NOTE: Cross-posted from BostonPocketPC.com.
During last night’s monthly Boston/New England Windows Mobile User and Developer Group meeting, we covered a number of items. Steve Hughes’ KIN presentation was great in providing lots of info. We also covered an overview of Windows Phone 7 development (SIDE NOTE: We are planning a number of focused developer presentations in the coming months on various aspects of Windows Phone 7 development. Stay tuned for more details…).
During the meeting, a recurring theme emerged. It spanned both the KIN and Windows Phone 7, and it is an area that is essential for both platforms’ success. It is also an area that has been a sore point for Microsoft and it’s partners throughout the life of the Pocket PC, Smartphone, Windows Mobile and now Windows Phone – price competitiveness. It is an area that if not addressed will potentially cause history to repeat itself and risk the failure of the platforms regardless of the the values they provide.
The cellular industry has a long history of product pricing through subsidies that reduce the cost of a phone for the consumer. While we all know that the physical phone is but one “cost” when combined with voice, data and additional services, the general consumer expectation has been that the cost of hardware should not be an obstacle in making a purchase. This has become a sort of “immutable law” for the average consumer when it comes to cell phones. For many of you reading this piece, this line of reasoning does not apply (and rightly so). Your love of “gadgetry” supersedes cost. But remember – you are the exception, not the rule. Just think about significant others, family and friends who have questioned your sanity about the amount of money spent on such technology :-) All this brings us back to the history of Windows Mobile in the cellular market space.
Traditionally, device manufacturers using the Windows Mobile operating system and mobile operators (the AT&Ts, Verizons, etc of the world) have chosen to brand these devices as “high-end” and often priced them closer to traditional computers than phones. At the same time, the industry still treats them as “disposable devices” in terms of shelf-life (translation – you, the consumer, are willing to upgrade to new hardware on a frequent basis at “discounted” prices in return for renewing service agreements). At prices that are often still $100 - $200 USD over other phones (even after subsidies and discounts), the perception to the average consumer is often “that’s an awful lot of money for something that I won’t keep forever.”
I will grant you that Microsoft is working hard with Windows Phone 7 to attempt to add long term value to Windows Phone 7 devices. But they are not the device manufacturer nor are they the mobile operator, both who see value in you not keeping a single device for long periods of time. That being said, what else will drive sales of new Windows Phone 7 devices. Ironically, the answer lies with Apple, AT&T and (of course) the iPhone.
While initial sales of the original iPhone were good, it was not until the iPhone price drop (remember the event that had many early iPhone adopters feeling foolish for paying so much?) that truly drove sales. Since then, there has been a continuous and very conscientious effort of Apple and AT&T’s parts to bring new devices to market at lower prices. The most recent example – the entry price for the iPad coming in at under $500 and resulting amazing sales numbers – shows that competitive pricing in this segment matters. Price matters. The iPhone and iPad have, in essence, revolutionized another aspect of technology (at least in the cellular space) – powerful devices at affordable prices (at least that is what the numbers show).
For both KIN and Windows Phone 7, price will matter. IN the case of KIN, which Microsoft themselves brand as a “feature phone with great features”, but not a smartphone, pricing this device significantly above other feature phones will likely be disastrous – history and the numbers simply don’t lie. Interestingly enough for Microsoft, this is the first phone for them in which they are actually closer to being the manufacturer than ever before (while Sharp was their hardware partner here, Microsoft really ran the design part of things). Such is not the case with Windows Mobile, nor will it be the case with Windows Phone 7; Microsoft is simply the operating system licenser. However, Microsoft has the most to lose or gain with it’s investment in Windows Phone 7 (keep in mind that most of the device manufacturers are currently hedging their bets on the operating system front with Android as well).
So, how does Microsoft ensure price competitiveness with Windows Phone 7 devices? I don’t know the final answer here. Some common sense possibilities include putting pressure on the device manufacturers and mobile operators to ensure cost competitiveness (although that really hasn’t worked out in the past). Perhaps Microsoft themselves stepping up (at least initially) to cover some of the subsidy cost in order to improve chances of success. Regardless – something has to be done here to make certain that Windows Phone 7 devices do not show up on mobile operators shelves with prices that induce consumer “sticker shock”.
“Those who cannot remember the past are condemned to repeat it.” - George Santayana
For Microsoft and it’s partners in the cellular space, these words have never rung more true. Regardless of capabilities or of “sex and sizzle”, KIN and Windows Phone 7 devices risk being relegated to inventory shelves if they cannot entice average consumers with effective competitive pricing.