New Phone, Who Dis?

Did you ever notice that the monkey in the “New Phone, Who Dis” GIF uses a flip phone?  Anyone remember when it was a big deal to get the wireless provider to hook your old phone and your new phone up to a computer and transfer the contact information?  Were you crossing your fingers that they would provide the transfer for free?

These memories about the cell phone shopping experience are about as outdated as the flip phone.  Now, all content that is stored on the cloud like contacts, photos, and music is available on your new phone once it’s booted up and your credentials are entered.  I think you can successfully argue that the backed-up content is more valuable than the monetary value of the phone itself.

Who DisMany other transactional customer relationship processes have removed the retailer as a middleman.  In my experience, this was seamless with Apple as they moved the transaction off of a second party’s platform and into a direct relationship when I purchased a new phone recently.  This piece is focused on Apple’s iPhone.  Besides having green texts in iMessage I’m sure everyone with a Galaxy, Pixel, or other high-end smart phone on the Droid OS has had similarly positive experiences.

Due to the importance of the phone in our daily lives, the purchase is an emotional transaction process and can cause anxiety.  The ability to self-provision from the comfort of your couch like ordering the next delivery of toilet paper from Target is now simplistic enough to perform easily.  Apple even provides complimentary new phone familiarity training with your new device.

Buying an iPhone directly from Apple likely means purchasing Applecare instead of a different form of insurance if you’re so inclined to opt-in on protection.  Apple also provided double the trade in value to ensure phones are exchanged instead of becoming iPod hand me downs to the kids; thus limiting the supply in circulation.

All of these changes have shifted the relationship to the phone manufacturer and away from the retailer.  The changes have supported the manufacturer’s income statement, but they’re also building its ecosystem, brand loyalty, and an enduring competitive advantage from the direct relationship.

applepayRetailers give the best eye-level shelf space to the products that earn them the highest margin or pay for placement in areas like an end-cap.  The physical shelf-space on the iPhone is limited.  The lock button is prime real estate on the phone’s physical plant.  Apple has provided the ability to quickly access Apple Pay from the phone.  Previously, it was accessed by the thumb-engaged home button and now a double click of the lock button opens the function.

The other use of the lock button is to engage Siri by holding the button down.  Bundling Siri (voice) and Apple Pay (payments) on the same button is the equivalent of a well placed Buc-ee’s at the intersection of two expressways.  The choice demonstrates the importance the company is placing on these technologies that will be revenue generators for the next decade.

Stocks such as Visa, Mastercard, Paypal (owner of Venmo), and Square have performed very well over the last decade.  Many investors believe that payment processors; the ultimate highway tollmen, will continue to be profitable for the long-term.  The millions of Alexa and Google Home devices now residing in homes have increased the opportunities present in voice.

Apple PayHow can new forms of payment benefit consumers?  Convenience, speed, and knowledge are benefits.  Millennials may be the last generation with any experience writing personal checks.  My son was told to have cash sent to his school in an envelope with a parents name on it to pay for pizza recently.  Seriously!?  Transferring funds with ApplePay or some other service would have made this request much simpler for everyone.

Only 25% of iPhone users have activated ApplePay.  Apple asks users to establish the service when they set up a new phone, but nobody wants to grab for their wallet during this process.  Just get me back on social media and my music streaming ASAP.

How will these new forms and processes for payment become more widespread?

In my opinion, the moment that governmental agencies begin accepting digital forms of identification is when the floodgates will open.  Apple Health already allows users to establish medical information like emergency contacts, whether you’re an organ donor and your blood type.

mclovinYou won’t need to carry a wallet or a phone case that holds your ID for the weekly Thirsty Thursday pilgrimage when individuals can present or scan their phone to prove their age to purchase alcohol.  What’s more secure and cost-effective; a laminated government ID with a state seal hologram or a phone scanning a thousand points of your thumbprint or face?

My decision to purchase a new phone was not easy.  I’d had my iPhone 6S for just over three years, but when it became obvious that the battery was degraded I knew it was time for a change.

I’ve run into similar situations on the farm.  How many times do I to deal with my lawnmower not starting or the four-wheeler electric shift not working?  Capital is a limited resource, but so is your time and the value you place on getting the most out of your time and physical assets.

Companies wrestle with similar questions and there are historical examples as well.  Morgan Housel wrote that,

Part of the reason the German military was so powerful in the early years of World War II is because it had to forfeit every gun, tank, ship, and plane to the Allies after World War I, which meant it rearmed in between wars with brand new, state-of-the-art supplies while other armies used outdated equipment. Having everything taken away from them in 1917 was a counterintuitive competitive advantage.

If you run a business or organization how do you determine what the tipping point is to deploy new capital?  What is your merchandising program to alert customers to its availability and the service they desire while also encouraging behavior that drives revenue?  Is there a middle man that can be removed from the relationship between your business and your customers?

Steve-Jobs-300x225In business, the closer you are to the end-user (customer) the more sticky the relationship and the better pricing power.  In the investment environment costs have been squeezed from asset managers and while there is still substantially more assets invested in active management the Vanguardization of expenses phenomenon continues.

Financial advisors have been able to save funds for their clients by participating in this shift.  Vanguard says the next area ripe for disruption and fee compression is financial planning.  If you’re in this space how do you maintain your pricing power?  Companies the size of Vanguard and who’s “Why” is to drive down costs for investors aren’t going to be beat in a race to the bottom.

Providing excellent personalized service with a human touch and giving away fabulous content will continue to be desired by clients.  In Simon Sinek’s Ted Talk when describing Apple he states that, “people don’t buy what you do.  People buy why you do it.”

Why does your business exist?  Start with Why and review capital expenditures through the lenses of customer experience.  Steve Jobs said, “you’ve got to start with the customer experience and work back toward the technology – not the other way around.”   Likewise, don’t start with a business that you want and build from there.  Begin with the client and the market opportunity and aim for the bullseye.

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2 thoughts on “New Phone, Who Dis?

  1. This is an excellent piece of writing!
    My 6S is 3.5 years old and it says my battery is 94%.
    I am trying to keep it until I can switch to 5G when the phone and Verizon are reliable.
    What phone did you buy?

    Like

    1. Thanks! The XR. Gave me the features I wanted and was cheaper than the top of the line version. Only downside is the notch at the top IMO. Great productivity enhancer with not having to worry about battery dying daily.

      Like

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