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The domination of the big branded device, however, is now under threat, according to Bernt Ostergaard, a director at Giga Information Group. "While all the mobile phone operators were essentially selling the same service," he explains, "the differentiation was at the level of the handsets. The future of mobile communications, however, is in the services. The operators need to differentiate their services and they recognize the power of a brand to do that."
Ostergaard's thoughts are echoed by other industry experts. "Initially the industry was solely concerned with voice," says Datamonitor's Richard Clifford. "As we head towards data transmission with 2.5G and 3G technology – payments, radio, the mobile Internet, MP3 – there'll be more brand competition between content providers, operators and device manufacturers. I foresee four to five global operators and then maybe two or three on a regional level. Brand is therefore going to be crucial."
And the handset market is a perfect battlefield to attract the customer's eye. While the services of mobile operators are intangible, here is something physical that the customer holds in her hand. Her experience of the operator's brand begins and ends with the phone itself.
Virgin Mobile, a virtual operator that runs services in the UK, Singapore and Australia, acknowledges the importance of creating a complete branding experience for its customers. "Customers should have a full on experience with Virgin Mobile," says company spokesman Steve Day. "From the moment they walk into a store to buy a phone we want them to experience the brand, from the point of sale to the brochures to the phone. It has to be fun – and it has to be red! It's important that everything the customer touches is refreshing. Our ultimate aim is for customers to have an end-to-end experience."
The operators' growing interest in brand exposure, however, could significantly affect the handset market. "The need to differentiate services redefines the relationship between manufacturers of handsets and service providers," believes Ostergaard. "Operator-branded phones need proprietary technology and functionality which only smaller manufacturers will be willing to give exclusively."
Device makers can no longer work in a vacuum. They must consult with the operators and offer a more "personal" service. "Operators will have more influence because of the move to data services from voice," notes Clifford. "The operators can't afford for 3G to flop like WAP has done in Europe and they will have far more bargaining power with the manufacturers. Moreover, as margins decrease and handsets become more commoditized, handset manufacturers can't afford to be frozen out.
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"The growth in average revenue per user is leveling off, at least in Europe. Operators will therefore work with manufacturers that can offer added value."
With more of a level playing field, smaller firms are starting to make their mark. Sendo, based in the UK, has been particularly successful. It supplies cell phones to operators throughout Europe and also has an agreement with Islacom in the Philippines. "The operators are our main focus," says company spokeswoman Marijke van Hooren. "We provide them with what they want in terms of design and applications and we offer exclusivity. Our own branding strategy is to put the Sendo brand on the back of the phones – a bit like Intel Inside. However, if an operator wishes to brand the phone solely with its brand, that is fine with us too."
mmO2, the newly branded wireless operation recently spun off from British Telecom, has gone a step further in its efforts to spread its name. In October 2001, it commissioned Taiwanese firm HTC to design and manufacture a new, exclusive wireless PDA device. With markets approaching saturation in Europe, carriers need something to pick up sales. Branding a new type of device makes a lot of sense.
Of course, the demise of the global handset manufacturers will be by no means complete. The strength of their own brands mean that many customers will still prefer to choose these handsets. "You'll still need the big branded manufacturers," says Clifford at Datamonitor, "and operators will have to work with them too. But the big boys will need to be on their toes."
Instead, the likes of Nokia will turn their brands to better use. "Incumbents will focus more on total systems – just look at how much they've fought for 3G contracts," notes Ostergaard. "Phones will contribute to less and less of revenue." Indeed, Ericsson now outsources its entire handset manufacturing to Flextronics; Nokia aims to capture 30% of the 3G infrastructure market. This is where the serious money now lies.
The operators, meanwhile, jostle for a greater share of the handset brand space. "A decade ago, brand was almost an afterthought," remarks Day at Virgin Mobile. "But the telecom operators are now aware that branding is critical – just look at all the rebranding going on at the moment. There's an inordinate amount of attachment and emotion associated with brands. The operators have certainly wised up." [21-Jan-2002]
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Edwin Colyer is a science and technology writer based in Manchester,
UK.
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Aug 26, 2002
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Commodities: Branding the Basics -- Eric Mirabel
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How do we go about turning a commodity product or production capability into a new brand? We look at the Middle East, a transitioning market where manufacturers are branding commodities.
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Aug 19, 2002
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Brands in Toyland -- Ron Irwin
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Is branding in the toy world just child’s play? We look at how traditional brands like LEGO and Brio stand up to the dazzlingly high-tech competition.
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Aug 12, 2002
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Long Live the King -- John Karolefski
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Young and svelte, bloated and strung out, Elvis had universal appeal throughout his short lifespan. The king may be dead but apparently the brand lives on.
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Aug 5, 2002
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IBM Navigates the Biotech Maze -- Edwin Colyer
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IBM Global Services is expanding to a variety of areas like its recent acquisition of PwC Consulting. We look at how a brand like this penetrates the life sciences market.
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Jul 29, 2002
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Do Nonprofits Have Value? -- Robin Rusch
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As we unveil Interbrand's league tables of the world's most valuable brands for for-profit brands in 2002, we ask, Is there value in a nonprofit brand?
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