Why do computer and phone companies offer so many plans and models?
In his Daring Fireball blog, John Gruber’s takes to task the view that Apple suffers through not having a wide product range.
John makes the valid point that Samsung seems to stealing market share from HTC rather than Apple but the whole theory of offering too many choices strikes to the heart of two industry’s business models.
Those two industries are the mobile telco business and the Windows personal computer sector.
In the PC world, the wide range of models has been both an advantage and a weakness; it’s allowed Dell and others to create custom machines to meet customer needs but also leaves consumers – both corporate and home buyers – confused and suspicious they many have been taken advantage of.
All too often customer were being had; frequently buyers found they’d bought an underpowered system stuffed with software that either was irrelevant to their needs or an upgrade was necessary to get the features they hoped for.
The entire PC industry was guilty of this and Microsoft were the most obvious – the confusing range of operating systems and associated software like the dozen version of Microsoft Office was deliberately designed to confuse customers and increase revenue.
For the PC industry, the “baffle the customer” model reached its zenith, or nadir, with Windows Vista where Microsoft deliberately put out an underspecced ‘Home’ edition designed to push sales up the value chain.
Compounding the problem, most of the manufacturers followed Microsoft’s lead and put out horribly underpowered systems in the hope that customers would upgrade with more memory, better graphics card and bigger, faster hard drives.
Most customers didn’t upgrade and as a result the Vista operating system – which was horrible anyway – enhanced its well deserved reputation for poor performance.
In the telco sector, consumer confusion lies at the heart of their profitable business model; a bewildering range of phones and plans often leaves the customer spending too much, either through an overpriced plan or paying punative charges for ‘excess’ use.
Having a hundred different types of Android phone adds to the confusion and, by restricting updates, they can cajole customers into ‘upgrading’ to a new phone and another restrictive plan every year or so. This is why you get phone calls from your mobile phone company offering a new handset deal 18 months into a two year plan.
Apple’s model has been different; in their computer range there has never been a wide choice, just a few configurations that meet certain price points. The same model has used for their phones and iPads.
For Apple, this means a predictable business model and a loyal customer base. They don’t have to compete on price and they don’t have to fight resellers and telcos who want to ‘own’ the customer. It’s one of the reasons mobile phone companies desperately want an alternative to the iPhone.
Companies using the baffling choices business model – Microsoft, HP, Dell and your local mobile telco – may well continue to do okay, but that business model is coming under challenge as new entrants are finding new niches.
For all of us as consumers all we can do is make the choices that are simple are reject complexity. Warren Buffett has always maintained he doesn’t invest in businesses he doesn’t understand, perhaps we should have the same philosophy with the purchases we make.
