# Wednesday, 14 July 2010

The iPhone 4.0 has been marred with controversy even before it shipped. Before it was announced and launched, tech bloggers got a hold of an iPhone 4 and posted blogs about it, causing Apple to crack down on the bloggers and their sources. Almost immediately after launch, a hardware defect was discovered that when reception is poor, holding the phone a certain way caused the phone to drop the call. Apple’s response: Hold the phone differently or buy a $30 case for the phone.

Almost four weeks and 2 million units sold later, the party line from Apple is the same, hold the phone differently or buy a case. Blogosphere as well as the main stream media have not let this issue go and now it is even made it into everyday conversation between normal people (meaning not geeks like us.) Consumer reports yesterday did not recommend the iPhone 4.0 due to the antenna issue. That is pretty huge. Apple’s response: deleting all threads on its forums about the Consumer Reports recommendation.

PR experts are saying that total recall is inevitable, while tech bloggers say no. I don’t know what Apple will do, however, if I was on the board of directors, I would recommend a full and complete recall. Put Steve Jobs on TV to say sorry and give everyone a brand new phone. Here is why: Apple fanboys don’t read Consumer Reports, but my mom does.

While there are a large number of Apple fanboys out there that will follow Steve Jobs anywhere he leads them, that group is a fixed size (apparently about 2 million.) They will preorder the iPhone and its $30 case and probably leave nasty comments on this blog without even reading the whole thing. Fine. All successful companies and products have their fanboys. The problem is in order for Apple to grow and take on more market share, they need to go mainstream, win over the non smart phone customers. You think Apple is profitable now, wait until they start to convert the non smart phone customers into iPhone customers. Regular phone users outnumber smart phone users in the US by about 4-1, in the emerging markets, it is even higher. The opportunity is enormous.

Apple and the iPhone can do this, but to do so, they have to have one clear message: Apple products are elegant and easier to use above anything else. If this message is delivered successfully, Apple’s brand will command a premium. This is why Apple has made billions selling iPods, iPads, and iPhones. My mom has an iPod, enough said.

However, mom is using a four year old cheapie Nokia phone and is considering a new smart phone. She reads consumer reports and has been for 20 years. She watches the news. She doesn’t understand the difference between the “bars” problem and “antenna” and why a $30 case will help her. All she hears is Apple=problem. She will walk into the store and say to the salesperson “show me something that is like the iPhone but does not have the problem I hear about on the news.” They will show her a slick new Droid X.

Steve Jobs has to make the decision fast since he is losing control of the message, something rare in Apple-land. Recent history has shown us how a slow to recall company, Toyota, became tarnished very quickly. Just a year ago Toyota was on top of the car world, the #1 brand in the US market. Today they number 3! 

Now consider the famous Tylenol case. On September 29th, 1982, a 12 year old died from taking a cyanide laced Tylenol tablet. A few others died a day later and the FBI figured out that someone had poisoned bottles of Tylenol in a Chicago neighborhood. What did Johnson & Johnson, the maker of Tylenol do? They immediately distributed warnings to hospitals and distributors and halted Tylenol production and advertising. Even though the poison bottles were only discovered in a single Chicago neighborhood, a few days later J&J recalled every Tylenol bottle on the market, over 31 million of them, worth over $100 million. J&J then did a public awareness campaign and reissued new bottles with tamper proof bottles. When the new product went to sale, market share dropped from over 35% to 8%. Within a year, the public had rewarded J&J for its decisive action and Tylenol regained its market share and went on to be the #1 product in its category. People still don’t forget, 28 years later, it is still required reading at any MBA class.

While the iPhone’s antenna problem is not life threatening as in the Toyota and Tylenol cases, the damage to Apple’s brand can be catastrophic. With Google’s Android right on its tail, putting Steve Jobs on TV will do wonders for the Apple brand and PR. Steve will go from a saint to a god, silencing his critics overnight. I might even become a fanboy. ;)

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