The Biggest News That Didn’t Happen

Amidst all the anticipation of the iPad announcement, some on the internet asked what Steve Jobs would pull out for his “One More Thing” slide (a point that was eventually shown to be moot.)  One rumor was that Apple would use today’s program to announce a CDMA or LTE iPhone for Verizon Wireless.  Boy Genius Report even posted a story about a kick-off event that would coincide with the Apple announcement.

Sadly, it was not meant to be.  It looks like the only product announcement from Verizon Wireless today is a decidedly less sexy VeriSign app.

Why should anyone interest in marketing, regardless of one’s cellular carrier, wonder what could have been?  Why should we look forward to the days when the commercials where Luke Wilson’s claims that only AT&T offers the “most popular smartphones” are just a piece of advertising nostalgia?  The answer is because such an announcement would have a profound impact on the cellular service market and illustrate beautifully how product and companies become (and stay) market leaders.

In an earlier post, I described how Verizon has recently had success in positioning its 3G service as superior to AT&T’s despite the fact that only AT&T has the 3G device that consumers want most.  AT&T’s attempts at re-positioning by re-framing the argument have largely failed, but the exclusivity deal with Apple has ensured that it has remained a major player in the 3G market regardless of the number of dropped calls.

Historically, producers have looked at a mix of two attributes to define their market share: cost and unique value offerings.  The Wiersema Customer Intimacy model adds a third piece to this mix: customer relationship.  Competing products can be overlaid on a series of three-pointed spider diagrams to visually demonstrate who leads in the areas of “best product”, “best total cost” and “best customer relationship”.  In order for a product or service to be a market leader, it must excel (i.e., win) in at least one of these attributes and must remain competitive (i.e., maintaining some minimum threshold of quality) in the other two attributes.

To understand how different companies focus on different attributes, lets look at the four leading mobile network operators in the United States: Verizon Wireless (91.2MM subscribers), AT&T (82.5MM subscribers), Sprint (48.3MM subscribers), and T-Mobile (33.4MM subscribers).  For our exercise, we’ll measure “best product” in terms of the quality and desirability of devices that are offered, and we’ll measure “best customer relationship” in terms of service quality.

To demonstrate how these cellular companies compete today, let’s look at the cellular market with an AT&T exclusive iPhone in place (Verizon Wireless is in red, AT&T is in blue, Sprint is in green, and T-Mobile is in purple):

Cell phone market with AT&T-exclusive iPhone

  • Best product: AT&T (iPhone)
  • Best total cost: Sprint (lowest price for comparable plan)
  • Best customer relationship: Verizon Wireless (widest coverage, most reliable service)

Note that the three leading companies have each staked out an attribute to call their own.  T-Mobile is competitive, but it doesn’t own one of the attributes, and it won’t until it can undercut Sprint’s pricing or until Google convinces iPhone users that they’d prefer to have a Nexus One.

Now, let’s envision the market with a Verizon iPhone:

Cell phone market with Verizon Wireless iPhone

  • Best product: Verizon Wireless (iPhone with wider coverage, fewer dropped calls)
  • Best total cost: Sprint (lowest price for comparable plan)
  • Best customer relationship: Verizon Wireless (widest coverage, most reliable service)

Under this scenario, things don’t look good for AT&T.  Unless AT&T could reposition itself to outclass Verizon Wireless in either service or product quality, it would be forced to compete against Sprint on price or risk losing significant market share.  This is why Engadget reported an audible sigh in the auditorium this morning when Steve Jobs announced that the iPad would use the AT&T 3G network.  Attendees were basically being told that AT&T had gotten a stay of execution.  If the rumors of a Verizon Wireless iPhone eventually prove themselves true, AT&T had better have a plan in place, or else Luke Wilson will be out of a job.

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