Thursday, August 23, 2007

iPhone: BMW of the mobile set?

Over the past 20+ years, the Mac attracted its share of fanatics, and apparently the iPhone now has them too.

Seth had passed along an earlier survey among members of the ChangeWave Alliance showing interest in the iPhone. (The Alliance seems to be a unique group that defies simple characterization). I couldn’t find its internal report to members on a public website, but they got some coverage in June from a Bloomberg news story.

However, I did find a recent report of customer satisfaction by ChangeWave members, where the iPhone figures were more than 2x as high as most of the rest of the industry, including Samsung, Motorola and Palm (Nokia was only slightly better). The only firm to rival Apple was Blackberry maker RIM, which was #2 as reported in earlier ChangeWave surveys this year. They admit that the sample may be biased, since obviously the earliest iPhone buyers are the most motivated. (And I think by its nature the membership is probably an atypical sample of technology lovers — representative of smartphone buyers but not cellphone owners as a whole).

[iphone satisfaction

The survey also enumerates likes and dislikes of iPhone owners, of which (as predicted on introduction) the speed of AT&T’s 2.5G EDGE network was the biggest problem. Interestingly, 77% were “very likely” to recommend the iPhone to others — a phenomenal number.

I think this suggests a very specific marketing tack for Apple, consistent with its earlier product strategies. Keep the iPhone expensive, exclusive and “insanely great,” with low volumes and high gross margins. Make sure that every customer is highly satisfied with the experience, generating strong word of mouth, and don’t go chasing after customers who are less likely to appreciate the price/features trade-offs. Unlike the iPod, don’t try to dominate the market from top to bottom.

More than a decade ago, the forgettable Gil Amelio said Apple should aspire to be the BMW of the PC industry. Eventually, Apple was hummin’ on all 8 cylinders, but switching costs and network effects mean that most buyers today don’t even consider a Mac. (There aren’t many switching costs when it comes to buying a new car). I think the “BMW” metaphor may actually come true with the iPhone: a premium product at a premium price — something that everyone would love to own, but not something that will be confused with a Chevy or a Kia.

If Apple tries to join the top 5 global phone makers, it could sell hundreds of millions of phones a year, but it would likely face a ferocious battle among established phone makers (as well as end its current strategy of national market exclusive carriers with side-payments). So far — like Pixar — Apple in the iPod era has gotten ahead by piling success upon success, not overreaching and not making any major mistakes.

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ryan.j.fisher said...

It seems that the iPhone may be available to more than AT&T customers...ala a teenager in the US who developed a hack to the iPhone:

Mike Lundy said...

Nokia's way of saying, "Why pay for a BMW and its service plan, when you can get similar handling, performance, and service in our model?"...

Anonymous said...

BMW is a package. And so is the iPhone. Neither is the best at any single thing, but it gives users/drivers a feeling they cannot get from any other car/phone.