The Double-Edged Sword of Mass Market Appeal

by Eric March on June 11, 2008 at 10:44 pm

CNN Money had an interesting article on whether the iPhone can avoid the “Razr trap” — company slashes prices on revolutionary device to appeal to larger market. It’s an interesting question, but the analogy isn’t completely apt in this case. What did Motorola in wasn’t simply the price cuts, nor only Motorola’s failure to innovate. Their problem was that they beat that Razr horse until dead, and then they beat it some more. Then, when there was little more than a puddle of protoplasm left, they thrashed it with a mixer set on “whip,” and then boiled the daylights out of it until all of the liquid had evaporated and there was nothing left but a charred crust of solids stuck to the bottom of the pot. And then they beat the pot.

Motorola seemed to rely solely on the Razr line and its bretheren for far too long, with too little changing between models to make them interesting enough to sustain it — something I like to call Palm Syndrome, because they did the same thing, though their Treo line has managed to sustain them, due largely to the inexpensive Centro. Motorola, like Palm, spent a lot of time at the top of their respective games, and Motorola, like Palm, got caught surfing the wave of a single product line’s success for entirely too long and they both crashed headlong into the sand when the wave had finally had enough.

Although this may seem to share some similarities, the differences are important. First of all, while the iPhone is certainly responsible for a great deal of Apple’s current success, it is by no means the only thing. Apple’s successes really started with the iPod after all, and while the iPod market is pretty saturated, the line is still evolving enough that it’s keeping people interested. Second, both the iPod and iPhone have the side effect of acting as a gateway through which many people are being turned on to Apple’s computers by virtue of their affinity for the mobiles. The “It just works” philosophy is rubbing off. Third, the iPhone is still in its comparative infancy, only just about to enter its second year of life, and already the innovations are showing (even if some of them ought to have been there from the first generation). Fourth and fifth, Palm and Motorola both spent four or five years patting themselves on the back before market forces reminded them that they’re not as clever as they thought they were, and both companies set their focus too narrowly to properly navigate the evolving market. Apple clearly has their eggs in numerous baskets and are pretty aware of what the people want and expect of them.

But here’s the problem. Apple wants what Motorola and Palm used to have, and what RIM, Nokia, HTC and others currently share: A majority share of the mobile phone market, and I’m sure they’d like to capture both the smartphone and feature phone markets. To do that, they’ve slashed the price of the iPhone to the point where it is competitive even with higher end feature phones, and better than any high end smart phone. The $199 price tag is going to be far too irresistible to many of the holdouts who were playing wait and see. Apple could very well get their wish.

But you know the saying. Be careful what you wish for. Becoming that appealing to the market could create insane demand for the product, which in turn can glut the market. In this way it does share some similarities to the Razr: There could come a point where there are so many of them that the market becomes saturated and the iPhone’s growth could level off, a point along the success curve you might refer to as jumping the shark — the point at which people will become bored with a product that has become too common and pedestrian to warrant further attention.

This is where Apple needs to be very mindful of how and where they position themselves in the highly competitive and fickle mobile market. You want to put your product in the hands of everyone, but you don’t want to do it in such a way that it dilutes the value of your product, both financially and socially. I’m not saying that the price cut was a bad thing — this is a subsidized price after all and we’re all used to that business model — in fact it’s pretty awesome. But Apple needs to make sure that they keep shaking things up a little, innovating, introducing important new features and changes, and in the main, ensuring that they keep the line fresh and new with each successive generation so the fickle mistress that is the general public doesn’t get bored and start casting its eyes elsewhere for entertainment.

The good news is that Apple has been pretty good at doing that so far. Their computer line has been kept fresh and interesting enough both on the desktop and laptop ends of things — the new iMac alone has spawned a new breed of all-in-one desktops, and the MacBook Air has brought the waif look into vogue for the portable set — and the introduction of the iPod Touch last year definitely put a spring back into the iPod line’s aging step. Apple definitely has the ability to innovate and keep things fresh, and I am sincerely hoping that they bring this to bear on the iPhone in particular, because the competition is starting to heat up as companies are beginning to understand that style is playing as much a role in the success of a device as substance, and some of them are proving that they can make a pretty capable, if rather derivative device themselves.

We already have a pretty good idea that next year’s model will feature a much better camera, and likely video recording to go along with it, if the recent Apple job posting for a digital camera engineer is any indication. If they can continue the improvements of that caliber, Apple stands a good chance of leading the pack. As long as they don’t spent more than a few moments patting themselves on the back, don’t let themselves be blinded by success, and continue to understand their market, then they might just avoid going the way of Palm and Razr and any other company that grew too big relying on one product’s huge success for too long.

Posted in Op/Ed, iPhone 2.0