iPod: The Fad That Refused to Die?

When thinking of fads most people think of an item that enjoyed a brief moment of fantastic success then faded just as quickly into obscurity. Examples of this phenomenon are numerous: pet rocks, mood rings, Yahoo Serious, and the Hamster dance to name but a few. The careful reader will note the glue binding these items together is their questionable utility. The aforementioned items are all things that actually serve no discernable purpose. Hence, their meteoric rise to popularity is more surprising than the following stomach churning freefall into oblivion.

The more common type of fad is one where a product with utility becomes a sudden must have. Often the precipitating factor is scarcity upon introduction. Items of this ilk include Cabbage Patch Dolls (a toy a mother would gladly shiv someone for in the middle seventies), the new Volkswagen Beetle, and the original Xbox. When items such as these were first introduced, initial demand far exceeded initial supply. Thus, a self-perpetuating cycle was born: as the products became scarcer they also became more desirable. Once they became sufficiently lusted for the inevitable price gouging began which made the items seem even more valuable. Once supply became sufficient the cycle reversed and the one time “must haves” went to “can get any times” and much of the appeal was gone. In these examples, the products did serve a function and, hence, never ceased being produced and provided a nice income to their manufacturers for years to come.

The second scenario is what most people expected from the iPod. Yet the iPod doesn’t seem to be slipping from an object of mass lust to a more pedestrian but still profitable product (at least if Apple Matters checks with retailers are any indication*). So the question naturally arises: How has Apple managed to keep the iPod fashionably desirable for the four years since the iPod’s introduction? The answer consists of clever moves and well paced product additions.

Most people will aver that the iPod has only been a smash hit since the fourth quarter of 2004 (2 million iPods were sold in that quarter alone, well over half as much as all the iPods sold up to that point). The notion is a bit disingenuous, while sales did increase at a record clip in that particular quarter the iPod was already a major success, so an examination of the iPod phenomenon from the beginning is in order.

Introduced in October of 2001 the original iPod was largely derided for being too expensive ($499 if memory serves). Despite the initial skepticism, the diminutive digital audio player soon showed signs of being a hot item (a.k.a. short lived fad). Supply of the original iPod was not plentiful enough to meet demand thereby increasing the prestige of the item. The fact that the iPod was hard drive based instead of the more common flash based players led people to think it was a completely revolutionary product (it wasn’t, several hard drive players were on the scene before the iPod) and further whetted their appetite to be on the “cutting edge.” These attributes were gravy as word spread on the iPod’s ease of use. A music player anyone could use, that would hold their entire music library and doubled as a hard drive? It was too much to pass up for a great number of people.

Exact figures for the sales of the iPod for these time periods are difficult to come by but, judging by the scarcity of the player, the product enjoyed demand that Apple was unable to meet. In the second quarter of 2003 the iPod showed signs of slipping from the lofty perch of hot item into the more mundane realm of profitable gizmo when sales of the player dropped from 219,000 to 80,000 units. If nothing had changed, the iPod would probably have become just another .mp3 player.

Apple had something up their sleeve to reignite interest in the iPod and that something was the iPod music store. Revealed in April of 2003 the store offered a completely new method of legally acquiring music. Shopping for tracks at home proved to be a popular pastime as sales of the digital tracks proved astounding. The effect on iPod sales was pretty impressive, as the numbers of iPods more than trebled to 304,000 the next quarter. A 300+% increase was just the beginning, iPod sales topped out at an astounding 733,000 units for the holiday season of 2003.

It is at this point that most clear-headed, business minded individuals would be satisfied. Satisfaction with the status quo may work for the Mac side of Apple but the iPod division is always looking for the next big thing. Rather than taking baths in tubs filled with hundred dollar bills Apple made a bold move and introduced the Pod mini at the 2004 Mac World. On the surface the move made little sense. Priced only fifty dollars less than the larger iPod the mini offered only a fraction of the storage and the savings in size were not that substantial. The best case scenario, many felt, was that the mini would flop while the worst case was that the mini would horribly cannibalize sales of the larger player.

Predictably, this is an Apple product after all, demand yet again outstripped supply and the mini was the new rage. Sales didn’t immediately reflect the popularity, featuring only a modest increase over previous quarters. Yet, once Apple was able to deliver the mini in quantity sales rocketed, more than doubling to over two million iPods sold in the fourth quarter of 2004. The mini had reinvigorated the iPod line and kept the cult of iPod churning ahead at breakneck speed.

Clearly, the mini had hit a sweet spot of storage, physical size and price with consumers and soon became Apple’s most popular model. As supply of the mini became sufficient the iPod, in all likelihood, was poised to finally become a nice selling product but one that lacked rampant consumer buzz. To keep the buzz machine alive the shuffle was introduced. Steve Jobs did a masterful job of pitching the screen less wonder of randomness and there were initial shortages but the shuffle never quite captured the public’s attention like the earlier iPod models.

Apple made their boldest move at this point: killing the insanely popular mini and replacing it with the nano. The diminutive size, the flash based durability of the storage media and the color screen all meant that the nano was instantly desirable by even those people who already owned iPods. The addition of black as an option didn’t hurt. Coming on the heels, nearly literally, of the nano was another revision to the iPod: the ability to play video. The addition of video spawned another new market, another round of hype and another bundle of iPods going into the hands of waiting consumers.

At this point is clear that the iPod isn’t really a single fad that refuses to die but a carefully managed effort to ensure that the iPod stays enviably hip as long as possible. By carefully selecting when to update the iPod, release a new model, or add a major feature Apple is sustaining a cycle that would have ended long ago in the hands of less deft managers. As it is every change in the iPod builds on the success of the previous models and enhances the entire line. Instead of thinking of the iPod as one very long running fad it may be wiser to view the iPod as a series market defining moves that capitalize on the initial, and surprising, fad that was the original iPod.

Apple Matters methodology is as follows: go to Turkey Creek Super Target and look in the iPod storage case. Today’s inspection revealed that Target was, once again, sold out of iPods.