Blackberry outsells iPhone in Q1 2009, becomes Dell of smartphone market… and other interesting tid-bits

In Q1 2009, RIM increased its share of the consumer smartphone market by 15% over the prior quarter.  In other words, RIM now has a market share of nearly 50 percent when it comes to consumer smartphones.  According to NPD group, a “buy-one-get-one” promotion by U.S. CDMA carrier Verizon Wireless helped push the Canadian company’s BlackBerry Curve past the iPhone 3G in the first three months of the year.  This comes as bad news for Apple and Palm, since both companies lost 10% each.  NPD reported that the BlackBerry Curve was the top-selling smartphone during the quarter, followed by the iPhone 3G, the BlackBerry Storm, the BlackBerry Pearl, and the T-Mobile G1.  “Verizon Wireless’s aggressive marketing of the BlackBerry Storm and its buy-one-get-one BlackBerry promotion to its large customer base contributed  to RIM capturing three of the top five positions,” NPD analyst Ross Rubin said.

On the surface, it looks like the folks over at Waterloo (RIM HQ) should be celebrating.  But what if they don’t have anything to celebrate with?  By cutting margins in half – that’s what happens with a buy-one-get-one promotion – RIM is well on its way to becoming the Dell of the smarphone market.  Sure, the company’s products took three of the top five smartphone spots in the quarter.  But the iPhone was #2 – and it got there without using any “aggressive” promotions or buy-one get-one offers.  In other words, the iPhone spoke for itself (no pun intended), while the Curve needed all the help it could get to entice consumers to buy it.

You might say to me, “Alex, numbers are numbers; there are no if’s, and’s, or but’s about it.”  Well, there are in this case.  While RIM did sell more devices, the more important question is – at what cost?  By discounting giving away  the Curve, RIM has basically admitted that it can’t compete with Apple’s iPhone on the basis of value, user experience, or customer delight.  Thus, it resorted to price-cutting measures.  It’s kind of like deciding on that Porsche Cayman you’ve always wanted, but seeing a Toyota Yaris next to it for free, when purchased with another Yaris.  So you buy the Toyota because your sixteen year-old daughter needs her first car, and you just couldn’t pass on the buy-one get-one offer.  By allowing Verizon to give one Curve away as another one is bought commoditizes the BlackBerry brand, plain and simple.  This is something Apple didn’t have to do.A parallel of this can be seen in the PC market, where a Dell, HP, Acer, Asus, Gateway, Toshiba, and (name your PC brand here) can be purchased for hundreds of dollars less than an Apple Mac.  By choosing not to compete in the botton of the market, Apple has consistently won user satisfaction surveys and delighted its customers.  Year after year.  Can any of the aforementioned PC manufacturers say the same?  RIM is following the business model of the PC manufacturers, and it doesn’t have to.  It’s not relying on a third party to get its software, the way the PC makers are relying on Microsoft for Windows.  RIM makes the entire widget – the way Apple does.  So this is purely a choice on RIM’s part to position itself as the bottom-feeder of the smartphone market.  In the long run, I don’t think this is a sound strategy.  RIM might win some number wars, but at what (whose) expense?

Some more interesting tid-bits from the NPD report: smartphones now make up 23 percent of cell phone sales, up from 17 percent in the year-ago quarter (Q1 2008).  According to NPD’s Rubin, “Even in this challenging economy, consumers are migrating toward Web-capable handsets and their supporting data plans to access more information and entertainment on the go.”  Translation: people want information and entertainment on their mobile devices.  Guess what’s the best device that delivers?  iPhone.

On a closing note, I’ve been a long-standing supporter of the idea that Apple make the iPhone available on all the carriers once the exclusivity contract with AT&T runs out (hopefully during the summer of next year).  I truly belive that Apple will do just that: during the launch of the iPhone – the first few years of it – Apple wanted to understand the cell phone game and be conservative, attacking first and foremost with product.  It wanted to understand the various business models as well as perfect the technical and engineering techniques that go into making a cellular device.  Remember, the iPhone is Apple’s first cellular product.  Ever.  Apple also wanted to streamline the experience for the user: want an iPhone?  There is only one carrier where it’s available: AT&T.  Once the launch has come and gone and Apple has learned about the “ins and outs” of the cellular game, the company can really start to focus on making the device available to as large of a market as possible, and this means making it available on all carriers, not just in the U.S., but worldwide.  Once this happens, even the buy-one get-one promotion from RIM won’t stand a chance.  What do you think?

Posted in BlackBerry, Decisions, Marketing, Numbers, RIM