Apple Chose Customer Experience Over Verizon for iPhone

I wrote last week about the challenge that retailers face when sharing a customer relationship with manufacturers. This morning’s USA Today reports that Apple—one of the most brand-savvy companies around—rejected an iPhone alliance with Verizon Wireless over this very issue. ( “Verizon rejected Apple iPhone deal”, USA Today, January 28, 2007, available
here.)

According to the article, Apple was unwilling to allow the iPhone at Verizon’s usual retail partners, such as Wal-Mart and Best Buy. In addition, “Customer care was another hitch: If an iPhone went haywire, Apple wanted sole discretion over whether to replace or repair the phone. ‘They would have been stepping in between us and our customers to the point where we would have almost had to take a back seat … on hardware and service support,’ [Verizon Wireless vice president Jim] Gerace says.”

It’s no surprise that a firm as obsessed with customer experience as Apple would want close control over how iPhone customers were treated. Still, it’s impressive that both Apple and Verizon would feel strongly enough to reject a major distribution deal over the issue.

Apple’s decision to open its own retail outlets shows the same dedication. (See this article at ifoAppleStore.com for a detailed history of Apple’s retail efforts.) Most personal computer manufacturers have avoided owning stores, particularly since Gateway Computer’s high-profile retail failure in 2004. Dell announced a limited retail trial in 2006, perhaps more a sign of desperation than anything else.

Only the strongest manufacturing brands can afford their own retail outlets. The very uniqueness of Apple’s product makes it easier to limit retail distribution without losing sales to competitors. The universal availability of products via the Internet also minimizes the negative impact of limited physical distribution. (If I can’t make it to an Apple Store, I can still buy the product on line.) Assuming that Apple does a good job servicing its on-line buyers, it can actually deliver a better and more controlled experience remotely than by relying on other companies’ employees to deliver it in person.

The real question is what manufacturers who cannot afford their own stores can do to improve the brand experience of customers who buy through third-party retailers. This is where product design and packaging become so important, to communicate to the customer that the manufacturer is ready and eager to help with any product questions or problems. Old-fashioned brand-building advertising also plays a major role in convincing consumers that the manufacturer really cares. Naturally this must be backed up by quality customer service when customers do call. For manufacturers that are unable or unwilling to deliver a quality experience, hiding behind the retailer’s brand may actually be a better approach.