BrainTrust Query: Will the iPhone take the market by giving customers what they want?
By Bill Bittner, President, BWH Consulting
I just got a new cell phone – a Motorola Krzr on a Verizon plan. Based on my experience so far, Apple has an open field with its highly (to put it mildly) anticipated new iPhone, due for release on June 29th. (According to the New York Times, and others, the iPhone’s been dubbed “The God Machine” – by whom, is unclear.)
The whole Apple mantra is centered on providing an outstanding user experience by making technology useful and easy to use. It seems that Verizon regards the cell phone as a tool for marketing their services and whether it is useful or convenient to use are immaterial.
I had a Verizon phone already and the only reason I changed was because my contract had been expired for three months and my new phone would be “free”. Anticipating the learning curve, I waited until a convenient time to make the switch. I had pictures on my old phone, custom ring tones and, of course, my address book. My first disappointment was to learn that only my address book could be transferred to the new phone.
The pictures are gone unless I want to upload and download them again to the new phone (for only a small fee). And I won’t be able to load the custom ring tones via email the way I had done with my old phone. Apparently that “bug” in the old software has been fixed. Ring tones are now only available by buying them from one of the service companies who no doubt pay Verizon some kind of fee.
I have an MP3 player… I use it to listen to radio programs on topics like security software, the economy and, of course, Car Talk. I thought my new cell phone was going to eliminate the need for the MP3 player because it promised to let me download music files etc., but apparently that’s only the case if they are digitally protected. I also use the MP3 player to record notes for later follow up. The phone promised to do this too, and it does. The catch is that the files are in a proprietary format that cannot be played on my PC.
Oh yeah, and the “free” phone required a $30 “music package” to make the connection with my PC. This connection depends on a custom Motorola USB cable that contains some type of special circuit that is detectable by the software. So much for open standards.
Discussion Questions: Is it so difficult for product manufacturers to design around the “consumer experience” as their primary focus? Will iPhone be able to take the market by merely “giving customers what they want?”
[Author’s commentary] Of course, Apple will be somewhat dependent on their service partner, AT&T, to assist in fulfilling all the promises being made. AT&T’s under the helm of new CEO Randall Stephenson. The iPhone deal is being hailed as a real coupe for the telecom company, but will be piled on top of a busy transitional agenda. According to Stephenson, as interviewed by InformationWeek: “Our biggest challenge as a company is to ensure that our customers really understand what the new AT&T is all about. We are the most complete communications and entertainment provider for the way people live – and that starts with wireless. When people recognize that, we win.”
So, on the one hand, he seems to understand the need for consumer centricity, but on the other…huge branding and organizational challenges to deal with. And reportedly, the iPhones will be sold at AT&T retail locations. Will associates be able to match the level of service at Apple Stores? Should be an interesting partnership.
A big part of the cell phone market is based on fashion. Anything new has an edge, so the iPhone will be very popular. The real questions: will it significantly hurt the traditional players: Nokia, Motorola, Samsung? Will it significantly enlarge market share for AT&T? Will it slow down AT&T’s customer churn (customers dropping AT&T)? Each 1% of market share is a big win in the cell phone and cell service businesses. And how long will it take for the iPhone knockoffs to undercut the price 80%? Or will the iPhone be so strong that its customer loyalty becomes akin to the iPod? Apple computers have tiny market share, yet the iPod has huge share. My guess: it all depends on the competitive response until the new fashion comes along. Will that take 9 months? A year? If it takes 18 months or longer, the iPhone will be a monster hit (at least 10% market share.)
A piece of the conversation is missing here. Switching services is such a pain these days with the contracts and penalties, it becomes an obstacle to jumping ship to AT&T. As much as I am drooling over the iPhone, in my mind I look at it like I did the Motorola RAZR–“how long until Apple makes one for the Sprint network?” I don’t think the iPhone–appealing as it is–is enough to get me to switch networks. By the time I pay for the phone, penalties, and sign up costs the iPhone becomes a hefty investment. Now if AT&T were to buy out my contract with Sprint….
Cingular was an instant success in the marketing world and should have remained as the name. I can hardly wait until June 29th to touch an iPhone and see if it turns out to be what we think it will be.
As a marketing professional, I’m immune to most advertising, and as a boomer, not so much into iPods, but having seen the TV ads for the iPhone, I’m drooling. I want one! They nailed me.
I’m already on Cingular–“now the new AT&T”, and satisfied with the service. 9 months into my 2nd 2 year contract, I’ll wait about a year until I can renew again to get the best price and a new phone. (BTW, other than me, does anyone else think they should have kept the Cingular brand?)
Bottom line, if my cynical marketing self can be so excited about the iPhone, the masses will flock to it.
I’m on my second SmartPhone from AT&T, née Cingular, and I’m amazed that more people don’t use them. (Mine’s a Cingular 3125.) It operates on the latest version of Microsoft’s portable Windows software and works flawlessly. The biggest advantage to my SmartPhone is its ability to synchronize with Microsoft applications on my PC. This includes Outlook, of course, so when I switch phones everything on my PC automatically is loaded to the new one and I never lose anything. I easily send and receive emails, use websites, compose Word documents, and manipulate Excel documents. I can play any mp3 available, and anyone can lay their hands on thousands and thousands of free mp3s that do not carry Apple encryption.
One of the major complaints about the iPhone is, interestingly, the “goo” that accumulates on the sparkling screen (when new) from face oil and fingerprints. There are no widely-available cleaners, but even if there were, who wants constantly to clean their cellphone? Another complaint is that it is large and cannot be slipped into a pocket without risking scratching the exposed screen (flip-phones like mine work best for this). But my major concern is an Apple appliance easily synchronizing with a PC. Hasn’t happened yet.
As I see it, this is not exactly giving customers what they want, and this AT&T customer will not make a change to the iPhone.
Some random thoughts:
The poll’s top two choices were “Monster hit” and “perhaps, but only for a niche enthusiast market”–I’d like to suggest an amalgam of the two: monster hit that starts at first in a niche enthusiast market that grows into an entirely new category that we can’t really see the shape of yet.
——
Someone mentioned that the Apple TV is nonexistent–it may be that we need the iPhone and the interface tinkering it represents, and some other pieces not yet in view, to see what the whole apparatus is really going to do. Call me a victim of the reality distortion field, but Steve hasn’t been wrong yet (except maybe about John Sculley).
——
I agree AT&T could screw this up for Apple in two ways. Maybe three.
Third way first:
We travel twice a year to see family at a house on the water. Lovely place–but it’s about a hundred feet from a Verizon tower. So, no Cingular service, which I imagine means no AT&T service either. So the iPhone won’t work there. It’s a small thing, but telling, imho.
(What was that we were saying about Verizon’s attitude toward its customers? It apparently likes its non-customers even less.)
Now, first way.
If the iPhone has a problem, the Apple store should be allowed to handle it, as well as the AT&T store. AT&T stopped doing warranty work in-store on its phones years ago, and more recently stopped doing in-store exchanges on phones that were more than 30 days old.
After years of great service from a particular store on an account with five phones and counting, we took each of these policy changes as a slap in the face but realized the store-level folks were powerless to disobey the orders from on high.
Second way:
Network coverage issues in general. AT&T’s coverage even in areas that are solid orange on its maps can be iffy, and a $500 phone/PDA’s coverage should be bulletproof.
The whole culture of the Mac is based on the idea that the thing just works–“call failed” doesn’t have much of a place in that world.
——
I’ll be shopping for mine in the fall.
The only problem with the iPhone is the AT&T exclusivity. I won’t switch just for a cool phone, to a service that is not so great.
For me, the puzzle has been figuring out why Apple went with the name iPhone. Seems like the gauntlet had been thrown down to produce the world’s most advanced cell phone, so they started there. But by the time they were done, they had a portable multimedia PC, that (by the way) makes calls. Even in their new ads, the phone functions are treated somewhat flippantly as an afterthought.
In other words, Apple appears to be doing their best to break down the walls of the cell phone/PDA market and establish new ground on their own terms. It’s semi-brilliant, IMHO. It immediately shifts the challenge over to the competition to change their game.
Another quick observation, regarding consumer-centricity: the user interface for the iPhone, from what I can see, is truly groundbreaking. The touchscreen literally pulls the user into the experience in a way that breaks down human/machine boundaries. Critics have said the iPhone really isn’t introducing any features that can’t be found elsewhere. They’re missing the point.
It is not difficult for product manufacturers to design around the “consumer experience” as their primary focus. But they have to have the desire and humility to do so. Unfortunately, far too many companies have an attitude that “What do our customers/consumers know? We know what is best for them and what they want.” It is all a matter of management attitude. The perfect example is the big three in Detroit!
The popularity of the iPod will draw many to the iPhone. Apple has shown, in many cases, the ability to really zero in and control this market. Look at the results of the iPod versus the Zune, for example. On the other hand, not everything is a home run. The Apple TV, for instance, is almost non-existent. It definitely will also be a factor of whether or not an “iPhone killer” comes along and how long that takes and if it is successful. Further, the success of connecting with AT&T is yet to be determined.
The iPhone won’t “take the market” but it will change the market. Right now you have two basic models. In one, the carriers tell the handset manufacturer what they will or won’t buy and do or do not want on the phone. The handset makers do it. No consistency, no standards, the software on the phone serves the carrier. In the other, the smartphone OS maker creates a platform and puts in every widget they can think of so the handset makers can again satisfy the carrier’s wishes. Windows Mobile from one handset to the next does not work the same way.
The iPhone represents another, very Apple, model. We make the whole widget and you, the carrier, can either go with it or not. But we’re not compromising the UI to lard it up with stuff the carrier insists on. So far, AT&T seems to be willing to try this model. If Dr. Banks thinks Windows Mobile works flawlessly, then he is *not* the target for the iPhone. The other 99% of the world is.
iPhone will be a hit, IMHO, and will take a nice share of the market, but unless it is one of a whole line of phones with a consistent user experience, it will not dominate like the iPod has. It will, however, have some impact over how all phones work in the next few years. Carriers are looking at technologies like Rich IP Applications to try to create consistency across handsets, and the success of the iPhone will accelerate that trend.