Windows Phone’s Canary in the Coal Mine

Few believe Nokia will survive as a company if Windows Phone 8 isn’t successful. How can we tell if Windows Phone and Nokia will live or die?

Coal miners used to take canaries down into the mines to detect deadly gasses. If the canary suddenly dropped dead it was a warning to the miners they were about to die too. The canary in the coal mine for Windows Phone is the sales force responsible for selling Windows Phone at retail.

This is a copy of a guest post I wrote for GeekWire. View the original here.

My day-after-Christmas blog post last year, titled “Windows Phone is Superior, Why Hasn’t it Taken Off?”, was hastily written (on the beach) as a response to a Hackernews comment that galled me.

I must have hit a nerve because not only did the reaction to that post cause my blog to come crashing down, it made the top of Techmeme for almost 2 full days. Once the nice folks at WPEngine had my blog running on something more solid than my home server that post had over 70,000 views.

I was trying to articulate that Windows Phone 7, while a really, really, good product, had entered an exceedingly complex multi-sided market where the parties responsible for SELLING it were not incented to do so.

Consumers do not buy things. 

Consumers are sold things.

Broad marketing, including advertising and grass-roots evangelism, have a huge impact on what consumers end up buying. I discuss this in my post on brands. Like it or not, the masses are very much influenced by what they are told via brands, brand marketing, and advertising.

In retail, the term assortment is used to describe how much of a product is available, in what varieties, and how prominently it is displayed. For example, a well-assorted potato chip product sits on an end cap near the store entry, with lots of inventory visible, in several sizes. A weakly assorted product can be found on the rear wall, with one variety visible, and is crowded out by competing products. Retailers don’t assort products because they like them; they assort products because the purveyors of those products pay more than the other guy to have them assorted.

A human salesperson, acting 1:1 with a customer is an extremely powerful force. In the mobile phone space, particularly in the US, phones are purchased from carriers. It is the retail sales people (RSPs in industry jargon) in the carriers’ stores who interact with the people who wish to buy a new phone. More often than not, the final decision on what phone to buy is made based on what the RSP is pushing.

It does not matter how good a product is; if it is not marketed, assorted, and SOLD, consumers will not buy it. They WILL buy the alternative they’ve heard more about, is highlighted in the store, and is being pushed on them by a salesperson. Remember Betamax?

We are on the cusp of the launch of Windows Phone 8. Much has changed since Windows Phone 7 launched in the fall of 2010:

  • Microsoft has released several upgrades to Windows Phone 7, fixing most of the shortcomings of that v1 product.
  • The Windows Phone Marketplace has grown to include over 100,000 applications and games.
  • Windows Phone 7 has gone global; now available basically worldwide including in China.
  • Microsoft inked a strategic deal with Nokia, giving Microsoft the deeply committed hardware partner it lacked at WP7 launch. Nokia has released WP7 devices that people seem to think are damn nice.
  • The Windows Phone user experience has moved to the forefront of industry consciousness by becoming the core of the much hyped Windows 8 “Metro” look & feel.
  • Apple has won a patent lawsuit with Samsung; potentially driving Samsung to tighten its ties with Microsoft and loosening its ties with Google.

While much has changed, some things have stayed the same:

  • The carriers still hate and distrust the OS providers in general and Microsoft in particular (I’m quite sure Verizon remembers Kin).
  • Apple’s products are easy to explain, well marketed and thus highly desired, and easy for RSPs to sell. Apple continues to have no problem getting carriers to do a great job of assorting iPhones.
  • Apple continues to provide an alternative channel for the iPhone with its Apple Stores.
  • The Android device manufacturers (with Google’s help) continue to pour money into media advertising and incenting carriers to assort Android phones.
  • Consumers like to feel like they have choice. Two strong options provide choice; it is not clear a third option is needed.
  • Most people (and that includes RSPs because they are people too) still have an iPhone or Android device in their pocket while out on a date.

Windows Phone 8 looks great. Its features and capabilities are far better than Windows Phone 7 (and you know I already think WP7 was a “superior” product). It has a well-designed look and feel that enables it to stand out. It has all the features the competition has and also some innovative capabilities they don’t.

The hardware we’ve seen so far looks compelling. Moving to the Windows NT kernel from the Windows CE kernel has enabled Microsoft and the device manufacturers to support more powerful hardware. Nokia, which did an amazing “v1” job with the original Lumia series, should be able to outdo even itself with these new designs. Samsung appears to have put at least a few people from the “A” team on the case with the ATIV S.

You can assume, as I do, that the WP8 devices will be fantastic. Or, you can assume I’m just a Microsoft shill and the WP8 devices are crap. Either way, at the end of the day the question is:

Will Windows Phone 8 devices sell in sufficiently large numbers to make Microsoft a strong force in the smartphone space and keep Nokia in business?

I don’t know.

I don’t know how much money Microsoft, Nokia, Samsung, HTC, and the others are pouring into the carriers for co-marketing. I don’t know what sweet strategic deals Microsoft has negotiated with ATT, Verizon, Vodafone, and Telstra to get them to be incented to ensure these phones are well assorted in the carriers’ stores. I don’t know what kind of training and incentives are being given directly to RSPs.

And you don’t know either.

But I do know the way you can tell if it is working or not is to go to the carrier’s stores once WP8 phones are actually available and ask the RSPs what phone you should buy. Heck, even handicap them by saying “I hear Windows Phone is great. Help me pick one out.”

If they steer you to a WP8 device then the air is clear. The canary is happily chirping. Coal mining can continue. Sales will skyrocket.

If they steer you to an iPhone or Android device then I’m sorry, but that’s the equivalent of the canary lying feet up in the bottom of the cage.

If you want to leave a comment, I suggest you do it over on the GeekWire original. There’s quite a healthy discussion over there:

GeekWire Comment Thread for this Post

1 comment

  1. Brian says:

    There’s also the pricing and support question.

    A lot of those carrier salespeople get evaluated based on customer churn and how often devices are returned.

    If you’re a salesguy at a carrier, you’ve got a portfolio of devices including:

    1) The sells-itself $199-on-contract iPhone 5. On the plus side, it’s an easy sell. On the minus side, it’s expensive for the carrier to subsidize, so if you sell too many of them, you’re going to probably get dinged (and definitely not make as much money)

    2) The sells-itself $149-on-contract Galaxy S III. The best-selling smartphone in the world, with great software and support, low subsidy cost and low return rates. This is quite possibly the “safest” choice in mobile at the moment for all parties involved… no wonder it’s the best-selling.

    3) The “big question mark” $199-on-contract WP8 device from Nokia or Samsung. This device costs consumers as much as an iPhone, but costs the carrier less. But consumers may not like them and return them in droves.

    I’d argue a LOT of 1s and 2s will get sold… 3s won’t sell well at all.

    If Nokia or HTC or Samsung were to price Windows Phones at “below Android levels,” they’d spark a revolution. If a Lumia 920 or ATIV S was $49 on contract or $450 all-in, it would sell like hotcakes… alas, Microsoft has decided instead that it wants to be an also-ran, with also-ran pricing.

    I’m a WP fan, but I cannot imagine many consumers choosing the all-new Microsoft offering at the same price (or higher) than the proven Apple and Samsung products.

Debate this topic with me:

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