Google May Find Out That Consumers Like To Buy Cellphones The Old Fashioned Way
I knew there was something wrong with Google’s plan the second I left its sunny Mountain View, Calif. headquarters to go to the airport.
Google (NSDQ: GOOG) had just released the Nexus One — the first so-called Google Phone that it would sell direct to consumers at Google.com/phone. And, when the cab driver found out that I had one, he matched the day’s excitement by saying he would buy one that night. He even took a picture with his aging BlackBerry Curve to mark the occasion.
However, like most customers, he assumed he could go to the nearest T-Mobile store to pick one up. That’s exactly Google’s challenge. While Google pledges to open up the wireless industry, it may actually end up fighting consumers who are stuck with the way it operates today. Many, especially in the U.S., have become hardwired to buy phones as part of their service plans, and in return, expect to pay less than what the devices cost at retail.
While the physical phone has gotten fairly good reviews, the dizzying amount of headlines since the Jan. 5 launch are more focused on the way Google does business. Consumers want to know who they can call for support. Is it Google, HTC or T-Mobile? (Actually, it’s Google, which promises to get back to you in a 48-hour window if you email them). Further, Google has revealed it will charge a termination fee of its own — so a consumer could conceivably get hit twice if they choose to return the phone, and cancel their contract with T-Mobile. It may cost up to $550!
More information released today doesn’t provide much hope that Google’s new model is working — at least not in the first week. Flurry, a mobile analytics firm, looked at its data to estimate how many Nexus Ones have been sold already. By analyzing the usage of Android applications, Flurry estimates that 20,000 Nexus Ones were sold. That tracks poorly compared to the myTouch3G, which sold up to 60,000, and the Motorola (NYSE: MOT) Droid, which sold 250,000 in the first week.
So, does that mean it’s a lousy phone? Absolutely not. As we’ve written before, the Nexus One is the best phone running the best implementation of Google Android. And although we still believe that after using it for a week, it’s also not anything revolutionary — the phone just works well.
The real story is the way Google wants to change the value chain. For years, U.S. consumers have been taught to buy a phone from the carrier, which provides both a service contract and an equipment subsidy. The phone can be purchased at a store, online, or even through a big retailer, like Best Buy or Amazon.com (NSDQ: AMZN) — but the transaction is very much the same. Consumers also have learned the hard way about early-termination fees — if they leave their contract early, they will have to pay to cancel it. While the mindset is shifting a little bit as smartphones become more popular, heavy subsidies and carrier attachment is still being reinforced, especially with the iPhone, which AT&T (NYSE: T) — and only AT&T — is estimated to sell for $325 below retail value.
At the end of the day, consumers will only change their behavior if they perceive a better value somewhere else, and right now it’s not clear what you get when you buy a phone directly from Google. In fact, it pretty much sounds like business as usual, except that you’ll get charged twice if you leave early.
At the press conference last week, Google made it clear that it believes it cannot innovate quickly enough when the carrier is involved. Mario Queiroz, Google’s VP of product management said: “To help Android adapt to the needs of consumers like you and me, we will be applying engineering resources to select products with our partners — that
Many reports re: how Google’s lack of traditional customer service causing problems for the company, but not a single report mentions the types of problems for which consumers need support!
I mean, do they need their hands held through the provisioning process? Do they not understand how the apps work? What? This is a mobile phone we’re talking about folks!
Could this be a case of U.S. consumers having to get passed the fact that there is no need for expensive phone support and the media making a new out of nothing? Amazon got away with not publishing it’s toll free number on it site for years and all carriers wish they could do away with live telephone support, too. Google has taken a bold step towards a future where live telephone support will be reserved for say financial services … as usual, they are not afraid of leading the rest of the industry through uncharted territory and reap the benefits as they shake things up and show the rest that there’s more than one of doing something. Things are little bumpy at first, but they’ll get through this and make their users happy.
This is not a bold step, it is being out of touch with the support needed for a sophisticated device.
Google could always have started with phone support and then phased it out. They are not shaking up the industry, just shaking up their customers and making them angry. If they want to shake things up try bypassing carriers or something that changes the value chain.
This is just stupidity.
Many customers may still prefer buying phones the old fashioned way but that is diminishing. Young customers are well accustomed to buying stuff online these days. Buying a phone is no different. The only difference is that in a real store, you can hold the phone in your hand and try it out. That is not something that you can do online. Sure you can watch videos of the phone and see all its features, but it’s still not the same thing as having it in your hand.
So even if a phone is really popular, unless the customer has had it in their hand, they will be reluctant to buy it online. And once you are in the store, that is where the sales people will do all within their power to convince you to buy it now. Usually they will take extra care to provide more customer service while you are there. They try to make it a more personal experience. This is not something you get online. If you’ve ever seen shoppers looking to buy a cell phone, you will notice that they usually will pick up several phones while in the store to guage their weight, feel, way of operating. For a lot of young people, a smartphone is a very personal item that can convey something about the image you want to portray to friends. With so many competitors, buyers really want to see and compare.
So while Google will sell lots of phones online, the old fashioned way is bound to stay for a very long time.