Hold the iPhone: This Thing Still Needs Marketing

At $500 a Pop, Apple Device Won't Sell Itself

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YORK, Pa. (AdAge.com) -- The iPhone hardly needs marketing, right? It's a jaw-droppingly beautiful piece of design, from a company renowned for good customer experience, and it's already been lauded to the skies by every newspaper, magazine and blog you can name.
Many don't expect Steve Jobs to cede marketing control of the iPhone to Cingular.
Many don't expect Steve Jobs to cede marketing control of the iPhone to Cingular.

But while you'd never bet against Steve, it won't be quite that easy for Apple, Cingular and the agency assigned to this seemingly simple task. First, this is going to be a test of the mass-affluence theory that Americans are now willing to pay big bucks for elegant design or products with great stories. At $499 -- and with Apple's record of sticking to its price points -- this will be one of the most expensive products ever to hit the mobile market.

Buying the Apple experience
It also remains to be seen whether consumers will take a chance on a company with no record in the phone space. In that sense Apple will be relying on the public's appetite for iPods translating into the mobile category. "The thing that's going to make it successful is the fact that you buy into an Apple experience," said Stuart Carlaw, wireless-research director at ABI Research. "Everyone who has an iPod has an individual relationship with it. ... It would be ideal to start the [iPhone] marketing around their core competency."

Then there's another challenge: the politics of two marketers working together to sell one product, something that gets especially tricky when one of the marketers is Apple. So far they haven't gone public on whether the phone will be handled by longtime Apple shop TBWA/Chiat/Day or by Cingular's agency, BBDO. The service provider normally does the heavy lifting in these situations, given that it sells the phones, but it's seen as unlikely the autocratic Steve Jobs would want to cede control.

"Typically, phone makers rely on carriers to do some of the marketing," said Rob Enderle of the Enderle Group, "but here Apple will have to carry the marketing. And they'll have to be very careful that Cingular doesn't screw it up. They don't want discord between the two messages."

Details of the exclusive, multiyear deal were not disclosed. But experts expect Cingular topped what it spent for the Motorola iTunes Rokr phone to partner with Apple. "I wouldn't be surprised [if Cingular shelled out] north of $100 million" for iPhone, said Dave Whetstone, entrepreneur in residence in charge of the wireless practices for Publicis & Hal Riney, San Francisco, who said such deals rival sports sponsorships.

Deal's marketing value
Roger Entner, VP-wireless telecom for Ovum, said carriers typically pay more to manufacturers for exclusive deals, and sometimes even include a payback based on the number of units sold. However, he and others believe the deal's marketing value is in its halo effect, particularly as Cingular transitions into AT&T.

"This deal aims to drive home the point that Cingular is the carrier with all the cool stuff," Mr. Enderle said. Even Cingular's spokesman said the deal is part of Cingular's "imperative to give people the coolest devices."

Still there are plenty of potential technical issues in the Apple iPhone. It does not enable over-the-air downloading of music, which many consider to be the next wave in digital music downloading. Others faulted the network, saying the technology Cingular will use for the Apple phone is not the industry's highest speed. "What good is a Mercedes if it is running on bike tires?" one rival said.

Familiar hurdles
Working in Apple's favor is that it's been here before. The iPod faced similar hurdles: entering an established market, addressing an unproven need, asking consumers for exclusivity (iTunes-downloaded songs play only on iPods) and carrying a premium price tag.

"People talk about the iPod as a slam-dunk five years later, but when it was introduced, very few people called it a slam-dunk. I think it was more like another overpriced device from Apple," Jupiter Research analyst Michael Gartenberg said. "This is a first-generation product ... and likely the first of a series or family of iPhones."

Mr. Jobs has said he will consider the iPhone a success if it achieves 1% market share in 2008, or sells roughly 10 million phones-and only 1% of U.S. customers are looking for a device as pricey as $500 to $600.

"People still swallow pretty hard" when it comes to the price, Mr. Entner said. "It's the Ferrari of devices. Everyone gawks and is impressed, but nobody really drives one."

Well, maybe not nobody. At Consumer Electronics Show last week in Las Vegas, most eyes were glued to one screen or another ogling Mr. Jobs and his iPhone. "The guy's a genius," said John Coyne, who heads the Hewlett-Packard account at Goodby, Silverstein & Partners. "I can't wait to get one."
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