Nokia’s VP of Smartphones, Jo Harlow recently proved how little she understands how the retail market works from a retail and customer perspective in a recent interview with All Things D. She attempts to defend her decision to release Nokia’s latest flagship device, the Lumia 1020, as an AT&T exclusive by claiming that carriers are more encouraged to market an exclusive device compared to one released on all carriers at once.
Considering she has a baccalaureate degree in psychology, she clearly has no clue of how to apply her education since she is very wrong from every perspective in this situation. in fact, she clearly doesn’t understand how these carrier exclusives hurt Nokia’s bottom line from both the promotional AND retail sales dimensions.
Exclusivity results in less carrier promotion, not more.
Let’s begin with her belief that exclusive devices give carriers more incentive to promote. this is patently false if you have an ounce of common sense. where is the incentive for a carrier to spend MORE on promoting a device only they have? maybe she subscribes to the idea that, due to exclusives mostly being limited by time, a carrier will want to promote extensively to get sales before another carrier is allowed to compete with the same device? if so, she’s wrong. when you have something none of your competitors have, you have the market cornered and this effectively decreases any incentive to promote competitively. using the current situation as an example, AT&T’s exclusivity on the Lumia 1020 eliminates any incentive to saturate the market with device promotion because potential buyers for the 1020 cant get it anywhere else for at least 6 months.
Had Nokia released the Lumia 1020 across all carriers, they would be forced to compete with each other as interested buyers would be able to get the desired device on any desired carrier. eliminating the device as the differentiator opens up availability to anyone who even remotely wants one and puts the carrier in a position where they must advertise and promote to establish differentiation. to argue otherwise, one must release their grasp on all common sense.
Exclusivity limits total sales long enough for it to then become irrelevant and forgotten by consumers.
Once the exclusivity period ends, the competition will likely have released, or at least announced, the next big thing and replacing the Lumia 1020 in the minds of shoppers. the US cellular market is still dominated by subsidized handsets and 2-year contracts. consumers are generally ignorant of how much a smartphone truly costs while carriers aim to keep them ignorant and locked into long-term contracts with termination fees. so unless you’re already an AT&T customer, chances are you’re not willing or financially able to switch carriers to get it. those not locked in a contract are either too poor to buy one or are too smart to sign a contract. but like the Lumia 920 before it, the exclusivity on AT&T not only limited potential sales during the exclusivity period, but once other carriers finally got equivalent hardware in the form of the Lumia 925 on Verizon and Lumia 928 on T-Mobile, consumers stopped caring as the competition had already caught up in the form of the Galaxy S4 and HTC One… but even worse is Nokia themselves releasing the Lumia 1020 only weeks later. yes, the introduction of the 1020 will destroy potential sales of their 925, 928 flagship devices after being on the market for less than 90 days. from the consumer perspective, imagine just how painful that feels for those who just committed $200 and 2-years for a Lumia 925 or 928. piss off your potential buyers like this enough times and they become not just Samsung or HTC buyers, but Nokia haters.
You get an exclusive! You get an exclusive! Everyone gets an exclusive!
Once a carrier gets their exclusive, the next carrier expects the same deal. it’s why Apple does no favors for anyone. AT&T got the Lumia 920 as an exclusive for the better part of a year. once that period ended, nobody else got the 920. instead, Verizon and T-Mobile ended up with their very own “exclusive” hero devices in the 925 and 928. aside from some very minor tweaks, these are both just repackaged Lumia 920s, featuring now 6+ months old hardware and accompanying performance. what results in no advantage for buyers is worse for Nokia as they paid to develop and manufacture these devices.
the bottom line, with Jo Harlow’s bullshit filter removed, is Nokia has managed to sink even more R&D dollars into yesterday’s platform only to give carriers an “exclusive” device they have no incentive to promote and buyers have no reason to buy. to kill the few remaining potential sales of the 925 & 928, they’ve announced the Lumia 1020 and again made it an exclusive, thus starting the circle of slow suicide all over again.
as an example of how to do it right, Apple sells 2 previous generations of its iPhone at a discount. they only change the amount of included storage to manage the perceived value and incentivize purchase of the latest iPhone model. no changes to the design and a longer manufacturing run results in steadily increasing profits for each iPhone sold over the lifetime of the design. the curtailing of exclusivity periods and handcuffing the carrier’s ability to “incentivize” Apple hardware creates maximum profits through extension of a design’s life, respecting buyers with a reliable upgrade schedule, and the ability to get your desired device on any carrier.
Sorry Jo, but you’ve just plain got it wrong. considering how your plan costs Nokia billions in potential sales, it’s surprising that Stephen Elop still hasn’t let you go.