Wednesday, July 09, 2008

Vodafone NZ, iPhone and a marketing step too far

There's been an outrage on Vodafone NZ's iPhone plans. I've been commenting on Rod Drury's blog on Mark Rushworth's performance on Campbell Live.

I've known Mark for a good while now and thought he did well given the approach that John Campbell took. Unfortunately for him he couldn't get the really good news out there.

There is a lot of emotion in the NZ market about Vodafone 'ripping people off' and its easy to see how that could happen. The fact is, with the exact same information and a different approach this could be significantly different - and it all comes back to wanting to take the marketing a step further than they needed to.

My hypothesis is pretty simple - Vodafone have Telecom on the ropes at the moment and want to make a killer blow. iPhone is pretty close to that. However instead of landing one massive punch, they have only ended up with a relatively weak hit. And that is as a result of trying to overplay their hand.

The overplaying of the hand was by a two stage release of handset prices and plans.

The announcement of $199 sticker price for the iPhone on Monday was designed to maximise the hype around the iPhone. That price all of a sudden meant that someone on Sunday who thought iPhone was unobtainable found that they could afford the entry ticket. That would have got a lot of people very excited (hey - we were talking about 2 of them at home!). An implied promise was made - you could afford the iPhone.

The release of the plans the next day broke the promise - it wasn't affordable.

That is the root of this issue - an implied promise was made and then broken.

When you look at it in more detail, its a like a fighter who has swung to land the killer blow and then ended up hitting himself in the back of the head. Here's why.

1. There was no benefit in splitting the plans and the headline price - the people who are most upset now are the people who would have ruled themselves out of buying an iPhone already based on their expectation of the price. Vodafone have upset their next tier of customers down. By launching the sticker price and the plans on the same day these customers would not have even been in the conversation.

2.These upset customers are looking very deeply into Vodafone plans - the issues around prepaid, $1 a day data and lack of total customer choice means that Vodafone is getting more scrutiny that it would have expected and is having to defend this.

3. What has been missed is that the $250 plan, when compared to existing Vodafone plans is actually very sharp. It's a 10% saving on an equivalent plan for the same bundle - it costs less. No-one has picked that up. In fact most people seem to think this is somehow a rort. So Vodafone has actually cut some prices but is not getting any credit for it.

4. Instead of basking in the glow of iPhone solely, it opens up an opportunity for Telecom to do something different with mobile data pricing. Whether it takes this opportunity is a moot point - this is an opportunity that simply was not there at the start of the week.

My view - launching these plans in one hit at an event would have given Vodafone a pretty strong position. Trying to milk it has led to an instant loss of trust.

Will be interesting to see how Vodafone learn from this - that is the next challenge - my guess is that they are locked into an Apple contract that gives them limited flexibility at this point and will just have to tough it out.

Disclaimer - I am working for Telecom Wholesale today, 9th July 2008 (and for the next two days). These opinions remain my own and do not represent any company position.


stuartm said...

I just want to make a comment on what you said in point 3 above:
"...the $250 plan, when compared to existing Vodafone plans is actually very sharp. "

You're correct in saying that "compared to existing Vodafone plans" the $250 plan works out cheaper, but the problem is that it's now being highlighted how ridiculously expensive the current plans are.

No other phone before has had such a huge, coordinated, world-wide launch before, so now people in NZ are getting to see first hand how badly the plans here cost when compared to overseas plans. (what you mentioned in point 2.)

This was also John Cambell's main line of questioning - why are we so much more expensive than the rest of the world? And this is what Mark had no answer for. (apart from when he tried to say that it costs more to get the data here, which is BS.)

Ben Kepes said...

@miki - awesome post - as analytical as we'd expect the engineer in you to be.

Seems to me that voda know they have a relatively short window of opportunity on this one - with WCDMA going live in a few months this is their one shot at performing a rort. Hook people on and worry about the inevitable price cutting later

Also seems to me that they know that they have the other telco(s) by the balls. If someone else were to undercut it would create a price war that would do no one any good.

Sure announcing the $199 a day earlier was kind of bizarre, but maybe just maybe voda is thinking that "any publicity is good publicity" - there are probably 100000 NZers that now know about the iPhone and didn't before - what is that sort of marketing worth

brenda said...

Missing one key thing though, IMHO. The iPhone has wireless internet. Chances are that at home, at work, in key places - there will be wifi.
It syncs so easily with your computer that exchanging movies, music, podcasts, photos is all done through the sync process.
Chances are you won't use much data outside your wifi network. So you don't need a large data plan!
In the face of outrageous data charges, I have the data turned off all the time on my iphone - but if you just need it to be able to get emails wherever you are, you'll find the data you are needing is relatively minimal.
IMHO of course. Don't let it put you off getting an iPhone, they're incredible!

Juha said...

I was not a little surprised to see that the 3G iPhone doesn't use 3G for the Apple Store. Seems it only works over WiFi.

That said though, using any app like Google Maps (you want to exercise the GPS, no?) and even web browsing will quickly eat into the comparatively meagre cellular data allowances in Voda's plans.

I do agree that Vodafone really screwed up this one. There is competition arriving (well, I hope so) and trying to milk its monopoly like this isn't going to do much for customer loyalty. Telecom and maybe also NZ Comms must be breathing a sigh of relief.

markcraven said...

What a great post and sums up what I have been thinking about this iphone shambles. I hope telecom offer the iphone (on prepaid as well) and make a point that their 3G coverage is country wide not in the main centers as it is for the VFN iphone. I have been loyal to VFN and critical of telecom, but no more. Bring on competition!