For wireless carriers, the white knight in the tale of declining voice ARPUs is wireless data services. They have been employing various techniques over the years to drive adoption. First there were heavily marketed text messaging plans; next were affordable, then free, smartphones for postpaid users; and now even prepaid plans offer data friendly smartphones. The newest front in the drive for data adoption is free netbooks. The momentum swept up all the major U.S. carriers and even cable companies such as Comcast. However, this promotion carries considerably more risk than previous campaigns and has the potential to severely damage the operators’ brand.
Netbooks are a new category of mobile devices that consumers simply don’t yet understand. As proof one need only look to the return rates of netbooks at retail outlets. Intel’s chief marketing officer Sean Maloney said retailers are experiencing return rates for netbooks, “in the 30% range.” Consumers are buying the devices expecting a laptop like experience, but are dismayed by the lackluster performance relative to their laptop or desktop. This is clearly a headache for retailers who must cope with the inventory, financial planning and cost implications of taking back nearly one third of all netbooks sold. The netbook OEM will surely suffer too in the way of negative brand perceptions. However, the retailer is largely immune from such brand degradation as most consumers typically make a buying decision regarding a particular brand long before they ever walk into a store to purchase an item. The decision is made after hours, days or weeks of research. There is a mental divide between the product and the channel so the retailer bears relatively little culpability for a bad purchase. The same can not be said for a netbooks acquired through an operator.
Is it the network?
Operators bear a heavier burden because their product – wireless broadband service – is sold in conjunction with the netbook. They are inextricably linked. Thirty percent of consumers are disappointed by their netbook experience because they aren’t technologically savvy enough to appreciate the difference between the processing speed of a netbook and a laptop, for example. And who can blame them? Should anyone really expect the average consumer to understand the difference between a 1.6 GHz processor versus a 2.93 GHz processor? The problem for the operators is that the average consumer may confuse a slow processor for a slow network. Unlike a netbook purchased at a general retailer, the consumer doesn’t have the luxury of returning the netbook, learning a lesson and moving on. With the carrier experience they must suffer through the experience, or pay for a new laptop, because they are shackled to a two year contract. The average consumer is just as likely to blame the network as they are the netbook.
The scenario above would be a disaster for a carrier like Verizon Wireless who built its brand on running the best and most reliable 3G network. The AT&T brand has already been battered by disgruntled iPhone users who have taken to the blogosphere to decry the lackluster performance of its 3G network. Surely the last thing they can afford is another misstep.
The solution to this issue isn’t to stop offering free netbooks, but rather work overtime to educate consumers about the limitations and practical uses for netbooks. This starts with arming every retail associate and agent with the facts about netbooks. It also requires the operators to lean on OEMs to draw clearer distinctions between netbooks and notebooks when crafting marketing messages. After all, Yankee Group research shows that manufacturer Web sites are one of the leading resources for consumer research for mobile devices. Netbooks can still be the knight in shining armor for operators looking to drive more data services – providing a few of the kinks in the armor are hammered out.
