(The following article is excerpted from Softletter’s from the Product Positioning Workbook for High-Technology.)
The High End and Hardware Positioning
If we apply the Workbook’s visualization technique to the iPhone vs. Fire Phone, the problem comes in sharper focus
For hardware products, design can play a powerful role in defining a product as a high-end item. Apple pioneered the strategy of making the market care about fit and finish with the release of its first major consumer electronics product, the iPod. The iPod was not the storage nor feature leader at the time, nor did iTunes exist; you had to rip your music from CDs onto the unit. But the iPod was by far the best looking unit you could buy with, for the time, a revolutionary touch wheel interface.
Apple also made manufacturing and materials part of the definition of high end devices. Highly polished stainless steel, single block aluminum chasses, deeply saturated colors, high resolution screens and more all came to define high end and luxury for consumer electronics. Slimmer, lighter, and more refined represents the high-end zeitgeist in today’s world of consumer electronics. Black polycarbonate slabs reflect the low end.
The 2014 failed launch of Amazon’s Fire Phone illustrates how Apple has set the rules for playing in premium consumer hardware. Amazon has a history of producing useful, low-cost, drab looking hardware devices whose primary function is to act as no-profit or loss leaders to drive purchases of Amazon stuff. The most famous example is the Kindle, which kicked off of the eBook disruption that took down a large percentage of the U.S. retail book market.
Amazon followed up this success with its line of inexpensive Fire tablets, then turned its attention to smartphones. The Fire Phone project, code named “Tyto,” was setup in Amazon’s Lab126. The facility is Amazon’s design studio and a conscious homage to Steve Jobs and his immortal “pirate” building at Apple HQ where the original Macintosh was developed. Channeling Jobs further, Bezos appointed himself the device’s “super product manager” and made every major design and functionality decision for Tyto during its development cycle.
As the project took shape, Bezos became fixated on providing a unique new feature for the new device, a 3-D effect for the screen called “Dynamic Perspective.” Implementing it required four power-sucking cameras installed in each corner of the phone. Dynamic Perspective’s only practical use was to make your lock screen look 3-D. Sort of. Which wasn’t practical.
In Benzos’ mind, this one feature branded the Fire Phone a high-end, luxury device. This is the not the first time a CEO has made this type of mistake and it won’t be the last.
When the phone was released, a standalone unit cost $650 and $750 and $200 and $300 via a contract, the price points also charged by Apple. It was also exclusively distributed by AT&T, a deliberate attempt by both companies to remind the market of Apple’s runaway success with the original iPhone.
From a design standpoint, the Fire Phone was an undistinguished black polycarbonate slab with a rubber edge, a design cue taken from entry-level Chevrolets. And while Amazon wanted you to watch lots of videos on your Fire Phone, it lacked an HD screen.
The launch of the Fire Phone was a complete failure. When it was all over, write-offs associated with the project were estimated to have reached around $500M and Amazon was able to fill a warehouse with unsold units.
From a positioning perspective, Amazon was attempting to sell a phone with:
- One unique piece of “chrome” that added marginal functionality to the phone’s performance
- Some high-end features, such as more RAM and storage, all of which the unit’s low-end look negated.
- A high-end price that wasn’t justified by the unit’s feature set and appearance.
If we apply the Workbook’s visualization technique to the iPhone vs. Fire Phone, the problem comes in sharper focus.
The failure of the Fire Phone to sell upon release was completely predictable. The mismatch of features to the unit’s price created cognitive dissonance. Value buyers bought slab-style Androids, while luxury seekers went to companies such as Apple and Samsung, both of which have spent tremendous money and time on creating sleek looking, high-tech pieces of “jewelry” whose appearances also burnish their owners.