There has been some recent debate about Samsung and their approach to regionally locking handsets, starting with the Galaxy Note3. It's a very interesting situation, and one that will impact grey marketers and their customers more than those who sell and buy in market. But the real story is not the region locking. It's about the lack of transparency by Samsung and what they are attempting to do which is to protect their "customer" and their customer isn't the consumer.
The fact is this is about protecting the distributors and dealers who legitimately buy devices from Samsung, forking over hard cash, putting staff and promotion behind the sales of product in the legitimate market the device was sold into and to protect against what is called product diversion. It's also about protecting the carriers from having devices that can be bought elsewhere, without contract and put on their network, but without the long term predictability of how long the customer will stay with them which is why the carriers get behind any product. It's another creative way to help those carriers who buy hundreds of thousands of units so they can keep the customer "locked to them" without the customer being locked to the device if they want to change devices the way some people change shoes.
Spinning the story by using FUD was what Samsung did. Put fear into the public's mind via the media. Get the media to first amplify that fear via the approach of having to always tell what's new and shiny. Show your customers what you're doing to protect them, then when the bloggers figure out the truth they will send the message out that helps drive the sales in market while keeping those out of market (anti-diversion tactic) from buying the devices but tell enough that makes the in market end user comfortable.
Next comes the real sneaky angle. Some blogger will come up with the idea that the grey marketers will find "agents" in the local market to "activate" the phone in market with a local SIM meaning a pre-paid SIM should work. The phone will be "activated" in the "region" it's designed to be "activated" in, then repacked, and shipped to be sold out of market so in the end Samsung's regions end up exactly where they were before, but the speed at which the devices end up out of market will be slowed down, giving each country or region a bit more time to sell the Galaxy Note3 faster.
For Samsung this allows them to say to their in country distributors that they are doing something about it, when in reality it's all window dressing because the smartphones are being be manufactured to save costs as "worldphones" with frequency bands that work everywhere (though not always with the fastest speeds possible for all yet) so the reality is, with a bit of patience you can figure out how to get the phone you need for where you'll be if your a savvy consumer.
So let's now attack the story and coverage for merits or lack there of using the 4 P's of Marketing:
1. Place-The story is not about region locking per se, but about protecting distribution which is place.
2. Price-The story is not about region locking per se, but about protecting margins and keeping price points where they should be in market because the grey marketers love to play the currency game as much as they do selling the products.
3. Promotion-The story not about region locking per se, but about drawing attention to the products in market, and to force the customer into thinking they need to buy locally. That's promotion via the media which costs less than buying ads, and which helps reinforce in store promotion which Samsung has to pay for via what is called price and positioning, and which usually includes things like payment terms and dating (when the retailer has to pay, how much they have to pay, quantity discounts, etc.) as well as price protection terms so as the prices fall the retailer can lower prices and not take a loss.
4. Product-The story is not about region locking per se, but about drawing attention to the product being available for sale.
The reality is there are statutory laws designed to prevent this from happening in the USA and elsewhere know as parallel import laws which like patents and trademarks are designed to prevent infringement of the distribution kind. But, unless the customs agents inspecting the cargo coming into the country know that the distributor isn't the offical importer, the products get in the country.
Of course the way around that is to take possession of the goods in the country you purchase them in, because they are for personal use, sell them first in the "region" they were intended to be sold in to the customer who wants them, and when they reach the other country to where they are being imported, they are now personal property.
The stone cold reality is that the Internet has made the world a very small place, and standards have in many ways weakened protectionist efforts so to take steps to curb the enthusiasm around something good, brands turn to spin, hype, FUD and obfuscation to try to keep the status quo. And that's the difference between a good brand and an great brand.
Compare Samsung to Apple. Apple sells unlocked devices directly to consumers through the Apple stores ONLY. If you want one, you buy it direct from Apple, and so does or did HTC. But Samsung doesn't really sell direct, they rely on the channels to drive their sales, and that's what this is all about.
Distribution and protecting the channel.
Don't be fooled by the hype, FUD or obfuscation. Buy the phone you want, but be prepared to have to do some extra work if you want the phone that you can't buy direct from the manufacturer to be the phone you want.
Oh, and to the issue of pricing. Apple already figured that out too long ago. Just look at the prices in various contries and you'll see that their pricing holds steady and costs more outside of the USA than it does here. They already did the math, and last time I checked keep selling more, and growing more everywhere, and they don't seem to have a grey market problem.
Just as Phone.com focuses on the SOHO and Small Business market with a very complete and full featured set of services to separate them from the Grasshoppers of the world, a new player out of Los Angeles, Telzio is looking to take the same approach and go after the market that Jive is tackling, with larger businesses who are working both nationally and internationally with what is best described as a spin it up and deliver service approach very similar to past client Aretta that was acquired by cBeyond a few years back.
The core value of Telzio lies in their rapid deployment set up and automation engine that gets a business up and running in very short order. Compared to larger servcies, where provisioning is the pain point, this core part of their value proposition makes them an interesting and new player in a space of sameness.
Pal Martin Geddes, one of the better, brighter and more forward thinking people in telecom today, authored a missive to his newsletter followers entitled "Rise of the Sensible Network" last week. It's an updated and padoxical viewpoint on the famed report by David Isenberg entitled “The Rise of the Stupid Network” that is often considered as the seminal treatise on the way the telcos went when it came to sealing their own fate.
Geddes longform article is a very strong read, and provides the basis of so much that will be discussed in a series of upcoming foundation events he'll be speaking at that set the stage for where telecom and the Internet are going, especially on the subject of OTT based communications. OTT is something that Martin, and his regular Future of Vocie speakermate, Dean Bubley and even I espouse and cover in our blogs and speaking engagements, with prime examples coming from the likes of HookFlash's Erik Lagerway and uberConference's Craig Walker, both of whom have all been very actively involved with for many years in delivering, or from services like Skype, Truphone (client), the now departed Gizmo, Google Hangouts, WhatsApp, Line, etc.
Martin will be speaking at some upcoming events, and this topic is far from over.
The buyout of Vodafone's minority stake in Verizon Wireless means Verizon can now make the mobile division a fully integrated part of its overall business, just like AT&T has done with their mobility unit. Largely this benefits the Enterprise customers as now they can buy from one sales team, not have to in theory have two different account groups.
The second thing it does is accelerate the deprication of DSL to non-existance, as Verizon, which is all about LTE, will push the rip and replace and expanded footprint where DSL and ADSL couldn't go. I will also go out on a limb and say that Verizon will accelerate their FiOS build out, not slow it down/let it grind to a halt. Why? fiber backhaul and fixed mobile convergence. Let's face it, you can build all the towers and get faster radio access networks out in the hinterlands, but if the fiber isn't in the ground to get it back to the network, you have bottlenecks. So what good does it do selling $59.00 a month LTE service if the speedy content doesn't go anywhere fast? How can VoLTE work, and be the replacement for Circuit switched calls if the network won't support the volume? Enter the need for more fiber in the ground, and since you can split off more local loops to that massive network, why not get more people connected who are paying more for it. Combine the two and you have speed, access and capacity.
That's the opposite of what AT&T is doing, using a hodgepodge of wire types -fiber, coax and copper to get to the prem. And since home users tend to not switch carriers as much as mobile users do, getting more FiOS users for Verizon is good long term business.
The news sites are a flutter with the realization that Microsoft if buying Nokia for less money they paid for Skype, hyping the idea that ex Microsoftee Steven Elop is the potential heir apparent to Steve Ballmer.
I personally think this is simply a thinning of the herd, and as new stars rise, older ones with assets -the Nokia patent pool, massive distribution teams, a very skilled hardware design and manufacturing team was attractive to Microsoft, especially with all the cash they have offshore. They pick up a team to build things and with their own sales force and mobile operator deals actually sell them, and what's more they reduce by a factor of 4 their royalty payments.
Unlike Dell, which use sub-manufacturers to make computers, now MSFT has it's own plants and people, and unlike Dell Microsoft has now has a team that knows how to design and build very good hardware--you never heard bad things about Nokia smartphones-more often you just didn't find them when they were really hot, or when you did, they sold very well and impact the top line for the Finnish company. This is exactly why Dell needs to buy BlackBerry. They get smartphones and own an OS. The world is moving from powerful desktops and laptops to smarter, faster and more powerful tablets and phones, and while BB's issues are largely sales, Dell's folks know how to do that.
But back to Microsoft. They have a leadership problem. Elop while a possible answer, he will likely be looked at as a returnee, so not the right choice as picking someone from the existing executive suite, even a slighlty reconsitituted one means the rest on the team feel passed over, and the rivalry it causes during the run up to the annointing is also very bad for business, as the direct reports all line up like gladiators. That leaves looking outside--way outside. And I mean way outside. Hardware is not what the future is about. Software is. And consumer marketing models are where the thinking is. Look at Netflix. Look at Nike. Look elsewhere...
Enter Yahoo-and a whole new management team. What they are doing is all about aqui-hires and building a new team from the inside out. In essence the Yahoo leadership is buying up pieces and parts -- that are all human capital, taking some of the newly acquired IP and incorporating it into what will be a very efficient mobile and cloud services focused team. This is exactly where Microsoft (and Dell) are both super light.
In my view Yahoo becomes an attractive aqui-buy for either Dell or Microsoft. It gives either a new leadership team, cash, cloud and mobile. It also brings new, next generation services, which Dell lacks in a consumerization of the enterprise model world.
Personally, I am not surprised by the Nokia buy by Microsoft, as the writing has been on the wall since 2012's CES where I saw nothing new with the Surface line of tablet PCs. The lack of 3G modules then was a huge OOPS for Microsoft, and something that Nokia's engineers never would have missed.
One more thing--Nokia has a massive developer program, and rich API's. Don't be surprised if Microsoft looks at Twilio, plugs that into Skype/Lync and then delivers it all to the new handsets. In an LTE era, voice is no longer about minutes, and the data pipe of wireless is the new wire. We're far from done seeing buying going on..it's a great time to be in M&A.
Samsung Galaxy Note 3 (Photo credit: Janitors)
