Joining the crowd of the mortals

It has been quite some time since I wore my favorite "critic" cap but it wasnt because of the dearth of topics. It may be because of the lack of time(but I am not getting into that). This time round, i'm taking a huge risk of wearing this cap again. That is because everyone seems to be very happy about Apple offering the 3G iPhone for USD 199. The other day, in a discussion with a group of professionals, i was overwhelmingly short of support when Apple's 3G iPhone strategy was being discussed. Its tough to be a naysayer without the company of fellow naysayers. Through this medium, I'll try to put across my views, in totality as to why i think 3G iPhone @ USD 199 ain't such a good idea after all.

First of all, lets be clear that it is great news of all those longing to own an iPhone but couldn't because of the high entry barrier. Sometime after this announcement, I was lucky enough to experience iPhone first hand (thanks to my manager who managed to get the one from US unlocked in India) and needless to say, it didn't disappoint one bit. Leave alone disappointing, it only increased the urge to own one. But that's when the telecom cum marketing guy(albeit a crude one !!!) deep inside raised alarm bells. Is it such a good strategy after all? Apple was always a company known for its premium products/services. Be it MAC or be it the iPod line of products. Its products always had fashion as being central to them. The need was driven by its designers and fulfilled by its R&D team. A look at its history suggests that Apple had always succeeded even though the core functionality of the products it introduced was already available in market although at various levels of comfort, quality and innovation. The reasons behind two of its biggest successes are mentioned below.

• iPod: It wasn't like iPod succeeded because there were no portable music devices in the market. Sony, Phillips etc were manufacturing them and were making good business out of it. What Apple did was to give a PC interface to a portable music device and create a hip looking device. Giving iPod windows support was single most important decision in iPod's PLC. Windows support helped iPod reach the masses - much beyond its initial kitty of MAC users.


• iPhone: Here again, Apple was a late entrant and the market wasn't short of mean mobile devices or manufacturers. The reasons for iPhone's success are again creation of a really hip looking device with a killer user interface. Visualizing (and developing) a mobile phone without a physical key pad left the competition and the target market spellbound.
  

Apple's products always had a distinct look and feel about them. Same is the true about its marketing and positioning strategy. iPhone's (for that matter all of its products) branding and positioning till date have been spot-on. Its products are known for their cult following. 3 Australia, the only other company which couldn't strike a deal for iPhone 3G has gone to the extent of launching a iPhone website and started a campaign allowing its subscribers to register interest in the iPhone, send SMS messages about the iPhone and provide comments which would influence the for the powers that be at Apple to see to strike a deal with 3. All this may be pointers to a real rosy scenario for iPhone 3G. But the factors which create doubts aren't about iPhone 3G but about Apple's overall mobile market strategy.

Below are some of the challenges that Apple (after the launch of iPhone 3G) will face in its overall quest for the mobile market.

• Apple iPhone is successful today even though there is only one product in its line because of its pinpoint positioning - appealing the youth with significant disposable incomes. By giving out iPhone 3G @ USD 199, its starts competing is segments dominated by traditional players who have the capabilities to derive better scale advantages.
• Apple just doesn't do enough R&D in mobile & wireless. Somewhere down the line, the Nokia's and the Samsung's of the world have better laid out product strategy for future technology evolutions. Already people have started talking about LTE and handset manufacturers have started developing handsets for LTE & WiMAX.
• iPhone 3G isn't going to yield much for Apple because ATT is retailing it at 199 USD. It will take some time before Apple can derive scale economies and the biggest risk here would be the launch of WiMAX/LTE networks by rival operators. For that matter, with congested 3G networks all throughout the mature markets (coupled with limited 3G networks in the third world countries) and femtocells pleading for more time, delivering a satisfactory 3G experience will be challenge.
• The possibility of more number of unlocked iPhones storming the market cannot be completely discounted with the locked phones being made available at such cheaper rates. With this, the revenue realization strategy of Apple will go for a toss.

Well you cannot help but undermine the above comments as a classic "doom-monger's" view countering anything new and anything good that hits the market. But that was why this post was updated. Apple till date has been a company which was mostly untouched by the "volume" bug and concentrating mostly on premium pricing on its brand. With the pricing of iPhone 3G, it looks like this bug has hit Apple and it stands the risk of joining the rest of the mobile pack. The pack which fights day in and day out (after deciding to play the volume game) to prevent their respective brands from becoming commodities. One final food for thought for all the friends around me who are doubly or triply excited about iPhone debuting at less than Rs.9000/- in India. I seriously doubt if its going to retail at that price and even if it does, they are better advised to take one good-deep look at the contracts they'll get into with Airtel/Vodafone.