Apple puts iPod halo to test with Shuffle and Mini

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Apple's iPod has sent sales soaring. Now the question is whether its new lower-priced version and Mac Mini computers can enable Apple to capitalize on iPod's success-or ultimately cheapen its image.

The answer will lie in its marketing.

The iPod halo effect has been talked about for months now, the idea being that the phenomenal success of the music player will translate into sales of other Apple products. Apple's announcement of the Mac Mini computers at $499 and $599, along with iPod Shuffle devices at $99 and $149, removes the price barrier and opens the floodgates to those promised sales. It's uncertain whether buyers will rush through.

"We know the halo effect has had an effect on reinvigorating the brand," said Jupiter analyst Michael Gartenberg. "Can Apple translate that affinity from one product to another?"

small fruit

"A low-cost Mac should move their market share even more than the lower priced iPods," predicted IDC analyst Roger Kay. But he noted that as yet the halo effect has not borne fruit; Apple's share of worldwide computer sales hovers steadily at around 2% worldwide. He said those numbers could change pending the strength of other computer vendors' holiday sales. On Jan. 12, Apple reported tremendous fiscal first quarter results, including a 74% increase in sales; revenue from iPod sales alone topped $1.21 billion. Mac computer sales were also up from $1.27 billion to $1.61 billion year over year.

Trying to push the Apple brand and the iPod halo downstream comes with risk. The potential problem of alienating Apple's much-cultivated premium brand buyers comes along with the promise of more sales to the low end of the market. The danger is that iPod may not retain its cool cachet if anyone with $100 can own one. Many analysts agree that it can, but the execution of both the business and marketing strategy has to be spot-on.

iPod Shuffle

"People probably said the same thing when BMW introduced its 3 series," Mr. Gartenberg said. "Now 7 series owners just snicker at 3 series owners and say `They think they bought a real BMW."'

So Apple's iPod Shuffle intro may mean catty comments on the No. 6 train in New York, but the company is also banking on sales. And their target is wide, including current iPod owners looking for a second device; Gen X parents now willing to bankroll the $100 to placate their teens; and consumers with more modest income. The Mini Mac looks to attract PC users who already have a keyboard, mouse and screen.

The key will be in the way Apple positions the products. Already, the iPod shuffle ad campaign, created by TBWA/Chiat/Day, Playa Del Rey, Calif., mimics its other iPod work.

"The cachet is not in the price, it's in the brand. IPod is an affordable luxury item, and they're simply bringing it to another level of buyers," Mr. Gartenberg said. "People who want an iPod will forgo buying an MP3 player at all saying `If I buy, I will buy an iPod."'

Some think Apple runs the risk of becoming mired in price-based markets where if its market share increases, its revenue decreases.

"The Mac Mini will be very successful, but it will likely cannibalize iMac and G5 sales," said Rob Enderle, principal of Enderle Group. As for the iPod shuffle, Apple is "betting pretty heavily that marketing will make the difference."

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