Will Your Next Mobile Phone be a Venti or a Grande?

Two years ago, we purchased our first Apple iPhone – the 3G unit.  We walked into the local AT&T Wireless store, looked over the phone, and let the salesperson proudly explain that this represented the finest 3G technology.

We knew that he had no clue about what he was saying, but that’s what the marketing dept told him to say.

How did we know that he had no clue?  We had been covering the wireless industry for many years, and understood that the term “3G” represented a very specific engineering concept where one could view full motion video (30 frames per second) over the air.  This required a wireless network (GSM or CDMA) and a mobile phone that was capable of a data transfer rate of 1 megabit per second.  KDDI in Japan launched a 3G service in April, 2002.  The service was expensive – even by Japanese standards which resulted in slow subscriber growth in those early days – but it was a network that offered a wireless data throughput rate of 1 megabit per second – and one could see full motion video on your mobile phone.

Fast forward to AT&T in 2008.  Maximum throughput on the upgraded GSM/GPRS/EDGE network was around 500 kilobits per second –downstream, at off peak times, when no one else was on the network.  In other words, the data transfer rate was only about half of what would qualify to be properly called a 3G network.  Therefore, how could AT&T call their network “3G”, and how could Apple call their newest iPhone “3G”?  We tried to explain the engineering concept to this AT&T person.  They smiled and confidently told us that the AT&T network was that fast, and hence, it was legitimately at 3G network.  We told him that showing a video using the built-in WIFI connection didn’t count – it had to be over the AT&T wireless network.  He smiled again, and said that AT&T was doing this.  It was like talking to a brick wall.

In the engineering world, 3G means something.  In the marketing world, 3G means “something/anything faster than the last product”.   In the engineering world, the simple term “fast” means something – a comparison to something else.  In the marketing world, the term “fast” means “super fast”, or venti, or grande, or whatever the marketing team wants people to believe it means.

That is the genius of marketing.

AT&T gobbled up the term 3G because Verizon was close to introducing a data-only service that was truly 3G – 1 megabit per second or more.  It took longer than expected, but Verizon will introduce its LTE network (Long-Term Evolution – another meaningless market term) across 30 cities next month.  AT&T will roll out LTE in 2011.  (The main characteristics of LTE besides 100 megabits per second download speeds will be an all-IP flat networking architecture which will make your mobile device a truly connected and always-on device).  Nevertheless, AT&T played a great defense in 2008 by playing offense.

Here’s one of our favorite examples of marketing playing defense by playing offence.  In 2001, Budweiser introduced its “Born On Date” marketing campaign.  Budweiser knew exactly how quickly its inventory turned, and how many days it took for a retailer to move beer off the shelves.  It also knew that its competition turned its inventory slower.  More importantly, it knew that the rising popularity of micro-brewery beers was slowing Budweiser sales, but that the inventory turns of those microbreweries was much slower that Bud.  Hence, the “born on date” campaign.  Budweiser took data that was used only in the finance dept (inventory turns), and created a marketing campaign that promoted its rapid inventory turns, while mocking the inventory turns of the micro-brewery competition.

From that point forward, microbrewery beers became associated with another less popular marketing term – skanky.

Did anything in Budweiser beer change such as flavor?  Of course not.   But Budweiser made the “inventory turns” terminology its own by renaming it as “Born on”.

Anyone interested in the new iPhone Venti, or will you be having an iPhone Grande?

What is the lesson for a startup company?  Define a meaningless term that also defines your competition, and make it your own.

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By Richard Piotrowski CFA is a former #1 ranked securities analyst, and the Managing Partner of Outram Research LLC, which focuses on assisting startups and prospective turnaround companies define an executable product strategy, competitive strategy, and an exit strategy.  You can follow Richard on Twitter: @Angelpitchdoc.  He can be reached at richard@outramresearch.com, or at his blog: angelpitchdoc.wordpress.com.  Also check out our website: www.outramresearch.com

About Richard Piotrowski, CFA

Richard Piotrowski, CFA, is a formerly a #1 ranked securities analyst, who has 20 years of experience building, dissecting, and fine tuning presentations, business models and valuation models of all kinds. The experience has been gained working in the investment community on both sides of "Wall Street", on "Bay Street" (Canada), as well as on "Main St." as Chief Financial Officer, Chief Operating Officer, as well as Evangelist and Marketing Director, where he focused on building messaging for solution sales opportunities based on value positioning, high ROI and fast payback. Richard joined Canada’s investment banking community in the early 1990s as an analyst following technology companies. He was recognized within two years by the Street, and was ranked "First" for Quality of Research in the survey of institutional investors conducted by an independent advisory firm – Brendon Woods. Richard was also the founding member of the internet technology research practice at two boutique investment banks.
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