Mind Your P's

By now, everyone on the planet is aware that a substantial price drop has rubbed some of the shine off of Apple’s iPhone. In my July 25 post, I wrote that if the iPhone failed, it would not be because it is a convergence device (as Al Ries contends), but because of flaws in 1-3 of the 4 Ps.

I’m going to revisit what I considered the iPhone’s potential drawbacks with updated commentary.

  1. “The Product does not live up to its hype, or it is not substantially different than other Smart Phones.”

    A beautiful, breakthrough device, the iPhone has a major drawback: it cannot run on AT&T’s fastest cellular data network, which means it is far slower than offerings from competitors Verizon and Sprint. Worse, initial models cannot be upgraded to use the faster networks.

    The speed issue is a huge competitive disadvantage, and a clear barrier to switching phones.

    Not insuring that the phone can operate at maximum capability is something like selling a Triple Crown winner for dog food – pennies on the pound – instead of raking in millions on stud fees.

  2. “The Price is too steep (up to $599 is a little pricey for a unique fixer-upper).”

    Shortly after the $200 price cut, Steve Jobs wrote, “We can’t wait to get this revolutionary product into the hands of even more customers this holiday season.”

    The iPhone was priced too high from the start. Other cell phones usually come cheap or for free because carriers have long subsidized the cost when customers sign up for their services.

    Charging extra for things like Ring Tones created bad buzz as well.

  3. Placement becomes an issue due to the exclusivity deal with AT&T.”

    There is a double-whammy here. Unless you’re in an area where AT&T (nee Cingular) has excellent coverage, an iPhone purchase is somewhat moot. Further, many Verizon, Sprint, T-Mobile, or other customers will not immediately switch because they are loathe to eat the remaining balances on long-term contracts with their existing providers. Thus, exclusivity becomes a self-inflicted wound to sales by limiting the potential customer base.

  4. “No one can argue with how Promotion has been handled.”

    No one could argue with the pre-launch pub, but Apple has botched their post-price cut PR blitz. The high price, greed gamble, has backfired. Media reports no longer hype how cool the phone is. All the talk now is about “sluggish sales” or the phone’s other potential shortcomings. And, while Steve Jobs’ response to early adoption anger was fairly honest (we want to sell more iPhones), the manner in which he did it has left Apple vulnerable to stepped up assertions of corporate arrogance.

Any product or service – no matter how cool – will ultimately fail when the strategic or tactical approach to the Four Ps is flawed. In the case of the iPhone, gaps in geographical coverage and speed (customer solution), high initial price (customer cost), AT&T Exclusivity (lack of convenience), and poor post-launch PR (communication) bode ill unless immediately addressed. The iPhone can still become the monster success almost everyone envisioned prior to its introduction, but not until Apple realizes that it must do a better job of considering customer need before its own.

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