Apple Throwing Away Its Core-iPods

Apple's iPod Touch and iPhone have been hugely successful, however their original product the iPod has been dropping in sales.  As discussed in the article by the Globe and Mail, Apple can be seen as intentionally cannibalizing iPod sales by focusing on promotions of the iTouch and iPhone over that of the original iPod, so that customers will buy the newer, more expensive, and higher margin products over the cheaper, lower margins ones.  Intuitively to me, it would seem like the older models of iPods would generate higher margins due to more developed economies of scale while the newer models would be the opposite.  However, when you consider product lifecycles then intuition can be wrong.  If you look at the market for mp3 players these days, the number of competing brands is endless.  When the iPod was first introduced it was a novel product and could command high prices.  Now that that the market has matured over the past ten years, the price of iPods has dropped due to the high volume of competing products in the market.

By introducing new innovations through the various iterations of the iPod over the years, Apple have effectively been stretching out the life cycle curve by keeping the iPods in the growth and maturity phases.  For a market this tech-reliant, the decline of sales is a quick inevitability.  The original iPod has become the vanilla flavor of the mp3 player market and consumers want to try new things.  So you can see Apple's promotional strategy as cannibalizing the original iPod's sales, but I see them as making good use of product life cycles.  By regularly releasing new products, they always have a new product that is growing in sales to make up for old ones that are in decline.  So the original iPod isn't being cannibalized, because it was already slowly starting to sink.