Beats by Dre is a product that is produced by Beats Electronics, which is a subsidiary of Apple Inc. Beats by Dre is one of the most known wireless headphones in the United States. They are commonly preferred over the available alternatives in the market because of their unique design and quality. However, there have been some alternatives being introduced to the market making it harder for the product to enjoy the dominance that they enjoyed a few years after they were launched in the US. Beats by Dre was introduced to the US market in 2008. This paper undertakes a competitive market analysis.
The United States wireless headphones can be said to be free competitive despite the dominance of two brands which fall under the same organization. According to data that was collected in 2016, 27% of the units that were sold in this market were either products but Apple or Beats Electronics. However, when the data were analyzed according to the dollar sales Apple or Beats Electronics earned 49% of the total dollars that were earned from sales in the market. As seen in figure one, Beat electronics still performed better in the market as compared to products that were produced by Apple. As seen in figure 1, the brand that came close to offering serious competition to Beats was LG with 10% of the units sold in the market. Beats had 25% of the units sold in the US wireless headphone market.
Figure 1: the US wireless headphone market. Retrieved from https://www.manufacturing.net/data-focus/2017/02/us-wireless-headphone-market
Beat by Dre is mostly bought by people seeking to create a social impression. This is the reason as to why the marketing strategy that is used in marketing the product target celebrities, youths, and people who follow hip-hop (Hackley, 2013). Initially, it would not have made sense to develop a premium product and target the youth because they were assumed to lack the financial ability to buy such products. However, there has been a significant increase in the relevance of the youth as a market segment for premium products over the past decade. This is the logic that was used when Beats by Dre was being designed and when the marketing strategy was being formulated and implemented.
However, it should be noted that the popularity of Beats by Dre is highly dependent on the popularity of Dr. Dre. If he loses its popularity will significantly influence the quantity of the product that will be demanded by the US market. Notably, there will also be a decrease in the amount of money that people will be willing to pay for the product. Therefore, the product will develop elasticity as far as the price elasticity of demand is concerned. From a critical point of view, this is the main weakness that the product and brand have as far as marketing is concerned.
The Price elasticity of demand for Beats by Dre can be termed as inelastic because the marketing strategy that is used for the product revolves around the quality and the unique features that the products. Even if the price could be raised today people will still buy the products because it is not the affordability that leads to its good performance in the US market. This is a factor that can explain why the product had only 25% of the units sold in the US market yet claimed 46% of the dollar sales as seen in Figure 1. Furthermore, Beats by Dre has been recording a significant growth in market share since it was first introduced in 2008.
The productivity of beats by Dre highly depends on technology. It is because of the innovative technology that is used in the production of Beats by Dre that the product stands out among the alternatives that are available in the market. Research on the reason as to why most consumers would prefer buying Beats by Dre instead of the existing alternatives suggested that majority of the respondents pointed to factors such as noise Canceling, comfort, quality, and retro (Reinelt, Hadish & Ernst, 2016). These are qualities that are only achievable through innovative technology.
Another factor that leads to the productivity of Beats by Dre is the marketing strategy that is used in marketing it. Dr. Dre is one of the legendary music producers in the US who is known to have produced quality music for decades. The use of the name “Dre” for the product was strategically intended at creating an impression of quality. Furthermore, Dr. Dre’s fans would always opt for Beats by Dre as opposed to the alternatives that have no direct connection to any celebrity. This is a form of marketing strategy that is referred to as celebrity endorsement. The only difference is that the company producing the product was owned by Dr. Dre before it was acquired by Apple in 2014.
There are various measures of cost that applies to Beats by Dre. Despite the fact that Beats by Dre costs $200 per unit in the US retail market, the cost of producing one unit is estimated at $14. However, the company invests allot in marketing. This is a factor that makes the product attract such a huge retail price regardless of the low production price per unit. However, other external factors are of influence on the cost of the product per unit. For instance, the company has to pay taxes which can be said to be of less impact on the market price and the revenue as compared to the impact that the marketing and branding are to the product. There is minimal impact on the market prices and price competition by the competitors because of the price elasticity of demand of Beats by Dre.
Some recommendations can be made on the manner in which Beats by Dre can increase their market share in the US market. One of the initiatives that can be taken is separating the brand name from the name of the founder of the company. This might include initiating a marketing communication that will change the popularity of the product from Beats by Dre to just Beats. At the moment, people have already associated the product with high quality. This will not imply that they will not use the founder for endorsement, but will also open doors for the product to be endorsed by other celebrities. More importantly, the popularity of the product will not be attached to the popularity of Dr. Dre. If anything happens to Dr. Dre’s popularity, there will be less impact on the performance of the product in the market because the association will be limited.
- Hackley, C. (2013). Setting the Marketing Scene. In Marketing in Context (pp. 1-28). Palgrave Macmillan UK.
- Reinelt, P., Hadish, S., & Ernst, C. P. H. (2016). How Design Influences Headphone Usage. In The Drivers of Wearable Device Usage (pp. 59-68). Springer International Publishing.