What Android manufacturers can learn from Apple to build strong branding
Just today, I read Philip Elmer DeWitt's post on Fortune Tech on Apple's awesome performance in 2011; with just 8.7% market share, the company pulled in 75% of the cellphone industry's profit. Yes, that is the entire cellphone industry, not just smartphones. The post goes on to point out that only 5 out of 8 top cellphone manufacturers are profitable, which does not paint a very bright future for Android or WindowsPhone powered devices.
Last year, I had blogged about the very different business models adopted by Google (Android) and Apple which have resulted in very different growth paths in the mobile industry.
Apple delivers a single, high cost, high quality mobile device every year (iPad and iPhone) and controls all aspects of the user experience, profiting on each front - hardware, software and app purchases. Apple owns the user, and this means more rigidity, controls and restrictions, but also results in a simple and intuitive interface, which works consistently and reliably each time. With just one device, Apple has a streamlined and effective innovation program. And the sheer scale of production enables them to keep costs down to the minimum, while maximising profit. It should be noted that Apple Stores (despite being full service stores) earn huge profits per square foot, even in expensive retail locations. Apple has clearly benefited hugely from focusing on the user and the user experience. Even a 3 year old iPhone 3GS is not yet completely obsolete -it can run iOS 5 - and today, at Rs.19,000, it commands the same price as the latest mid-range Android handsets!
The story of Android has been one of breathtakingly fast growth and scale. When this blog started in 2010, Android handsets numbered just 24 million - last year, they reached one billion activations. Market share crossed 50% of the smartphone market. And Android is a free and open source OS - the manufacturers do not even have a large innovation cost. So why is it not profitable?
Samsung sold 97 million smartphones in 2011 against Apple's 93 million. Apple has 3 smartphones in the market. Samsung offers Android and WP, but given Windows' miniscule market share, we can assume that most smartphones sold ran Android. How many Android models does Samsung have? Can you distinguish each of them clearly from each other? I tried to keep tabs of the Galaxy range in this post, but its a hopeless task. I am ready to bet that someone who wants to buy an Android phone and looks at the Galaxy range, will be completely confused. There are too many models, and the differences between them are too obscure. Just when you understand it, a whole slew of new phones comes out and then you have to understand it all over again.
I understand that it is an attempt to cater to every market segment, but at some point, it becomes counter-productive, and a drain on innovation resource. Remember that Android has to be tweaked for every display unit, every processor, and literally every component. And every time Google issues an Android update, everything has to be tweaked and tested again. Isn't this a huge innovation burden on companies manufacturing Android smartphones? And it's innovation that consumers cannot see the benefit of because it is only confusing them further. It seems like innovation for innovations' sake.
If I were an Android manufacturer today, here's what I would do
1. Reduce the number of handsets drastically. Focus on developing one or at most, two handsets in each segment - low cost, mid price and top end. Put all my efforts into creating the very best value offering in each segment. Create the very best phone that I can.
2. Educate customers about my range and clearly tell them the benefits of each smartphone. So that people buy an Android phone because they understand how it benefits them. Not just because it fits in their budget, or a salesman tells them so. Nokia is doing a good job of this with the Lumia. The demos I have seen in the Nokia showroom and in Croma, focus on the real benefits like Nokia Drive and baked-in MS Office access. I have yet to see any Android phone pitched on benefits, it's just about hardware and price.
3. Make phone software easily upgradeable, OTA. Stock Android is a fabulous example of how to make phones easy to upgrade - the user has to do nothing but push a button. And put a time frame to make sure that manufacturer upgrades closely follow Google's upgrades. This is actually a real brand differentiator. Especially if you go one step further and guarantee to support software upgrades for the next 2 years. This would be possible to do only if you were not pre-occupied with pushing out 100 new phones next year. The hardware on many modern phones is good enough to run upgrades at least for the next two years.
4. Reduce hardware upgrades to a reasonable timeframe. Too much of hardware upgrading is creating rapid obsolosence in the mobile phone space. As customers, it makes us think that all cell phone manufacturers want, is for us to buy more cellphones, faster. And this is counter productive if you are building a brand. I would pay a premium, with better grace, for a phone, if I knew that it will not be rendered obsolete by a hardware upgrade in 6 months time. This would also improve the brand value.
I believe that these principles will create stronger Android brands in the market place. They will make the manufacture of Android phones more profitable and also build back to keeping Android sustainable in the long term. Achieving huge scale in a short time span is great, but it has come at a cost of clarity and coherence in the brand portfolio of most manufacturers. Android still remains an attractive base on which to build an enduring cell phone brand.
Last year, I had blogged about the very different business models adopted by Google (Android) and Apple which have resulted in very different growth paths in the mobile industry.
Apple delivers a single, high cost, high quality mobile device every year (iPad and iPhone) and controls all aspects of the user experience, profiting on each front - hardware, software and app purchases. Apple owns the user, and this means more rigidity, controls and restrictions, but also results in a simple and intuitive interface, which works consistently and reliably each time. With just one device, Apple has a streamlined and effective innovation program. And the sheer scale of production enables them to keep costs down to the minimum, while maximising profit. It should be noted that Apple Stores (despite being full service stores) earn huge profits per square foot, even in expensive retail locations. Apple has clearly benefited hugely from focusing on the user and the user experience. Even a 3 year old iPhone 3GS is not yet completely obsolete -it can run iOS 5 - and today, at Rs.19,000, it commands the same price as the latest mid-range Android handsets!
The story of Android has been one of breathtakingly fast growth and scale. When this blog started in 2010, Android handsets numbered just 24 million - last year, they reached one billion activations. Market share crossed 50% of the smartphone market. And Android is a free and open source OS - the manufacturers do not even have a large innovation cost. So why is it not profitable?
Samsung sold 97 million smartphones in 2011 against Apple's 93 million. Apple has 3 smartphones in the market. Samsung offers Android and WP, but given Windows' miniscule market share, we can assume that most smartphones sold ran Android. How many Android models does Samsung have? Can you distinguish each of them clearly from each other? I tried to keep tabs of the Galaxy range in this post, but its a hopeless task. I am ready to bet that someone who wants to buy an Android phone and looks at the Galaxy range, will be completely confused. There are too many models, and the differences between them are too obscure. Just when you understand it, a whole slew of new phones comes out and then you have to understand it all over again.
I understand that it is an attempt to cater to every market segment, but at some point, it becomes counter-productive, and a drain on innovation resource. Remember that Android has to be tweaked for every display unit, every processor, and literally every component. And every time Google issues an Android update, everything has to be tweaked and tested again. Isn't this a huge innovation burden on companies manufacturing Android smartphones? And it's innovation that consumers cannot see the benefit of because it is only confusing them further. It seems like innovation for innovations' sake.
If I were an Android manufacturer today, here's what I would do
1. Reduce the number of handsets drastically. Focus on developing one or at most, two handsets in each segment - low cost, mid price and top end. Put all my efforts into creating the very best value offering in each segment. Create the very best phone that I can.
2. Educate customers about my range and clearly tell them the benefits of each smartphone. So that people buy an Android phone because they understand how it benefits them. Not just because it fits in their budget, or a salesman tells them so. Nokia is doing a good job of this with the Lumia. The demos I have seen in the Nokia showroom and in Croma, focus on the real benefits like Nokia Drive and baked-in MS Office access. I have yet to see any Android phone pitched on benefits, it's just about hardware and price.
3. Make phone software easily upgradeable, OTA. Stock Android is a fabulous example of how to make phones easy to upgrade - the user has to do nothing but push a button. And put a time frame to make sure that manufacturer upgrades closely follow Google's upgrades. This is actually a real brand differentiator. Especially if you go one step further and guarantee to support software upgrades for the next 2 years. This would be possible to do only if you were not pre-occupied with pushing out 100 new phones next year. The hardware on many modern phones is good enough to run upgrades at least for the next two years.
4. Reduce hardware upgrades to a reasonable timeframe. Too much of hardware upgrading is creating rapid obsolosence in the mobile phone space. As customers, it makes us think that all cell phone manufacturers want, is for us to buy more cellphones, faster. And this is counter productive if you are building a brand. I would pay a premium, with better grace, for a phone, if I knew that it will not be rendered obsolete by a hardware upgrade in 6 months time. This would also improve the brand value.
I believe that these principles will create stronger Android brands in the market place. They will make the manufacture of Android phones more profitable and also build back to keeping Android sustainable in the long term. Achieving huge scale in a short time span is great, but it has come at a cost of clarity and coherence in the brand portfolio of most manufacturers. Android still remains an attractive base on which to build an enduring cell phone brand.
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