Fighting back when a competitor has a better product.

What should a company do when its competitor comes up with an amazing product that everyone wants?

With all  the hype and excitement about the upcoming release of the iPhone, AT&T's competitors appear to be tearing their hair out.

Sprint just issued a list of anti-iPhone talking points (pdf), while Verizon Wireless apparently decided to take the high road with a confidential internal memo telling employees specific ways to trash the iPhone's capabilities.

At this point, there is absolutely nothing Verizon or Sprint can do to stop the iPhone's arrival.  On Friday, no matter what, the iPhone is hitting the stores and certain customers will jump to get their hands on it.

So, Verizon Wireless and other providers have only a few options...

1. Spend a lot of energy personally telling customers everything that is wrong about the iPhone and why it will make their life miserable.
   
   Of course, this could backfire by making Verizon and Sprint look like sore losers.  Plus, with all the hype the iPhone is getting, customers probably won't believe the negative points.  Each conversation will take up a lot of time, tying up service reps and dragging down customer service for other customers.
2. Make it incredibly difficult for existing customers to get out of their phone contracts.
   
   This will keep their customer numbers up in the short term, but make their existing customers hate them.  Once those subscriptions are up... goodbye!
3. Tell customers about all the great options available at their current provider and get customers to upgrade their accounts.
   
   A positive, proactive option that might retain customers.  Done wrong though, this could backfire by making customers feel manipulated (remember the AOL unsubscribe phone call?) and sucked into a more expensive phone plan that still doesn't give them what they really want.
4. Offer irresistable bonuses to customers to lure them back to Verizon/Sprint/etc.
   
   Tempting and proactive, but could be very expensive for the company to lure back customers, and could upset the current customers who aren't getting the same deal.
5. Cut their losses, congratulate AT&T, carefully take note of the successes and failures of the iPhone and then come out with anew phone next year that completely blows the iPhone out of the water!
   
   Verizon and Sprint already know that the iPhone isn't perfect.  Which means that they also know what can be improved.  Instead of pointing fingers at all the iPhone's faults, they should be figuring out how to take advantage of them by coming out with a better phone.

Verizon and Sprint are facing a big choice this summer as the iPhone enters the market and changes customer expectations.  But it's also a big opportunity for them.  As Seth Godin wisely wrote today on his blog:

The iPhone is a gift for every cell phone marketer in the world. Why? Because it creates a problem where there was none before. Now, a cell phone is not just a phone. Now, a phone is worth spending money on. So, since Apple created that 'problem' in my mind, how are you going to solve it?

He has it exactly right.  The iPhone has just completely redefined the cell phone market.

It showed that people want phones that are better, do more, look good and are easy to use.  It is also showing that people will happily pay a lot of money for a new, innovative phone that blows the others out of the water.

It's a great moment for innovation in phones.

So, now the question is, who can come up with the next phone that everyone has to have?

"Verizon is Evil" photo thanks to www.gizmodo.com

Comments

[Daniel Sitter, Idea Seller]

I like great hardware with lots of "buttons & knobs" as much as any guy Katie, and the exciting, new Apple i-Phone is as hot a product as I can remember. From a marketing standpoint, it's going to be hard to beat!

BUT... the fact of the matter remains, that long after the "buzz" of the phone sale is made, you are going to have to "live with" and use a certain mobile service provider day in and day out. Not everyone is very excited about that fact. That's reason enough for me and legions of others to hold back on our purchase, at least for now.

Over the years, I have experienced most all of the cell-phone companies and a variety of plans. For my money and sanity, I have returned to Verizon as the best service provider. I am hopeful that Apple will see the "error of their ways" and offer this incredible product through a variety of channels, including Verizon, in the near future. I sure hope so!

As far as Apple's competitors are concerned, I'm certain that there will be many sleepless nights, heartburn, headaches and general anxiety experienced over the coming months, but things will settle down. I expect that we'll be seeing some very creative offers and plans from many of them in the near future!

Hi Daniel, Thanks for writing in to talk about why many customers won't be switching to AT&T. You're right, there's so much hype about the iPhone right now that everyone seems to be forgetting that many customers won't choose to switch providers just to get a fancy new phone.

One thing to note before condemning Apple for making their product too exclusive: Verizon actually turned down the iPhone!

http://www.usatoday.com/tech/news/2007-01-28-
verizon-iphone_x.htm
(http://tinyurl.com/yntlu8)

And, by the way, I'm looking forward to seeing new creative phones and plans too!

[Mark True]

Great question, Katie:

I see another option: since Sprint and Verizon are service providers - they don't make phones as a core competency - why not offer Apple a deal they can't refuse to be the next provider of service for the iphone, when the exclusive arrangement is expired? I see in the comments that Verizon evidently turned down Apple, it's still an opportunity for Sprint and Verizon in the future...if the price is right and the newness begins to fade.

Yet another option: create a network that is unbeatable, one that reaches everywhere, one that is reliable, one that people will not leave no matter the coolness of the phone.

These are options that are based on their brand and don't put them at the whim of the next cool thing.

When organizations understand who they are, and make decisions based on who they are - not on what they're competition is doing - it seems like they can be much more successful. They can control what they do, but they can't control what the competition does.

-Mark

Mark, some very wise words there about how companies can only control their own future. I definitely hope that Verizon and Sprint start looking ahead to create theirs.

Also, I like your ideas. Instead of focusing on creating the next big thing (which can be fleeting), you concentrated on how those companies can create a sustainable competitive advantage. Very smart.

Want to get together and pitch some of those phone companies with our ideas? ;-)

~Katie