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Loyalty vs Hostage…

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With the recent news on iPhone price cut overshadowing just about all the great stuff announced during Steve Jobs keynote… It is not a very good move… Lesson learnt.

This article from CIO Today looked into the possible risk that awaits Apple on the world stage of its beloved iPhone.

Below are some excerpts:

Dangerous Waters Ahead

The snafu is indicative of the dangerous waters Apple is entering as it moves further into the mass market. “Apple has never been price-competitive. They’ve always built an audience on cool products that are different. They took that model to the iPhone,” Kane said.

But in entering the cell phone market, he explained, Apple entered a highly competitive area where most people pay nothing for a phone. Apple is accustomed to requiring that customers adopt its world view, Kane explained. The Mac is a tightly bundled package of hardware and software and the iPod requires Apple’s iTunes. So far so good. But with the iPhone, Apple imposes a new level of loyalty on customers — one to AT&T.

“More than anything else, this exclusive relationship with AT&T caused a lot of people not to buy the iPhone,” Kane said. People simply didn’t want to break their existing contracts with other carriers, he noted, and were planning to wait until they expired before buying an iPhone. Now, with the price cut, these people might very well be glad they waited.

“All I had to do before was make a commitment to Apple; now I have to make a commitment to Apple’s partners,” he said. “Loyalty has to be freely chosen,” Kane concluded. “Are people truly loyal or are they held hostage? When people feel they don’t have a choice anymore, that will erode their loyalty.”

Personal Thoughts:

For any phone company to tie up a specific phone with a carrier only, that would only mean one thing and one thing only. The phone is super cool and super hot and everybody will loves it! And the chips are all in the phone maker hand to tie up with the carrier that is willing to pay the most price for it! In Apple and AT&T case, it was reported that all sales / contracts from the iPhone 2 years package, 10% of the profits goes to Apple!!! That is on top of the hardware that Apple itself is profiting, they get the extra 10% from AT&T.

How can you disapproved that? If Sony came out with a PSP-like gaming system with phone built in and 3G capabilities and all in the package size, slightly smaller than the newly announced PSP… The chip will be in their court and any carrier would like to have exclusivity to it.

Now that is my assumption on the Apple and AT&T deal… the other possibility is that Apple choose AT&T and negotiated the 10% profit thing AND because AT&T runs on a 2.5G network which is less draining on the battery life of iPhone. That would make it a wiser choice to start off with while their engineering team continue to ramp up the battery for the second generation iPhone (iPhone battery is non-replaceable by normal user and given the multimedia functionality that every owner of an iPhone will want to play with… the battery life will be a ‘disappointment’ or ‘annoyance’ to the owner. It still needs to meet the basic requirement of being a phone that can last the whole day without charging)…

The article ended off with the quote on:

“Are people truly loyal or are they held hostage? When people feel they don’t have a choice anymore, that will erode their loyalty.”

In Apple case, I believe it is a mixture of both. People know that when they buy into Apple, they probably already know it to be a very locked in experience (unless they are really new to Apple) and Apple will tell you where to go next rather than otherwise (broadly speaking) BUT people are happy being led by Apple because they enjoy the user experience with their products (broadly speaking again).

The same could be said of any other company providing products / services to the consumer. PEOPLE LIKE THE EXPERIENCE BECAUSE IT IS INTEGRATED. Integrated does not mean locked in, I agree… but how many have successfully achieved that experience that Apple or Sony has brought to the world with non locked in mind set and grew at the pace that did (Sony is the 80s and 90s). There probably are… but not at the level where Apple has achieved… The ultimate goal of any business is to make money and have customer stayed on with them for the long haul and eliminate 3rd party threats. Thus the better integrated of all their products and services together, the more happier / better the user experience will be, as in Apple case (Apple achieve that not just with the integration only. Agreed. There is great marketing, product design, understanding usability…) One can argue that if Apple open up its iTunes to 3rd party integration, it will be a win win situation. Right? Well, the possible rationale would be on how AMBITIOUS Apple is on its world dominance AND how confidence its platform is, to allow 3rd party to tie in… cos that would spell problem / bugs / dissatisfaction to the user if 3rd party messes thing up AND probably the most importance of all, a much lesser sales of the billions of song sold through iTunes. Can any company live with that? It is more a test of character / values of the company than anything else. .

So in conclusion, erosion in any brand is inevitable sometimes… Business made decision based on business sense. Loyal customers sometimes give more grace to certain brand because of past pleasure experience and are generally more forgiving people…

Nothing is perfect, especially vendors / manufacturers. And we all made choices… So if you felt like you are being held hostage… live with it because there is compromise in choosing Apple. Complete loyalty all the time to a human-made company will never be possible. Apple probably knows that… It is just business decision. 

(don’t think I am making much senses after a while… but heck, it is meant to be informal anyway)

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Written by gooddealz

September 12, 2007 at 4:30 am

Posted in Opinions

One Response

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  1. • There is no 3G iPhone as yet because, as Jobs said at the launch, the “The trade off with 3G [in battery life] is too bad right now.”

    The above extracted from Tech Crunch site.

    The prediction was right on the battery life…

    Mike

    September 18, 2007 at 5:39 pm


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