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I worked in Windows Mobile at the time. He was just quoting what the best market researchers had told him. We were given a LOT of market research papers with i

I worked in Windows Mobile at the time. He was just quoting what the best market researchers had told him. We were given a LOT of market research papers with in-depth customer surveys where lots of people said, repeatedly, that they would "never pay money for a phone". If you think back to then, phones were "free" with a 2 year contract. The idea of getting someone who was used to free to switch over to $600 overnight was, by any reasonable accounts, not going to happen. The market researchers did the safe thing and said that the status quo would continue. Of course they were horribly wrong, but again, in the moment, trusting literally every expert in the field is not the worst position to take. After all that I learned to be wary of market researchers.

bosdev 8y ago
Consumers are just as bad at predicting the future as everyone else. Market research is great for making iterative improvements or learning what people are frustrated with, but it's data, not knowledge, and definitely not prognostication.
- com2kid 8y ago
  This is incredibly true, a huge lesson from the iPhone is that consumers can not tell you what they cannot imagine. Creating entirely new markets takes vision.
  - scarface74 8y ago
    They should have learned that lesson from the iPod - “No wireless, less space than a Nomad, Lame”
    - com2kid 8y ago
      Don't forget iTunes. Part of why iPod succeeded because it allowed stress free easy access to a giant % of the world's music, all at one constant price. The iPod wasn't revolutionary in any respect, it was a perfectly executed version of what other people were already doing, that had a huge, incredibly well done, marketing push behind it, with even the smallest detail given attention. Also the white ear buds were genius. Everyone who used them was advertising the product.
      - scarface74 8y ago
        That’s true. It took two years for Apple to sell thier first million. It wasn’t until both the music store came online and iTunes was released for Windows that it took off. But even by 2007, a small percentage of the music people had on iPods were bought through iTunes (less than 10%?) according to Jobs “Thoughts on Music” essay.
    - ryandrake 8y ago
      I guess the conclusion might be: Unimaginative people are bad at predicting the future.
      - Rexxar 8y ago
        Imaginative people are bad too, they predict the wrong version of the future.
jandrese 8y ago
The original iPhone pricing was really baffling. Had it not been a really revolutionary device it would have flopped IMHO. You paid $600 for the phone, and then AT&T added the phone subsidy to your bill anyway (and never took it off), so it was just stupendously expensive. Apple lowered the price pretty soon after launch. It was worth it to have a browser on a phone that wasn't total dogshit.
- thirdsun 8y ago
  I still remember the early iPhone days when german providers heavily subsidized the device. With a simple 30-50 EUR/month plan you paid about 50 € for the device upfront and that's it. Sure, you might argue that the price might be hidden in the monthly fees, but it would have been the same 30-50 plan regardless of if you opt for the iPhone or your run of the mill Motorola, Nokia or Samsung device. Basically the iPhones were sibsidized by all customers and you'd be a fool to select a cheap phone. Also note that these iPhones were unlocked and ready to be sold on eBay once it was time to upgrade. These days you pay full price stretched over 24 months.
jonahhorowitz 8y ago
There's a Henry Ford quote that's pretty popular at Apple - “If I had asked people what they wanted, they would have said faster horses.”
- georgespencer 8y ago
  And another I recall, although not sure to whom it is attributed: "If you asked Porsche owners what they'd like to improve in the car, they'd all say more leg room, a bigger trunk, and better safety features. Congratulations, you just designed a Volvo."
  - mikestew 8y ago
    Is that really what Porsche owners would say, though? I've owned a couple of Porsches in the past, and if you asked me, my answer would have been "MOAR...POWER. TIRES...MOAR STICKY." If I wanted a Volvo, I'd buy a Volvo. Or maybe I didn't get the joke.
    - tonyedgecombe 8y ago
      I read recently that most BMW owners don't know that their cars are real wheel drive. The enthusiasts are the minority, the majority are the status seekers.
- opo 8y ago
  That’s one of those quotes that helps start a discussion, but there is no evidence that Henry Ford actually said that quote: https://hbr.org/2011/08/henry-ford-never-said-the-fast https://hbr.org/2011/08/henry-ford-never-said-the-fast
thinkling 8y ago
It’s not that the market research was wrong in saying that no one would pay $600 for a phone, it’s that we reached an inflection point where smartphones were no longer primarily phones but became portable internet terminals. Msft should have understood that given the existence of PocketPC devices like the iPaq.
- com2kid 8y ago
  From Microsoft's perspective, they were winning. They had strong YoY gains on Blackberry, and Windows Mobile was set to overtake them eventually. By offering lower cost devices that didn't need to pay an extra per user Blackberry fee to the phone companies, MS was out competing Blackberry on price, while executing on their traditional strategy of having multiple partners flood the market with a variety of devices to fit everyone's needs. (Where everyone was defined as business users.) There were groups at MS experimenting with consumer focused designs, and even exploring app store types of business models (though they hadn't yet evolved into what Apple eventually released), people did realize that opportunity was there, but it is hard for successful incumbents to change. Windows Mobile 7, which never saw the light of day, had just gotten a new kernel, support for higher screen resolution, and was setting out to be a really nice OS to use for business users. Apple also did something else, it showed that the relationship with carriers could be improved. Microsoft had a very hard time getting past carriers testing requirements, they had a very hard time pushing out patches and updates. Apple showed a way by which carriers could be strong armed into being less customer hostile. The same way Apple showed that the music industry could be dragged into the 21st century. Apple also dramatically brought down the cost of certain technologies, as they have continued to do. A single manufacturer making a huge order for one part drops the price of that part for everyone else. The OEM model Microsoft used for Windows Mobile, with the myriads of device form factors, was not able to create those types of market efficiencies.
npunt 8y ago
While phones were routinely 'free' or $99, iPods were wildly popular in 2007 and routinely cost $300+, and one of the three legs the iPhone stood on was being an iPod. It should have been a red flag back then if market researchers and the people that hired them didn't see this as a convergence of music player + phone markets; it was the point of the keynote! I remember people complaining then that they had to carry both their phone and their iPod around back then. The smartphone market was also growing then, and devices like Blackberries and Treos were popular and cost $200+ on contract. I had been using a Treo since 2005, and remember the pain of getting apps on it and getting it to play mp3s or use GPS maps. When I saw the keynote, it was clear it was just the next logical step. It's weird that Windows Mobile didn't see these trends. Perhaps it was a case of underestimating the general market interest, though iPod's success should have been a strong hint that consumers really wanted devices of this type and were willing to pay. iPods were more popular than Windows Mobile devices even then. Finally there's just the 'sit down and use it' factor that the iPhone had. Once you played with it, it was hard to deny that it was the future. The fluidness and straightforwardness of the UI was so far ahead of everything at the time. Best I can think of as a comparison is sitting in a Tesla Model S after getting out of your Honda - it's not a question of if, but how much. At $599 the iPhone was definitely expensive for the time, but any reasonable businessperson could conclude from watching literally the entire history of technology that component prices are always on a steady decline, and there were other levers to lower price like carrier contracts. When the iPhone went down to $399 a few months later it's success was a foregone conclusion - after all, that was just a bit more than an iPod but with way more capability.
- linuxftw 8y ago
  It's easy to forget just how popular ipods were. I think you're right, that is a very important aspect of the original iphone.
  - mercer 8y ago
    let's not forget it was unveiled as a touch-based ipod + web browser + phone!
linuxftw 8y ago
The phones were actually free back then. There was no BYOD discount on any of the major networks. The most I've ever spent on a phone was $200 for a Motorola Razer after damaging my first one before it was upgrade time. Now I use a Moto G4 Play, and it's great. Why anyone would spend more than $200 on a phone unless there is a business requirement (ie, it makes you money) is beyond me.
- mikestew 8y ago
  The phones were actually free back then. No, the price was built into the contract. The few whack jobs that used a phone that they paid for outright got screwed because the model didn't even consider that.
- lagadu 8y ago
  > Why anyone would spend more than $200 on a phone unless there is a business requirement (ie, it makes you money) is beyond me. Are you also surprised that people spend over 50000€/$ on a car? The answer is simple: because it turns out that having nice things is nice.
  - linuxftw 8y ago
    When the difference between the two cars amounts to banal gadgetry of little utility, yes.
h4b4n3r0 8y ago
It was obvious to me right during Jobs’s demo that iPhone would completely destroy everything that came before and take all the profits. And price is much easier to lower than it is to raise, and Apple did lower it about 2 months after releasing.
deleted 8y ago
[deleted]
joeblau 8y ago
Marketing probably correct if you asked that question about the current set of incumbents that were out. Blackberry, Palm, and the rest of the phones with keyboards were not worth $600. I think Marketing's failure was not factoring in the new product category that was being defined. Honest mistake, honest miscalculation, and great quotable from Ballmer.
dalbasal 8y ago
Good lesson about market research. What they really learned is that people don't pay money for a phone. Asked if they would like to, they said "not really." Windows doubled down on the lower price range thing, which was disastrous for both the branding and the development of windows mobile. Everyone associated it with crap phones and they were stuck developing for last year's devices.
- com2kid 8y ago
  > Windows doubled down on the lower price range thing, which was disastrous for both the branding and the development of windows mobile. This is very true. Internally the devices we had to use were very nice. The most responsive phones I've ever used were internal test devices. That and my Motorola Q9H. Amazing device from a different era.
thirdsun 8y ago
When it comes to pricing I'd never rely on what people are saying. They may not like the price, but the only thing that counts is the actual, potentially reluctant vote with their wallet.
koffiezet 8y ago
Well, back in 2003 or 2004 I got myself a pretty damn expensive Sony Ericsson P910i (for €700 or so) in the hopes it would provide functionality that remotely resembled that of an iPhone. It was okish, but disappointing in some areas. I actually bought 3rd party software for it, including GPS software with an external bluetooth GPS module, which worked pretty well. Nokia also had their communicator lineup, which was similarly expensive. While these weren't mainstream, they did exist and sold well enough to warrant multiple generations of them, and were more expensive than the initial iPhone was at release - so I don't understand the people who said nobody would buy that thing. This combined an expensive music player that sold a ton of units with a phone for more or less what you'd pay for a decent higher-end phone + an iPod in those days. The moment I saw it, I knew I'd buy one. The lack of installable 3rd party apps and a GPS unit was something I immediately identified as an issue, but it was clear what direction they would be going in. I eventually had to wait until the 3G was available in Europe - which also addressed both issues (although the GPS receiver was absolute crap).

bosdev 8y ago

Consumers are just as bad at predicting the future as everyone else. Market research is great for making iterative improvements or learning what people are frustrated with, but it's data, not knowledge, and definitely not prognostication.

com2kid 8y ago
This is incredibly true, a huge lesson from the iPhone is that consumers can not tell you what they cannot imagine. Creating entirely new markets takes vision.
- scarface74 8y ago
  They should have learned that lesson from the iPod - “No wireless, less space than a Nomad, Lame”
  - com2kid 8y ago
    Don't forget iTunes. Part of why iPod succeeded because it allowed stress free easy access to a giant % of the world's music, all at one constant price. The iPod wasn't revolutionary in any respect, it was a perfectly executed version of what other people were already doing, that had a huge, incredibly well done, marketing push behind it, with even the smallest detail given attention. Also the white ear buds were genius. Everyone who used them was advertising the product.
    - scarface74 8y ago
      That’s true. It took two years for Apple to sell thier first million. It wasn’t until both the music store came online and iTunes was released for Windows that it took off. But even by 2007, a small percentage of the music people had on iPods were bought through iTunes (less than 10%?) according to Jobs “Thoughts on Music” essay.
  - ryandrake 8y ago
    I guess the conclusion might be: Unimaginative people are bad at predicting the future.
    - Rexxar 8y ago
      Imaginative people are bad too, they predict the wrong version of the future.

jandrese 8y ago

The original iPhone pricing was really baffling. Had it not been a really revolutionary device it would have flopped IMHO. You paid $600 for the phone, and then AT&T added the phone subsidy to your bill anyway (and never took it off), so it was just stupendously expensive. Apple lowered the price pretty soon after launch. It was worth it to have a browser on a phone that wasn't total dogshit.

thirdsun 8y ago
I still remember the early iPhone days when german providers heavily subsidized the device. With a simple 30-50 EUR/month plan you paid about 50 € for the device upfront and that's it. Sure, you might argue that the price might be hidden in the monthly fees, but it would have been the same 30-50 plan regardless of if you opt for the iPhone or your run of the mill Motorola, Nokia or Samsung device. Basically the iPhones were sibsidized by all customers and you'd be a fool to select a cheap phone. Also note that these iPhones were unlocked and ready to be sold on eBay once it was time to upgrade. These days you pay full price stretched over 24 months.

jonahhorowitz 8y ago

There's a Henry Ford quote that's pretty popular at Apple - “If I had asked people what they wanted, they would have said faster horses.”

georgespencer 8y ago
And another I recall, although not sure to whom it is attributed: "If you asked Porsche owners what they'd like to improve in the car, they'd all say more leg room, a bigger trunk, and better safety features. Congratulations, you just designed a Volvo."
- mikestew 8y ago
  Is that really what Porsche owners would say, though? I've owned a couple of Porsches in the past, and if you asked me, my answer would have been "MOAR...POWER. TIRES...MOAR STICKY." If I wanted a Volvo, I'd buy a Volvo. Or maybe I didn't get the joke.
  - tonyedgecombe 8y ago
    I read recently that most BMW owners don't know that their cars are real wheel drive. The enthusiasts are the minority, the majority are the status seekers.
opo 8y ago
That’s one of those quotes that helps start a discussion, but there is no evidence that Henry Ford actually said that quote: https://hbr.org/2011/08/henry-ford-never-said-the-fast https://hbr.org/2011/08/henry-ford-never-said-the-fast

thinkling 8y ago

It’s not that the market research was wrong in saying that no one would pay $600 for a phone, it’s that we reached an inflection point where smartphones were no longer primarily phones but became portable internet terminals. Msft should have understood that given the existence of PocketPC devices like the iPaq.

com2kid 8y ago
From Microsoft's perspective, they were winning. They had strong YoY gains on Blackberry, and Windows Mobile was set to overtake them eventually. By offering lower cost devices that didn't need to pay an extra per user Blackberry fee to the phone companies, MS was out competing Blackberry on price, while executing on their traditional strategy of having multiple partners flood the market with a variety of devices to fit everyone's needs. (Where everyone was defined as business users.) There were groups at MS experimenting with consumer focused designs, and even exploring app store types of business models (though they hadn't yet evolved into what Apple eventually released), people did realize that opportunity was there, but it is hard for successful incumbents to change. Windows Mobile 7, which never saw the light of day, had just gotten a new kernel, support for higher screen resolution, and was setting out to be a really nice OS to use for business users. Apple also did something else, it showed that the relationship with carriers could be improved. Microsoft had a very hard time getting past carriers testing requirements, they had a very hard time pushing out patches and updates. Apple showed a way by which carriers could be strong armed into being less customer hostile. The same way Apple showed that the music industry could be dragged into the 21st century. Apple also dramatically brought down the cost of certain technologies, as they have continued to do. A single manufacturer making a huge order for one part drops the price of that part for everyone else. The OEM model Microsoft used for Windows Mobile, with the myriads of device form factors, was not able to create those types of market efficiencies.

npunt 8y ago

While phones were routinely 'free' or $99, iPods were wildly popular in 2007 and routinely cost $300+, and one of the three legs the iPhone stood on was being an iPod. It should have been a red flag back then if market researchers and the people that hired them didn't see this as a convergence of music player + phone markets; it was the point of the keynote! I remember people complaining then that they had to carry both their phone and their iPod around back then. The smartphone market was also growing then, and devices like Blackberries and Treos were popular and cost $200+ on contract. I had been using a Treo since 2005, and remember the pain of getting apps on it and getting it to play mp3s or use GPS maps. When I saw the keynote, it was clear it was just the next logical step. It's weird that Windows Mobile didn't see these trends. Perhaps it was a case of underestimating the general market interest, though iPod's success should have been a strong hint that consumers really wanted devices of this type and were willing to pay. iPods were more popular than Windows Mobile devices even then. Finally there's just the 'sit down and use it' factor that the iPhone had. Once you played with it, it was hard to deny that it was the future. The fluidness and straightforwardness of the UI was so far ahead of everything at the time. Best I can think of as a comparison is sitting in a Tesla Model S after getting out of your Honda - it's not a question of if, but how much. At $599 the iPhone was definitely expensive for the time, but any reasonable businessperson could conclude from watching literally the entire history of technology that component prices are always on a steady decline, and there were other levers to lower price like carrier contracts. When the iPhone went down to $399 a few months later it's success was a foregone conclusion - after all, that was just a bit more than an iPod but with way more capability.

linuxftw 8y ago
It's easy to forget just how popular ipods were. I think you're right, that is a very important aspect of the original iphone.
- mercer 8y ago
  let's not forget it was unveiled as a touch-based ipod + web browser + phone!

linuxftw 8y ago

The phones were actually free back then. There was no BYOD discount on any of the major networks. The most I've ever spent on a phone was $200 for a Motorola Razer after damaging my first one before it was upgrade time. Now I use a Moto G4 Play, and it's great. Why anyone would spend more than $200 on a phone unless there is a business requirement (ie, it makes you money) is beyond me.

mikestew 8y ago
The phones were actually free back then. No, the price was built into the contract. The few whack jobs that used a phone that they paid for outright got screwed because the model didn't even consider that.
lagadu 8y ago
> Why anyone would spend more than $200 on a phone unless there is a business requirement (ie, it makes you money) is beyond me. Are you also surprised that people spend over 50000€/$ on a car? The answer is simple: because it turns out that having nice things is nice.
- linuxftw 8y ago
  When the difference between the two cars amounts to banal gadgetry of little utility, yes.

h4b4n3r0 8y ago

It was obvious to me right during Jobs’s demo that iPhone would completely destroy everything that came before and take all the profits. And price is much easier to lower than it is to raise, and Apple did lower it about 2 months after releasing.

deleted 8y ago

[deleted]

joeblau 8y ago

Marketing probably correct if you asked that question about the current set of incumbents that were out. Blackberry, Palm, and the rest of the phones with keyboards were not worth $600. I think Marketing's failure was not factoring in the new product category that was being defined. Honest mistake, honest miscalculation, and great quotable from Ballmer.

dalbasal 8y ago

Good lesson about market research. What they really learned is that people don't pay money for a phone. Asked if they would like to, they said "not really." Windows doubled down on the lower price range thing, which was disastrous for both the branding and the development of windows mobile. Everyone associated it with crap phones and they were stuck developing for last year's devices.

com2kid 8y ago
> Windows doubled down on the lower price range thing, which was disastrous for both the branding and the development of windows mobile. This is very true. Internally the devices we had to use were very nice. The most responsive phones I've ever used were internal test devices. That and my Motorola Q9H. Amazing device from a different era.

thirdsun 8y ago

When it comes to pricing I'd never rely on what people are saying. They may not like the price, but the only thing that counts is the actual, potentially reluctant vote with their wallet.

koffiezet 8y ago

Well, back in 2003 or 2004 I got myself a pretty damn expensive Sony Ericsson P910i (for €700 or so) in the hopes it would provide functionality that remotely resembled that of an iPhone. It was okish, but disappointing in some areas. I actually bought 3rd party software for it, including GPS software with an external bluetooth GPS module, which worked pretty well. Nokia also had their communicator lineup, which was similarly expensive. While these weren't mainstream, they did exist and sold well enough to warrant multiple generations of them, and were more expensive than the initial iPhone was at release - so I don't understand the people who said nobody would buy that thing. This combined an expensive music player that sold a ton of units with a phone for more or less what you'd pay for a decent higher-end phone + an iPod in those days. The moment I saw it, I knew I'd buy one. The lack of installable 3rd party apps and a GPS unit was something I immediately identified as an issue, but it was clear what direction they would be going in. I eventually had to wait until the 3G was available in Europe - which also addressed both issues (although the GPS receiver was absolute crap).