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A chat with Apple’s iPod and iPhone marketing czar. M8 m' n: C0 s# E% f d
) L( a, K& o" X6 B% R2 QThe iPod family. Image: Apple
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GregJoswiak has what you might call a busy job — he’s charged withmarketing two of Apple’s biggest hit products, the iPod and the iPhone.That might sound easy considering the buzz Apple’s productannouncements generate, but there’s more to the task than promotion; heworks with the company’s engineering teams to decide what the nextiPods and iPhones will look like, what features they’ll have, and whatthey’ll cost. He’s also got a knack for product positioning; Apple(AAPL) insiders say that in his previous job managing Apple’s overallhardware marketing, he pushed for the company to produce a 14-inchiBook, despite the misgivings of CEO Steve Jobs. The product turned outto be a hit. To get his sense of the future, I talked to Joswiak aboutthe iPod and iPhone’s holiday prospects, and the company’s plans forexpansion. J3 i( |6 b1 L7 h: M
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7 \8 M/ M- [; H& t2 [. v5 DFor a long time you managed Apple’s Maclaptop business, which is also going gangbusters these days, and I knowyou were really involved in discussions about how those products weredesigned and positioned in the product family. How was that jobdifferent from managing the iPod and iPhone? ?# S2 D! O5 h: b
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First of all Imanage product marketing and product management — I don’t actually ownthe engineering. But we work very closely with them, as you know, onthe features we create and what the product’s going to be about. I lookin a lot of ways at some of the similarities.
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+ }8 F6 j4 H4 Q! M. r: xThe firstsimilarity you’ve heard me talk about before: Apple is in a prettyunique position because we’re a world-class hardware designer and aworld-class software designer. It’s rare enough to be on one of thoselists, and we’re the only company I can think of that’s on both ofthose lists. So whenever we design a product, we try to take advantageof that capability that we have, to engineer the hardware and thesoftware together so we can take full advantage of each.
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0 y0 |- a# q$ H! C; l; o+ @9 CAs youknow, a lot of companies have difficulty with that – if you’re ahardware company, getting the software company to do what you need; orif you’re a software company, to get the hardware vendors who canactually do the right hardware. We’re more fortunate. We can movefaster, and we can create products that are, I think, a betterexperience for our customers.
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* A+ d* t, \5 m% T) tWhat’s different? Right now Ithink the iPod’s U.S. market share is 77 percent, so obviously it’sbeen just this huge hit — 120 million of them sold. Obviously we had todeal with growing a much smaller market share with our Mac business,and of course that has been growing very nicely.9 K! v; S+ v u! @# \
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It wasn’t an easy road getting here, though. You guys put a lot of energy into laptop development, for instance. j& h3 P% i# I
2 X3 M: v, K* G: j& ~+ z! U2 L3 ], rWemade some courageous decisions back when the market had gotten prettytough for tech companies, back in 2000 and 2001. And I always like tothink about the success that we’re having now, much of it goes back todecisions we made then. Because a lot of companies were laying peopleoff, tightening the belt, and if you remember, we were very vocal aboutsaying we were going to innovate our way out of this. And we made somecourageous decisions. We didn’t lay people off. Instead we invested inour products like we never had before. We invested in the OS Xtransition.1 @" h1 M& s4 S$ Y) x& J F: E G
0 F E; E8 C; g# S6 g uAnd to your point, on portables, we invested in notonly revamping the hardware line, but you could say we over-invested inportables, even though they were only about 20 percent of our mix then,with the realization that there’s no reason that they couldn’t sell asmany portables as we could desktops. We created an applicationsdivision that was all about how to create software that was better onthe Mac than anywhere else you could get it. And of course we startedthis whole music business, and we started a retail division. Those areall pretty dramatic things to do during hard times.
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1 n. w. ~% h$ E, fThere aresome fears, and maybe even some signs, that there are some more hardtimes on the horizon — maybe not on the order of 2001, but some toughertimes, particularly with the consumer. How are you feeling about that?
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Well,the iPhone’s gotten off to a pretty good start, as you’re aware. Forthe 74 days, to sell a million units, that took 22 months for the iPod.We tend to certainly, as product people, focus on creating greatproducts. When we do that, it’s up to the market to decide, and so farthey’ve been fairly positive about what we’re doing. I’m not aneconomist, but I believe in creating great products.5 I5 X0 C: C" i$ P$ ?0 h
; p/ i! R" G1 v9 L2 j* X! gWe reportedpretty good earnings in October for the September quarter, a recordquarter for Apple, and I think you can clearly see that this is thebest iPod product lineup we’ve ever had. And now the iPhone’s not justselling in the U.S., but now we’re here in Europe having just launchedit in the U.K. and Germany last Friday, and now of course bringing itto our French market on November 29th. You know, it’s pretty exciting.( z) L h2 U- Q2 @. b
3 z) L; Y7 L$ g; C! Y4 }TheiPod has grown from being a single 5-gigabyte music player into afive-tier product line, counting the shuffle, nano, classic, touch andiPhone. Early on, you used to say that Apple was focused on just makinga great music player. What are some of the risks you might face incontinuing to push this beyond being just a music device? G: p: k- z# Q4 j) ` n. D
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If youremember, I think I used to say that we never wanted to forget thatfirst and foremost, the iPod was a great portable music player. And alot of times people will have a hit product and kind of lose their way,forget what the product was about.. L- R: R/ K6 Q) n- c7 |+ Q
9 `+ B/ _! p7 T" Q* hThat’s why I was always proudof, for example, the way we first brought video to the iPod with thefifth-generation iPod. We gave it a larger display, but we made theproduct smaller and we made the music quality better. So even though wewere giving it this great new feature of video, we made the primaryexperience better. We just did the same thing with the third-generationnano. We gave it a bigger display, we gave it video capability, yet theproduct is the same size volumetrically as the nano it replaces.
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6 _8 I; o) }; Q1 AThat’swhat I mean about being focused on what your primary use is. All along,from the early days, we gave the iPod other great things that it coulddo. We gave it calendars, to-dos and contacts and things of that sort.We have been relentless in the innovation we’ve brought to the stage,and every year coming up with something that seems to be a big hit forthat holiday, and blowing people away.3 f$ m4 c6 v3 r9 {% d; G
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I think the softwaredevelopment kit (SDK) that’s going to be available for the iPhone isvery interesting, because we think that with the revolutionarymulti-touch interface and the phenomenal product that the iPhone is,and certainly having OS X underneath it, that it’s going to be anunbelievable platform for developers.
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Of course what we want tomake sure we’ve done is keep the phone safe and reliable, and that’swhy it’s taken us a little while to get this SDK out. Especially nowthat we’ll have a real SDK which means legitimate developers are goingto come into the space. There are all kinds of fantastic and greatthings that they’re going to do.& V& P5 z3 X( E/ E, b" J2 b! u/ F5 p
/ @( T0 i G' U5 tWhat’s your philosophy on howbest to handle an open iPod and iPhone? I know Steve Jobs has said youguys will have to balance openness with safety and security, andclearly there are a lot of developers out there who are determined todevelop software for this thing, even if they’re doing it sooner thanyou’d like. What kinds of challenges will that present?- }* ^2 H7 c5 U) d9 b* `6 d
3 d6 P" v" Q0 GOne ofthe things Steve talked about in his open letter is something Nokia’sdoing, which is requiring a digital signature. That way if there’ssomething wrong with an application, you have a way to track it back towhere it came from. So one of the things we want to do, again, iscreate a development environment that is going to maintain the securityand reliability of the iPhone yet at the same time offer developerssome really cool things that we can do.8 ~, G0 G' z6 ?% Y- A% @
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And it is hard. Again,Steve commented on this in his letter, those two things can run inopposition to each other, and that’s why it takes some time to figureout how to do it correctly. That’s important to us, and I think we’reon a good path to that.6 H0 N8 g) ~6 D5 E) t- f |! Z- B
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And checking IDs at the door is one way to do that, I guess?8 c7 j" ~& @; s2 E3 W' P8 F
9 Z! H5 r! g2 i1 n8 C6 GYeah. You know where it came from, and then it also keeps people more honest.4 @( [% k8 j+ w6 O/ |% C$ y+ m5 [
2 g0 }. z# u9 g eSomethingthat strikes me about this holiday season is that it’s the last onebefore the iPod, through the iPod touch and iPhone, becomes a genuineopen software platform. How does that influence the way you look atholiday sales of the iPod touch and the iPhone in particular? A9 {+ o2 T: S3 Q. u8 U+ v' e
2 J# x. r) ?. L! l! cYou’reright, I think it’s a big deal for iPod touch, it is also a big dealfor the iPhone. One of the things that was interesting when we broughtout the iPod touch in September was, we had two kind of opposingquestions. There were people who asked us if we were fearful that theiPhone was going to cannibalize the iPod touch, and some said are wefearful the iPod touch was going to cannibalize the iPhone.
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Andour response, which I think has turned out to be pretty accurate, washey — one’s an iPod and one’s a phone. If you’re in the market for aphone, we think we’ve got the best phone in the world with the iPhone.If you want an iPod, we have a whole choice of iPods including the iPodtouch. And they really are different, in that you’re either in themarket for an iPod or a phone. And the sales for both responded well.Our sales went up pretty dramatically at the time when we decreased theprice on the iPhone, and certainly we saw the iPod touch get off to apretty dramatic start.
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Developers see the opportunity already.You only have to look and see how many were creating iPhoneapplications without permission, when they actually had to break it, asit were, to do it. I think that was a good indication as to how muchthe developer community loves the iPhone, how much they see anopportunity to create great things. With the SDK, I think it’s going tobring more legitimate developers into it, as well as having thegrassroots, small developers, which I think is awesome. Sometimes theseone- or two-person teams have created the most dramatic things.
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. K6 \2 d: ]9 c/ Y. I& IOnthe marketing front, I’ve noticed that the way you guys have beentalking to potential customers about the iPod has changed over time. Itstarted off talking more about speeds and feeds, about how manythousands of songs you could fit in your pocket, and the latest iPodtouch commercial is different from that in the way the whole thingfeels and sounds. Can you talk about how the marketing challenge haschanged since the early days?9 Q2 }% a9 \4 d/ k1 q
9 M+ W1 @2 R4 RSure, I’d love to. First of all, I don’t think we ever talked about speeds and feeds.
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OK, I guess that’s true.
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' d" Q7 ^: b1 |7 H. E8 QThatwas one of the things that we went out of our way to do. We gavecapacity, because that was one of the things that was important forpeople to understand, but we actually tried not to make it like acomputer. Much sometimes to journalists’ chagrin. They wanted to know,hey, what’s the processor, where are you getting this component, whereare you getting that. We never wanted to get into that. We didn’t wantto make it a speeds and feeds product, other than of course, people hadto know the capacity.
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I think what has changed over time iscertainly early on, people had to understand what an iPod was about.You had to understand the whole message of a thousand songs in yourpocket. So some of the early advertisements had to set up some of thatfoundation. In a market like the U.S., where we have 77 percent marketshare, that’s really not required. People understand what the iPod is –it’s become a cultural phenomenon here. So we can change the way thatit’s marketed.
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9 n u' s, q; ]: K4 HBut when we go into other markets, sometimes someof the international markets, maybe our market share isn’t as high.It’s large in most of the big countries – the U.K. I think is about 58,Japan is about 60. But when we went into Europe a couple of years agowith advertisements, when France was in single-digit market share andGermany was in single-digit market share, we again had to establish the“thousand songs in your pocket.” We ran advertisements that were morefoundational than the silhouette ads that we’ve done. And we saw marketshare rise pretty significantly — again, our latest French and Germanmarket share is about 28 percent each. That’s a pretty significant riseover a two-year period." c- p, C$ g' D' q
0 j4 K: r" N K2 A+ d8 C4 ]* a- HWhen you mention that, it sounds likeyou guys have plenty of headroom still in overseas markets to sell abunch of iPods. Is that the way you feel about it?
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Absolutely. Ithink that’s a huge opportunity for us internationally. Again, itdepends on the country. I’ve mentioned the big ones where we’re eitherat or near 60 percent, Australia, Canada, U.K., Japan. But there areother markets where we’re in our 20s, at or near 20 or 30. That’s asignificant opportunity because not only can we grow share, but wedon’t have, in any of these markets, an incumbent to beat. We’reactually competing against “Other” – the off-brands that somebody’strying to sell only on price, and not establishing any value in themarket, which gives us a better opportunity because we’re the ones thatare actually building value in the market. As a result, it becomeseasier to grow your share against “Other” than it is againstname-brand, well-established competition.5 w, w+ u, n* U+ L
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And it sounds like PCpenetration is increasing in a lot of overseas markets where somepeople thought it never would. Is that a leading indicator forpotential iPod sales since iTunes is a key piece?
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Yeah, that’scertainly one of the metrics I look at. I certainly look at, to yourpoint, iTunes as part of the experience, which means it goes back tohaving a Mac or a PC. There’s a pretty good likelihood if there’s a PCout there that iTunes is on it. There’s more probability then ofgetting an iPod.. C9 T3 r# D+ n# W' k" m
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Are consumer markets in Asia a place where you’re focusing marketing? Do you get much of a holiday season bump there?3 L1 @* ?: ~6 Q
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Asiavaries. Japan is obviously part of Asia, and we’re already veryestablished there and we’re obviously still committed to trying to growthat market — we’re at or around 60 percent market share there, as youlook at the weeklies in October. But in a market like China, I thinkwe’re the number-one market share, but it’s like 8 percent – it’s avery fragmented market. So again, there’s lots of opportunity forgrowth there.0 |4 W$ @- ?* o: k! d5 I
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Are the holidays big in China?2 j2 J0 L$ N) i$ F3 E
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Obviouslythere’s variability within countries, and within markets even withincountries. Certainly, for example, the holidays have become much biggerin Japan. But we tend not to break out all of our sales, especially forthe iPod, on a geographic basis." H4 H, w, ^% T7 g- \& ^6 m
# c' P: c+ }3 S4 WWell, are you still having fun?The iPod is huge now. I remember when you guys were underdogs and everytime you came out with something, people were saying, ‘This probablywon’t work.’ Now whenever you guys are coming out with something,everybody’s saying ‘This is probably going to change the universe.’
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Yeah… you know, I think sometimes there are still skeptics. When we broughtthe iPhone out, as much excitement as it had, there were people whowanted to nay-say. But you’re right. When we announced we were goinginto retail, back in those hard times that I talked about, peoplethought we’d be out of the retail business in a couple of years. Whenwe were investing so much in portables, people were saying they didn’tget it because cheap desktops were where the sales were.1 E* d! ^- u' @
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And theiPod — people thought we were insane. We launched it six weeks afterSeptember 11, if you remember. People thought, again, what are we doinglaunching a whole new business at a time when we ought to just betightening the belt? We actually even ran TV commercials that firstholiday quarter, even though there were only so many iPods to sell. Socertainly opinions have changed over time, but there are alwaysnaysayers.* q7 Z5 a1 P: J/ N
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We do our best to try to understand what customersare going to want down the road. I’m fond of the Wayne Gretzky quote —you skate to where the puck is going to be. We try to understand as wedevelop our product road map, what’s going to be exciting in thefuture. And that’s one of the advantages we have over our competitors.Our competitors tend to put the cross hairs on where we are now, and bythe time they come up with a product that tries to match where we arenow, we’re beyond them. We’re one or two generations beyond, movingfaster than they are.$ }$ z( g2 x6 P0 F- L
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! f% D! r) @1 N; Ohttp://bigtech.blogs.fortune.cnn.com/2007/11/25/a-chat-with-apples-ipod-and-iphone-marketing-czar |
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