India Broadband Forum

Rameshjeee

Lost Opportunity: How Apple got its strategy wrong

It wasn’t just the pricing that did iPhone in. Apple got everything--starting with marketing communication to the sales and distribution model--wrong

IPhone’s launch in India has been dubbed the biggest failure of a top-notch brand from a well regarded company in recent times. Two months after the dust over the launch and the subsequent wave of disappointment has settled, it’s time to take an objective look at what actually went wrong with iPhone in India, given that it has been a runaway success in most other markets it was launched in.

Unlike the initial argument that it was the steep price tag that queered the pitch for iPhone in India,there is more to the debacle than just the pricing.Besides a very high price tag, one main reason behind iPhone’s failure in India is that there was a very weak link as far as consumer confidence was concerned.

Apple’s rivals in India, industry observers and analysts say that a flawed sales and distribution model and communication failure were the biggest reasons behind iPhone’s debacle.The company failed to strike a connect with Indian consumers.

India not a priority market?
Selling huge numbers in India was not even Apple’s game plan, it seems. Around the time of its launch, the company had said it hoped to sell 10 million units

Not good enough:
While Airtel ran commercials outsourced from Apple for four weeks on a few TV channels,Vodafone used the envelopes of the mobile phone bills sent to its customers to apprise them of iPhone’s launch in India.Globally by December, whereas in India, it would ship 100,000 phones by December 2009. Clearly, Apple wasn’t expecting big sales from the market.

Yet, what is surprising is that the company didn’t even manage to achieve this target. Apple had imported around 50,000 phones at the time of the launch but had only managed to sell around 11,000 units so far.
Analysts argue that by downplaying India, the world’s second largest and fastest growing telecom and handsets market, Apple may have missed not only a big opportunity to sell one of its blockbuster brands but also to lay the ground for its future products. “Around 120 million handsets are sold in India every year and, of these, almost 4% to 5% are smartphones. Nokia has around 60-70% share of this market.

Clearly, Apple had a big opportunity to establish itself in this market and, if not break market leader Nokia India’s monopoly, then at least give it a tough fight. It’s an opportunity that is now being assiduously chased by rivals such as Samsung Electronics Co. Ltd and Research in Motion Ltd, or RIM, the makers of BlackBerry.

It’s not about price
IPhone’s comedown in India has been described as a pricing failure by most. But on the face of it, it doesn’t seem logical. Priced at Rs34,999, Nokia N96 costs around Rs4,000 more than iPhone’s 8GB handset and Rs1,000 less than its 16GB model. IPhone’s other rivals, such as Samsung’s Omnia and BlackBerry Bold, are priced even more steeply . “More than the price, it was the pricing communication that hurt iPhone in India.

Apple CEO Steve Jobs had made a public announcement that iPhone would be priced at $199 globally (about Rs9,490).This built a false hope in the minds of those consumers who wanted to buy it and turned away those who could have actually bought it.

Apple had to tag the product with its real price because its licence holders in India, Bharti Airtel Ltd and Vodafone Essar Ltd, couldn’t have subsidized the price. “The reason why the price of an iPhone seems so high (in India) is because it is not sold on a contract. This selling process has not yet caught on here.

The two service providers, however, are providing finance options for as low as Rs2,600 a month to make it easier for those who want the product. But this hasn’t helped much.

Some market observers argue that Apple’s distribution and sales strategy in India was flawed from the word go. To begin with, the company licensed the iPhone to two service providers (Airtel and Vodafone) who didn’t have any experience in the retail selling of handsets, which is a complex business in India involving different strategies for different income groups.

Second, these service providers decided to sell the handset only at their outlets, thereby limiting its availability. Also, they antagonized the big organized retailers in the process (the Top 10 organized retailers are estimated to have a 50% share in total sales). Third, selling not being their core area of expertise, these companies couldn’t pitch it to the potential consumers aggressively.

The service providers’ strategy to sell it with a lock-in clause may not have gone down well with consumers. This meant iPhone buyers cannot retain their handset should they wish to switch operators despite having paid the cost of the handset upfront. This condition was a big dampener, especially because from next year, Indian consumers will have the freedom to change service providers without having to change their number or handset.

The other most evident flaw was its inability to strike a connect with consumers. Unlike in the US, where a month-long marketing and advertising blitz preceded the debut of the iPhone, Apple didn’t run any of its own campaigns in India. All the marketing communication was left to the two licence holders. What consumers saw was a round of print advertisements on the launch date that announced the arrival of iPhone and a few billboards in key cities.

While Airtel ran commercials outsourced from Apple for four weeks on a few TV channels, Vodafone used the envelopes of the mobile phone bills sent to customers to tell them about iPhone’s entry into India.

Even if you’re selling a niche product, the communication needs to be there on what’s on offer and to get (make) people curious. Otherwise buyers won’t be enthused.

People who buy high-end products buy them either for their technological advantage or to enhance their status. So, marketers promoting a high-end product must bring out the technology and exclusivity factors in a vibrant manner.

Ambiguous positioning
Some advertisers say iPhone’s positioning in the market was ambiguous. “IPhone was positioned as a lifestyle product but in India, the company or its licence holders did nothing to make it seem aspirational.
On the contrary, Nokia did a smart thing by positioning N96 as a convergence product. It immediately struck a connect with its target consumer for the communication was focused on its attributes.

Airtel spent only around Rs3-4 crore on iPhone’s advertising. On average, they spend around Rs14-15 crore on their new launches. The licence holders, however, argue that they were discreet in advertising for strategic reasons.

Apple’s strategy was not to sell a million phones in India. It only wanted to establish a presence in the country. Customers who were interested in buying iPhone were already aware about iPhone’s launch in India.
To be sure, some of iPhone’s rivals also went for a low-key entry into the market at the time of their launch but now, with the market heating up, they are pulling up their socks.

Its own failure notwithstanding, iPhone managed to stir the smartphone market in India quite successfully. To pre-empt its success, Nokia launched its N96 series, Samsung came out with its own version of the iPhone, and RIM is set to launch its BlackBerry Storm model soon. Google Inc. has also come out with its Android mobile phone software that can help Apple’s competitors better many of the iPhone features.

Apple refused to share its future strategy for India. Analysts, however, say the company will have to plug many gaps in its distribution and marketing and most importantly, open a direct communication channel with consumers, if it wants a meaningful presence in India.

kissme

their is no 3G yet in india, how come people will buy iphone 3G ?

Rameshjeee

We have 3G phones in Nokia also....they are doing well.

kissme

but we are not using 3G technology here , their is no use using 3G phones on EDGE technology

first the GOVT had to release 3G spectrum, some inside sources are telling India will skip 3G spectrum and will introduce 4G spectrum

Rameshjeee

3G is one of the facilities the phone has.Just bcoz there is no 3G facilities in India we cant ignore phone with 3G.

rahul4640

Rameshjee,
Now that 3G services are available from BSNL, shall not Apple be more interested in Indian market? Previously I was told that both Vodafone and Airtel are coming out with official iPhones in this month. Any news of that?