod, iphone and the itouch have revolutionized their respective markets. Apple also own software like iTunes, and Apple TV.

2008 Apple overtook the 2nd place on the U.S.A’s top list over music retailing, only beaten by Wal-Mart.

In January 2009 iTunes store passed 6 billion songs sold world wide, which accounts for almost 70% of the total online music sales.

The online library has more than 10 million songs (New songs are uploaded daily) and over 1 million podcasts.

Apple has also bought distribution rights of companies like NBC, Disney, and Pixar for more than 2,500 movies and 30,000 TV-episodes.

Changes in Consumption.

iTunes = 6 billion sold.5 billion a year illegally.

Sweden: 20 million downloads / year.

Sweden 2008: Download revenue higher than CD retail.

Record stores closing down.

Apple iLounge

The Situation.

The Situation.

25% of Swedes live in Stockholm.

35% of the Swedish GDP.

90% of 16 - 35 have computer access.

15% of those are Mac owners.

80% between 16 - 35 own a Mp3 device.

(1.5 million sold annually in Sweden)

Stockholm.

Apple iLounge

Apple iLounge

The Situation.S.W.O.T

Strengths

Top-of-mind in the Mp3 player market.

+ 10 million song catalog.

Apple iLounge

The Situation.S.W.O.T

Weaknesses

Low profit margins.

Limited experience in service.

Apple iLounge

The Situation.S.W.O.T

Opportunities

Opening a new market niche.

Fluctuating market.

Apple iLounge

The Situation.S.W.O.T

Threats

Failure to find a partner.

Low margin = low profitability.

Apple iLounge

The Situation.Competitive Rivalry.

Rivalry.

Supplier bargain power. Threat of new entrants.

Buyer bargain power.Threat of substitution.

Medium.

Both sides are quite equally dependent on

each other.

Medium - High.

Easy to enter. Many retailers already have

the locations.

Low.

Once a owner of Mp3 player the CD is gone.

High.

The illegal downloading is 10 times greater than

the legal.

Apple iLounge

Competitors.

Legal Illegal

Some of the most popular alternatives except iTunes are:

Mp3.com, eMusic.com Amazonmp3.com, Beatport.

Nokia and Sony Ericsson are also establishing online music services

Playnow (Sony Ericsson) have already more than 1 million titles available

Nokia are showing similar numbers.

Bit torrent (peer-to-peer) downloads is one of the largest threats to the digital entertainment industry.

Pirate Bay, Torrentz, Demoniod, and WhatCd.

Pirate Bay is the biggest one and offers a complete portfolio of movies, series, music, games, e-books, educational software, and computer software.

Pirate Bay have at least 2.2 million individual IP addresses from Sweden downloading every week.

Limewire, Kazaa, and Bearshare also share digital content illegally but not in the same scale as the bit torrent sites.

Apple iLounge

Segmentation.

Apple iLounge

Segmentation.

Primary target.

50% of Mac users pay for music, but only 16% of the PC

Liberal political and social views

Environmentally aware, buy organic or ecological products and are ready to pay more for it

Considers themselves intellectually curious

Above average vain and spend more than average on clothes

Mid - high income

Creative professional or student

Live, study or work in the city centre

Owns a Mac or Apple product (25.000 - 35.000 Mac users, and approx. 100.000 ipod owners)

Apple iLounge

Segmentation.

Shop, live or study/work within walking distance of location

Owner of a flash based Mp3 player, or Mp3 capable phone, (Minimum 200.000 in Stockholm city)

Between 20 - 35

Download music, movies Tv-series or any entertainment on a regular basis, both legally and illegally

Conscious about environmental issues and aspire to act “Green” and buy organic foods

Medium or high income

Secondary target.

Apple iLounge

Marketing Strategy.

Apple iLounge

Product strategy.

The iLounge.

Core product: The iTunes library of music, movies, TV-shows, games, applications, e-books, or audio-books.

The library is currently 10 million songs, 1 million podcasts.

It’s also full of more than 2,500 movies and 30,000 TV-episodes, all in high quality.

All of this directly transferable with high performance wifi, bluetooth, or dock station technology to any laptop, Mp3-player, Mp3-phone or other gadget.

The iLounge’s database compatible with the existing iTunes account.

Buy a quick-pass, sit down and listen, then you pay for the songs you want to transfer to your Mp3-player.

Complementary product: A fine selection of beverages, snacks, and sandwiches produced locally from top quality organic products.

Apple iLounge

Price strategy.

The music will be available at one of three price points:

69 cents, 99 cents and $1.29, with most albums priced at $9.99.

Movies are priced between 4.99$ - 9.99$ for renting over a period of 30 days.

Buying movies range from 9.99$ - 14.99$.

TV-shows will range from 99 cents - 1.99$.

Educational material, e-books, audio-books, applications and games will all be priced at the level set by the publisher

iTunes Members-only discount plans will be available.

Customer loyalty programs and bonus systems

The library.

Apple iLounge

Placement strategy.

The iLounge needs approx. 250 - 400 m2 to fulfill the concept.

Focus will of course also lie in creating something innovative and new for the customer.

The Södermalm district in Stockholm gaining a lot of recognition as a Stockholm “Soho”, it’s full of conceptual

stores, great restaurants, and culture.

Götgatan, the main street in Södermalm, is particularly know for it’s relaxed atmosphere, trendy shops and hip bars.

Outside of the 2 busiest streets, (Drottning gatan & Biblioteks gatan) this is the busiest one.

The whole length of the street is closed for cars and full of life all day and night.

Södermalm

Apple iLounge

Promotion strategy.

Frank PR agency (www.frankpr.se) are hired to buy editorial space in lifestyle magazines. etc.

Acne Advertising (www.acne.se/new/creative) will launch the ad campaign in lifestyle magazines, fashion media, and on

billboards in the Stockholm centre.

The advertising will run two months, starting one month prior to the opening and ending one month after the

opening.

Acne are also responsible for organizing a pre-opening of the iLounge for V.I.P’s in Stockholm.

We will “leek” this trivial information to all the major Apple forums, and bloggers.

This will inform the most hardcore Apple fans

Think local.

Apple iLounge

Price strategy.

Apple iLounge

Conclusions.

Apple iLounge

Evaluation measures.

Are we able t change our target’s habit, to move people away from illegal downloading and back to a “store”?

Popularity amongst the product groups, are we selling mostly

audio or is e-books, video and applications popular?

Amount of new customer registrations to iTunes through iLounge. Is the iLounge a good extension of the iTunes store?

Increased Apple brand notoriety. Can we notice any increase in popularity of Apple’s hardware products?

Media coverage regarding the iLounge, is the press and general public positive about the iLounge and the brand?

Are we successful?