Thursday, November 30, 2006

Mistake or Plan?

Over at Forbes, there's an article on the launch of Microsoft's Zune launch that asks whether Microsoft has forgotten in key group of people in the hyped launch of their new MP3 player: the people selling them in stores:

More alarming are some of the responses when [Piper Jaffrey analyst Gene] Munster's team asked salespeople about the Zune. "I've never heard of the Zune," one clerk said. "Who makes that (the Zune)?" asked another. Other clerks promoted some of Zune's features that Apple's iPod lacks. "The Zune is the same price as the iPod, but it has Wi-Fi and a built-in FM tuner," said one salesperson. "I love it; I have it and I love it," another said.

But is it selling? The Zune has fallen on online retailer's top sales rankings. On Nov. 16, the black Zune was the No. 7 best seller in Amazon's MP3 player list, according to Munster. By Nov. 20, it fell to no. 13. Today, it ranks No. 21, behind devices from Apple, Creative and SanDisk; the top five selling devices are all iPods.

Retail salespeople are a critical group when a main distribution channel for a product is the store shelf.

A company I worked for learned this the hard way; one of the products (from a division that I didn't work for) was a "smart phone." It was a telephone with a 4 or 6 line display and a little keyboard; you could use it get stock quotes, weather forecasts, horoscopes, or even send email. (Before you say, "Why would anybody want that?" note that this was when most homes didn't have any kind of Internet connection. It wasn't a terrible idea, just one that quickly became terrible as net access became common.)

The CEO often talked about one of the great marketing successes for the phone: it was available for sale in one of the office superstores. Unfortunately, nobody bothered to tell the people who worked in that store what it was. It was just the phone that cost three times as much as any other phone.

One day I was in one of those stores, and I went and found it on the shelf. It was sitting at the end of a display, not plugged in. I asked a salesman what it was. He had no idea.

That said, I'm not sure this is really a mistake on Microsoft's part. While the Zune appears to be a pretty good product, it lacks the cachet of the iPod, and Microsoft knows that. Promoting it to heavily to the folks who help customers at Best Buy and Circuit City would probably force them to evaluate it as an iPod substitute; and they'd probably find it lacking and pass that opinion on the customers.

I have a feeling Microsoft is content to let the buzz about Zune grow at the consumer level and allow sales to grow slowly - while they prepare newer models that will probably be a lot more interesting.

The last thing they need is Zune getting pegged early as a poor substitute for an iPod. I have a feeling that the decision to not push too hard at the channel level is intentional. Because ultimately, Microsoft is just not clueless enough to forget a major distribution channel.

Besides - they can afford to lose money on Zune for years. They've got lots of other revenue coming in. Apple, on the other hand, was saved from disaster by the iPod, and if its sales are eroded, they've got a problem. This is one competition where slow and steady probably wins the race.

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