Thursday, October 09, 2008

iPhone - Not India phone?

It’s been a month since Apple's much hyped iPhone launched in India. In midst of huge expectations the product hit the market on Aug 22, with Airtel and Vodafone taking up the distributorship in India. In order to boost up the initial sales, both service provides kept their shop open throughout the night. More importantly India's 'tech' city Bangalore was all geared up to welcome this popular Gizmo, where many technologists lined up in the showroom to pickup their phone before their friends. The next day's local newspapers flashed pictures of proud iPhone owners from the city. The first say sales numbers were pretty good and everybody believed iPhone will take off in India in a big day, given its one billion population. Much against the expectations and media hype, the iPhone sales started taking nosedive in subsequent weeks and it has not even crossed 1500 handsets throughout India. It clearly proves that iPhone is a big failure out here.

According to Geoffrey Moore's technology adaptation life cycle model, every technology product takes its own cycle to create significant business proposition. To start with, the ‘Early adaptors’ (technology enthusiasts) would start evangelizing the product who contribute to 13.5% of the total customer base. In order to create a successful business, a technology product should capture the next major chunk called ‘Early majorities’, who constitute to 34% of the customers. Even though iPhone was able to initially attract certain technology enthusiasts (especially in a city like Bangalore), it has clearly not impressed Early Majorities. Given the fact that India is one of the hottest markets for mobile operators and handset manufactures, Apple clearly missed a huge opportunity by not understanding the psychology of Indian customers. This exclusive story talks about some of the major reasons for iPhone not able to take off in India.

Cost, Cost and Cost

The first shock for Indian customers came in the form of cost. Apple priced their 8 GB model for 31,000 rupees and 16 GB model for 36,100. Every Indian customer felt getting ripped off by hearing such an atrocious price, given competitive handset prices. Added to that, there are no well designed offerings around the product. It’s a well known fact that India is a land of EMIs and installments, where people even buy clothes on installment basis. Even for a city like Bangalore, which consists of knowledge workers having good amount of surplus income, the 31,000 pricing has made the phone simple unaffordable. Apple should have worked on innovative offering methods, where it could have planned on recovering the cost over a period, after catching the initial sales volume.

In developed countries like US, Apple has done proper home-work by offering the iPhone at $199 (works out around 8000 rupees) by tying up with telecom service providers. On the other hand, Per capita income of US is 10 times more than India, which demands much smarter pricing strategy. This clearly shows that there needs to similar but much better pricing strategy should have been planned for Indian markets. The cost factor is been a major factor for iPhone not taking off in India.

The 3G infrastructure

The second point is about the mobile infrastructure in India. One of the major attractions of iPhone is its ability to provide mobile broadband connectivity using 3G technology. Unfortunately in India the 3G spectrum is still under negotiation and none of the service providers are offering 3G services to the customers. The applications in iPhone (known as "Apps") become unusable with the existing low speed GPRS connectivity. Also every new iPhone has to have a brand new connection and number. For well networked professionals, it becomes very difficult to change their existing mobile numbers just to get the iPhone.

Mobile ecosystem in India

The third major point is the mobile ecosystem in India. The iPhone can be purchased only for post-paid connections, whereas more than 85% of the subscribers in India opt for pre-paid schemes. Even though about 9 million new mobile connections are added every month in India, still majority of them come under the pre-paid umbrella. Added to that, using mobile value added services has not yet caught up in India yet. Only now the mCommerce services are catching momentum and other "cool" iPhone apps would take a long-long time to catch up in India. The mobile phone is primarily seen as a device to communicate rather than accessing emails, playing network games or social networking.

Media hype

Before even the phone was launched, the India media had given too much hype for the iPhone. Many tech shows, pod casts, blogs and websites compared the $199 pricing in the US and believed that it would be offered for 8000-9000 rupee range in India. The Indian media failed to understand the mature mobile ecosystem in the US, where the service providers can afford to subsidize the handset to a larger extent and recover the cost over a period of time. In case of Indian service providers, their margins are very thin and they only make their profits due to the sheer volume of connections. They can't afford to subsidize the handset, which will eventually start eating their pockets. The whole pre-launch analysis set "too-much" of expectations from iPhone, which it clearly didn't live up to.

The lukewarm response for iPhone shows "How not to sell products in India?”. No matter how great a product or service is, it needs to be wrapped with innovative business model, especially for emerging countries like India. As per C.K.Prahlad's "Fortune at the bottom of the pyramid" argument, the innovation needs to be even more profound for emerging geographies, in order to really leapfrog in terms of business proposition.

2 comments:

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