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  • Attention Verizon Wireless: Have You Heard of Dumping?

    June 10th, 2010

    Having endured those dreadful "Droid does" TV ads that never quite explain what purposes they actually serve beyond making phone calls, it's clear that Verizon Wireless is doing what they can to boost market share.

    Unfortunately, that means dumping smartphones.

    How so? Well, have you seen all those two-for-one offers? Buy one, get one free. That sounds fine at your local restaurant, but when you're talking about tech gadgets that are each worth hundreds of dollars, you wonder how Verizon can possibly profit. In the end, I suppose there's enough wiggle room in those two-year contracts to make up the difference, particularly when you take an unlimited voice deal and other frills. Or maybe the handset makers are cutting their prices to the bone to help the cause.

    In recent months this marketing scheme has clearly paid off. According to the NPD Group, sales of Android OS phones in the U.S. exceeded those of the iPhone in recent months. That happened even though Apple still moves more product worldwide.

    How that's going to change in the current quarter is anyone's guess, though the experts feel Apple will still gain the upper hand with iPhone 4 and iOS 4, even though Verizon is still running those miserable TV spots and the promise of super cheap hardware if you'll only become a customer.

    Now there's nothing wrong with vigorous competition. That's how companies sometimes learn to build better products, better marketing campaigns, and sometimes a little of both. It also gives you, the customer, more choices, and that's a good thing assuming that the various makes and models being offered are really all that different.

    There's the rub. You see, it doesn't matter if the display has a few more pixels and there's a slightly more robust camera if onscreen text doesn't look that great and the gadget takes poor snapshots. This is where Apple manages to stay ahead of the competition. Yes, you can easily do a standard bullet point comparison and find iPhone 4 and the latest and greatest Android OS hardware offer somewhat similar specs. OS features match up closely as well.

    Apple's advantage, and to some it's a disadvantage, is the integrated system that means the hardware is perfectly in tune with the software. The five megapixel chip on iPhone 4 will supposedly yield better photos than camera chips that meet or exceed that spec on rival products, although we won't know for sure until the reviews are in. Being able to edit your high-definition movies with the optional iMovie app is a plus, although it would be nice to have a hardware or software stabilization capability. It's really hard to hold such a tiny device steady while filming away.

    Of course, what Apple is doing now is no different from the way they mastered the digital music player market when the iPod was first introduced. Through the years, so-called iPod killers emerged, most of which sported better specs or some feature advantage of one sort or another, such as a built-in FM radio.

    In the end, the customers decided that having a music player that just worked most of the time, along with a seamless way to synchronize your music and videos, helped cement the deal. The integrated ecosystem trumped separates.

    Even Microsoft realized that fact when they double-crossed their PlaysForSure partners and developed the Zune. But they were too late. The iPod won, and cribbing iPod features from a year or two earlier didn't help Microsoft.

    The competition seems better focused when you pit the iPhone against Android. Of course, Google isn't in it to sell hardware. They simply want more eyeballs to look at their targeted ads and maybe click a few here and there. That's another area where Apple has a trump card. Apple is going to block attempts to by Google's AdMob system to scrape your location and browsing data. That means lost eyeballs, and less potential income for Google.

    Supposedly Apple's iAd will deliver advertising content of superior equality, which means that you might even be tempted to watch the announcements from time to time and consider the products and services offered. You can also easily move on without being further disturbed.

    Basically, this has become Apple's game to lose. If the iPhone 4 and iOS 4 are buggy, customers may quickly demand refunds and move on to the competition. Of course, the same is true for all those Android handsets that Verizon is dumping into the marketplace. If customers decide that even a two-for-one deal doesn't give them satisfactory handsets, the campaign might end up a money loser. But if the products are, as early reviews indicate, almost as good as today's iPhone in some respects, Verizon will laugh all the way to the bank.

    Of course, in the import and export world, when you dump product, you risk the consequences from governments who want to product domestic industries. But if Verizon Wireless wants to flood the market with free phones to beat AT&T and other competitors, so be it. Maybe that maneuver will also help reduce prices for other smartphones — even the iPhone.



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    4 Responses to “Attention Verizon Wireless: Have You Heard of Dumping?”

    1. dfs says:

      “Dumping” is generally a term for for a practice of a foreign country flooding our country with some product in the hope of ruining our own national industry for that product (as some other country might dump cheap steel on us) , and, if I’m not mistaken, it’s frowned on by international law and banned by at least some bilateral trade agreements. I doubt anybody is primarly adopting any strategy of putting the iPhone out of business. Some carriers are obviously flooding the market with cheap smart phones (Blackberries as well as Droids), but it’s because these carriers hope to entice purchasers into signing lucrative service contracts: the contract is where the real money gets made, and they estimate they can put out these cheap phones as “loss leaders” and still turn a nice profit. A good analogy might be the way that some printer manufacturers put out extraordinarily cheap printers because they know their real profit is going to come from selling supplies such as ink, toner, and special paper (a guy I know who works for HP once told me that it would be a good business idea just to drop free printers out of helicopters over high-population areas, because that would lead to great profits from selling supplies)

    2. Maybe a distinction without a difference. Verizon is giving them away to boost market share. Two times junk is still junk. :)

      Peace,
      Gene

    3. Steve W says:

      "Apple is going to block attempts to by Google’s AdMob system to scrape your location and browsing data. That means lost eyeballs, and less potential income for Google."

      It does NOT mean less eyeballs! It just means unqualified eyeballs.

      "Apple’s advantage" is that they don't have to qualify iAd "eyeballs". Some may call it arrogance; that fact is that all iAds "eyeballs" will belong to Apple iP-device users, and that is a qualfication in itself. Advertisers will know three things: 1) their banner ad was shown on x times on y iP-devices, 2) z users clicked on the banner, and 3) any interaction that occurred within the iAd.

      That's enough, IMHO.

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