Monday, April 10, 2006

iTunes Phone Flop’s Lessons

RED HERRING writes a lengthy article that finds "the droopy sales of Motorola’s ROKR phone, the first iTunes phone, could teach the cell phone industry two key lessons. The first is too much hype. " Miro Kazakoff at Compete said, "The ROKR is an example of a device that was heavily, heavily promoted and there was a certain amount of pent-up demand for it that was unleashed all at once."

The second lesson is "form matters more than function." Kazakoff said, “What we’re seeing is that people are really willing to pay a premium for style over functionality."

Kazakoff pointed out that "8.4 percent of shoppers looking at phones on looked at details on the ROKR iTunes phone in the first week of its launch, from September 11 through 17." Kazakoff noted this represented "a good level of interest in a debut week."

The article cites the numbers for other handset in their debut weeks and the ROKR's compared favorably. However, "interest in the ROKR declined immediately" over the ensuing weeks. Kazakoff said, “While it’s not a direct correlation, roughly speaking, the more interest we’re seeing in a device, the more sales they are seeing of that device."

Kazakoff added, "We’ve seen less interest around devices that are mainly differentiated by their features. The RAZR is mainly differentiated by style; people find it cool. The ROKR is differentiated by iTunes.”

Brad Akyuz at Current Analysis concurred. He said, "A lot of people in the industry felt that Motorola was going to come out with an iPod-like device with a cooler user interface, but [Motorola] just took an older phone and put the iTunes software in there. It was a big disappointment and nobody expected it to sell very much. I can tell you if the SLVR was the first iTunes phone, it would have been a hit.”

Kazakoff thought the ROKR's 100 song cap was a problem too. He said, "If it were a RAZR with iTunes and a 100-song cap, that’s fine because consumers want the phone because it’s cool, and if it comes with an extra feature, that’s fine. But when they’re buying a phone for the feature set, consumers aren’t interested in that 100-song cap."

Regarding the launch of the Apple iPod nano on the same day as the ROKR, Current Analysis' Akyuz said. "I don’t think online demand for the phone was impacted by the demand for the iPod. It had a macro-impact, but this is sort of the micro-level."

Compete's Kazakoff underlined the "lesson that form trumps function in today’s market." he said, "Shoppers consistently tell us that what’s most valued to them in purchasing a device, No. 1 is price, and No. 2 is form, shape, and design. People tell us that how a phone looks is particularly important to them when they purchase. What it does is significant as well, but to be a cool device it has to look cool.”

He added that "To capture something as elusive as ‘cool’ is exceptionally difficult. And we’re seeing the phones that differentiate on form factor as being the ones most able to do that. These devices with complicated form factors are more expensive to design and take longer to design. I think what’ll be interesting in the next couple of months is you will see people begin to unite both form and features. They’ll need to take email functionality and wrap it in a form that feels and looks interesting, a form that is unique enough to draw you through the web page to look at that specific device.”