The operator and manufacturer identity crisis

Marek Pawlowski, PMNThis article and photo essay by Marek Pawlowski, founder of MEX and Editorial Director at PMN, explores the identity crisis currently affecting network operators and handset manufacturers.

We live in confusing times, with handset manufacturers trying to become service providers and service providers battling with each other to offer the most stylish handsets. It seems these two key industry groups have forgotten how to communicate their core business to their retail customers.

This strange behaviour was brought home to me yesterday as I walked down London’s main shopping avenues – Oxford Street and Regent Street. On Regent Street, Nokia’s flagship store is currently dedicated to its N-Gage gaming service. The window display shows screenshots, game merchandise and invites customers to ‘Come in and play’ – there is not a single handset in sight.

Nokia's N-Gage shopfront on Regent Street

In contrast, Vodafone’s main store on Oxford Street, features a 10 foot high Nokia handset and a wealth of imagery and offers focused on all the great devices you can get from Vodafone.

Vodafone's Oxford Street shop, showing a Nokia handset advertising the Samsung Soul

(As a side note, I felt there was a certain amount of irony that the automated display embedded in the giant Nokia handset was actually advertising a ‘Free Samsung Soul’ when I took the photo.)

So great is Vodafone’s enthusiasm for its hardware, that it even features a product shot of the USB Modem as the central image for its mobile broadband advertising campaign! I’d like to know who in Vodafone’s marketing department decided the best way to sell a mobile broadband service was to show people a picture of the 3 inch piece of white plastic which facilitates the connection, rather than selling the ability to access email, read the news and watch videos on the move?

Vodafone's shopfront on Oxford Street advertising its broadband modem

Perhaps McDonald’s will start including images of its deep fat frying machines in its advertising instead of pictures of juicy Big Macs?

Three's Oxford Street shop promoting the latest handsets

The situation was the same at the Three store on Oxford Street. According to their main window display, Three is the best company to help customers ‘Save in style – with the latest handsets from £17 per month’.

T-Mobile's Oxford Street shop showing more handsets

A little further down the road, T-Mobile is also suffering from similar confusion. Its window display proclaims the availability of the Nokia N95 and the LG Secret.

These are the same operators who continue to give keynote presentations at conferences all over the world to outline their vision for value-added services and explain how, in contrast to carriers in the fixed line business, they will never become ‘just another bit pipe’.

If that is really their ambition, they need to start communicating that to their end users. If customers continue to choose their operators based on who can supply them with the coolest handset for the lowest price, the service providers have no hope of convincing users they are anything other than a ‘middle man’.

My recommendation to these operators would be to have a long think about the business they are in and how they can communicate the unique value of what they do to their customers.

At the moment, these companies are focused on building an unsustainable role for themselves. They are getting themselves into a position where their unique value proposition to the customer is their ability to handpick a particular range of devices and get them to market at the lowest price. Is that really a unique selling point for an operator?

The practical reality of a network service provider’s business model is very different: their real core areas of expertise are in efficiently building out good coverage, ensuring quality of service, delivering good customer care and managing millions of billing relationships.

I suspect a lot of people in the handset manufacturing business are actually really rather pleased with this turn of events. The operators are doing a great job of reinforcing the handset as the primary factor in the customer relationship. This leaves handset manufacturers in a great position to develop their own services businesses, something Nokia is currently investing many billions of dollars in each year. And, guess what, the handset manufacturers are much better placed to add unique value to mobile internet services, because they can tailor device specifications and form factors to actually deliver a great customer experience.

If the current situation continues operators could find their current obsession with influencing handset choice actually reduces their overall share of the value equation. It is time for them to re-focus on the core business elements over which they have long-term control – coverage, pricing and customer service – and communicate those effectively to customers.

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  1. 2

    Is’nt the retail store really part of the problem? If network operators are going to increase value for the user, then invest money in the network quality, customer service, and value add 3rd party product packages/innovation with new technologies. Let carphone warehouse, et al. play the role of hardware supplier.

  2. 3

    I would sign up tomorrow if an operators only USP was a reliable pipe for high speed data, BUT on a device of my choice, not the halfway house we have today where you are forced to buy a “dongle”.
    Operators try to “own” the customer, end to end. The customer doesn’t mind paying for the service (i.e data) as long as they can do what they want with it. If thats an application on the operator portal, great, sign me up, add it to the bill, if not let “set me free” to get the service I want elsewhere. This way the long projected near vertical “growth in data useage” graphs banded around the industry may actually materialise.

  3. 4

    I suppose it’s a consequence of creating a very physical, permanent shop, nominally to sell such an intangible, non-physical service.
    The easy solution is to put that service into a physical device – a handset – and hope that people associate the two (“they sell phones” is easier to understand than “they don’t sell phones, but they sell the service that lets phones talk to each other”). But as you say, it does leave the service providers not really selling themselves on their merits and strengts (or otherwise), and selling things that they have little or no control over or speciality in.

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