Buy a handset manufacturer?

There’s an interesting article over at The Feature on SK Telecom’s (a South Korean operator) plans to produce own label handsets, by buying some of the players in the market.

It’s all about who “owns the customer” – the handset guys or the operators. It’s a bit of a redundant argument really, because at best, any company tends to have a very precarious and temporary relationship with consumers these days, unless you deliver what they really want.

You “rent” the customer at best.

But accepting this, it’s a very difficult path to steer for operators, as ultimately, they’re in a highly competitive and commodised business. There really is very little to choose between say, T-Mobile and O2, to take a UK example. And, other than selecting on price, most consumers aren’t capable of selecting one over the other rationally.

And as this article says:

As much as the mobile operators believed they were promoting their own services, customers still came into the stores asking for “that new Nokia phone.” Operators that didn’t offer the latest and greatest phones lost out on business.

While it may well work in South Korea, I don’t think that owning handset manufacturers is the way to go in Europe. Brands are too endemic to our culture and Nokia, Samsung and Sony (to name but a few) are simply too strong as brands (especially in the youth market) to ditch. If you don’t sell them, consumers will go where they can buy them.

You can get cheap own-label jeans too, but no one who’s anyone will wear them.

I suspect that this won’t deter the operators and there may well be a mad scramble to buy one at vastly inflated prices. And then the whole project will be quietly abandoned, accompanied by huge write offs a few years later.

I’d suggest a slightly different approach to that taken by the article though. If anyone “owns” the customer (albeit with the qualification above) it’s probably going to be the retailer – where there is one in the channel of distribution.

History tells us that this is what normally happens, as it’s retailers who eventually become the dominant power. It’s about being closest to the customer and using your buying power and influence at point-of-purchase to drive prices down and retain all the transaction value into your part of the equation.

Ask farmers who they think owns the customer in their channel. And wait until Carphone Warehouse et al start using grocer type buying techniques in this channel.

So what could operators really do?

I think the answer lies in compelling content for that operator. While the TV you buy is an important decision when you make it, it becomes irrelevant thereafter. What’s important is what you watch, which is nothing to do with the set manufacturer.

So if Orange has a great range of content that isn’t available with other operators (or is consistently available before the others), you’re going to want that Operator’s product.

Assuming that they have a handset you like, the service works and they’re broadly competitive price-wise. This is the ONLY chance you’ll have to differentiate your brand in consumer terms.

I think this is the idea behind Vodafone Live! But sadly, it hasn’t lived up to the marketing hype and has very little that actually differentiates it. But it’s a step in the right direction, certainly.

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