iPredict

I passed by a computer store today that also sells smart mobile phones. There was a line outside of about 20 people trying to get in to buy the latest version of the phone. Each potential customer was attended on hand and foot by a salesperson. Only when one salesperson was free would another potential customer be let inside.

Obviously people demanded their latest mobile smart phone but the company was smart in limiting supply by only allowing a few people in the stores at a time. This had the effect of seeming to create even more demand. Every person who walked by the store could not help but wonder what was going on. It brought attention to the store & the product. Very smart way of marketing, by creating artificial demand.

Unfortunately, I think in the long run it will hurt the company. Making people along the street go around the line caused ill will among those of us just walking by. In addition, later this year, at least three other firms will enter the smart mobile phone space. Pushing down price and expanding into the mass market. This firm will see margins compress and its market share decline dramatically. They have gone through cycles like this before. Developing new & innovative products which they can sell at high prices with a lot of support. And then, over time, once they have braved the new trail, seeing competitors steal their thunder. Not a bad business model but also not sustainable over time. What happens if they cannot think of the next greatest thing? Then they will be stuck competing in a very competitive commodity business with high fixed costs.