Apple’s iPhone as “razors and blades” marketing
David Berlind looks into the iPhone as an example of a “razors and blades” marketing approach by Apple. His conclusion is that the stable “razor” component will be iTunes content and similar material of 
high personal value (in Apple formats) that Apple can enable via the iPhone. The replaceable “blades” component will be the iPhone itself. (Like the iPod, and unlike standard cell phones, the iPhone does not have a replaceable battery.)
With expected price drops, iPhone models will eventually be priced in the iPod range. So, you simply keep your Apple-induced “content” that you can’t live without, and pick up a new iPhone every other year. The hardware sustains the customer that Apple creates with its easy-to-use software innovations such as iTunes and the iLife suite.
Designing the customer to make this work
For this razor and blades model to work, Apple will need to pack the iPhone with finely-honed, customer-focused capabilities. This means designing a customer who will demand no less.
January 25th, 2007 at 11:33 am
This will require quite a bit to change. People, to first order, don’t use iTMS for music for their iPods … further the margins for music at Apple are in the 0-2% range … quite a bit below the 20-30% on iPods (by many accounts) and possibly much more than that on early iPhones.
If people use these are primary music devices (which is by no means certain) it may be that the stable piece is the content, but that is likely to come from sources other than iTMS (CDs, pirated, etc) … a few phones already play cleartext aac (eg … the default rip of a CD on iTunes) .. they have a terrible interface, but allow content most people (even though using iTunes) are building.
January 27th, 2007 at 8:58 am
You make a very good point. With limited storage, iPhones are not going to take the place of a 30g or 60g iPod any time soon. One could, though, use iTunes as the organizing principle for keepling a set of “mobile hits” on the iPhone. But, if music will play only a limited role as “content,” what will be the major personal context elements that will bind customers to the device (in addition to coolness and being a decent phone.) That would seem to depend on the “iLife” type elements that Apple can squeeze in (like photos), and associated apps (like maps, etc.)
At this point, it seems that the design life of an iPhone is about the same as a 2-year contract. This would mean that Apple has a two-year time frame to get users to put loads of “essential” content on their iPhones so they won’t switch to a Samsung the next time around. It also means that Apple will need to continue to add features to the iPhone OS and apps as a differentiator. Personally, I want the iPhone to be able to link to a digital projector, so you can use it to deliver (Keynote) presentations, with speaker notes and slides in the palm of your hand.
January 29th, 2007 at 8:35 pm
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