I read an article on The Unofficial Apple Weblog a few days ago that presented a really interesting argument: Apple could be planning on letting the iPhone 5 replace the iPod touch, discontinuing the latter. I won’t repeat the whole argument (you should go read it for yourself), but here are what I consider the big points supporting it:

1. Apple didn’t release a new iPhone in June, like they have for the past 4 years. Instead, all rumors point to release in September, a month which is traditionally reserved for a refresh to the iPod lineup. I have a hard time believing that Apple would deviate from their year-long cycle without a good reason.
2. Apple just started selling unlocked iPhones in the US. For the normal people among you, this means you can purchase an iPhone and have your choice of carriers, so long as that carrier uses GSM technology for their network. In the US, that means AT&T (and T-Mobile, but you’ll need to do a little more finagling for that). I wouldn’t be surprised if we saw an unlocked CDMA version (Verizon/Sprint) in the near future or, more likely, a dual-band iPhone that works on any network.
3. Apple is ruthless when it comes to simplifying operations. Removing the iPod touch from the production line allows them to use the additional capacity for more iPhones, which has always been a need. This is also supports a dual-band iPhone. Three models (iPod touch, GSM/CDMA iPhones) reduced to one model. Now that sounds Apple-like.
4. iOS 5, which was unveiled in June and due for release in the fall, contains no mention of new iPod touch hardware. Furthermore, the “iPod” app on the iPhone, which has previously been the way iPhone users access music and videos, has been broken into separate “Music” and “Video” apps, which is how it has always been on the iPod touch.
5. The market share gains could be huge. A move to a cheap iPhone or an iPod touch that transforms into an iPhone with a few taps (which is probably how it would work) would let them garner much bigger market share, very quickly. With the added network effect of iMessage (think BBM for all Apple devices) when it debuts this fall, Apple is well-positioned to shake up market share numbers big time.

There are plenty of smaller points, most of which get mentioned in the original article, but I believe those are the most powerful motivations for Apple to make this change. Regarding counter-arguments, there’s really only one that concerns me:

1. This goes against the business model Apple has used successfully for the past four years with the iPhone. The company has regularly disregarded market share numbers, preferring to focus on profit, and the results have been astounding. Reports show that Apple has 4.9% of the worldwide handset market - and 50% of the profits. AT&T and Verizon pay an exorbitant amount to Apple for each iPhone bought on contract, resulting in a profit margin that could be as high as 50-60%. I wouldn’t care about market share either with that profit margin. Why change that strategy? (Note: selling price and manufacturing cost factor in big here, but I can’t cover it any better than they did in the article, so go read it)

So Apple may not do this, but it’s fun to speculate. Let’s assume they do. What does it mean for you and me?

Most people have two sets of needs that until recently had to be served by two devices: one set being making calls, logging contacts, and texting, and the other being listening to music and other downloadable media. Recently, it’s gotten to the point where both of those needs can be served by your cell phone. If they aren’t, you probably fall into one of two camps. For those in Camp A, their cell phone doesn’t have the ability to play back media (i.e. a flip phone), or else the interface and experience for doing so is terrible (i.e. Blackberries). As a result, these people tend to carry around their cell phone all the time and their media device (iPod for 75% of them) only when they know they’ll need it. Camp B owns an iPod because everyone owns an iPod, even though they have a cell phone that’s perfectly capable of serving the same purposes (or maybe they have a legitimate reason, like they want access to the App Store). It would be interesting to see a statistic of how many iPhone users use it as their primary media device vs. how many Android users use their phone for music and video. I’ll bet the second number is far lower.

If the iPod Touch ceased to exist, and the price of a contract-free iPhone was dropped to $299/$399, you’d suddenly have a ton of freedom as a consumer. Have a smartphone but need an iPod? Buy an iPhone. It’ll cost you as much as an iPod, and when your contract is up on your cell phone, you can just activate your iPhone directly from the device. Have an iPod but ready for a new cell phone? Buy an iPhone and sell your iPod. You can be in Camp A, Camp B, or anything other camp - buy an iPhone, and it will meet your needs sooner or later.

An unlocked iPhone today costs $650. As an average consumer, you only pay a fraction of that because AT&T/Verizon subsidize the price for you, in return for you signing a two-year contract. Let’s assume they keep doing that after Apple drops the price (which they will). Don’t have a cell phone? How about an iPhone 5 for $50? How about an iPhone 5 for free? We’d be one small price war between carriers from that happening.

So if you’re in the market for either device (media player or cell phone), wait and see what Apple announces in September. It just be an iPhone 4 with a few changes, and a new iPod touch. Or you could end up with a device that offers an unprecedented level of power and flexibility.

What do you think? Would Apple do this? Would you buy one? Why or why not? Leave a comment below!

As part of a group project for one of my classes this semester, I and the rest of my team had to come up with a new product for a company of our choice. We selected Amazon. We started out thinking that we’d do something like a set-top box. Our brainstorming produced a product that looked a lot like Boxee on paper. Then Amazon unleashed a ton of new services in a two-month period, completely invalidating most of our brainstorming. The Amazon Appstore for Android, streaming video for Prime subscribers, and Cloud Drive and Cloud Player forced us to take another look at the project, and what we came up with this time was wildly different. Our proposal for Amazon’s new product is two-fold: a revamp of Amazon’s Prime service, and an Amazon-branded, Samsung-made Android tablet. Below is a slightly-edited copy of our initial proposal, though I’m sure some readers will quickly find the places where we have holes.

Amazon Prime

At the moment, Amazon Prime members pay $80 for two benefits: 1) free two-day shipping on almost anything purchased from Amazon, and 2) the ability to stream Amazon’s collection of movies and TV shows to any capable device (including computers, some set top boxes, and some Blu-Ray players). In addition, Amazon launched two new services called Cloud Drive and Cloud Player that allow customers to store media on Amazon’s servers and stream them using a web-based player or an Android player. Our proposed revamp of the Amazon Prime service would combine all of these offerings, while adding a music streaming service in the same vein as Rhapsody or Spotify.

The new Amazon Prime has three components. A customer may subscribe to one, two, or all three. The second service comes at 5% off and the third service comes at 10% off.

Prime Shipping – Exactly the same as the current incarnation of Amazon Prime, but with a cost increased to $100/year. The increased price will help Amazon retain higher profit margins. Existing subscribers will be grandfathered in at the $80/year price, but must move to the $100/year price if they want to add either of the other two new services.

Prime Media – A streaming service combining the television and movie streaming offered by companies like Netflix with the music streaming offered by companies like Spotify, Rdio, or Rhapsody. The price of $15/month was determined by adding the $5/month price of Rdio to the $8/month price of Netflix’s streaming-only plan. No media would ever be downloaded and stored on a device’s internal storage; it would simply allow for streaming from Amazon’s servers, requiring that an internet connection be maintained to use the service. The user would have complete control over which tracks were played.

Prime Cloud – This would continue to be offered in its current form, rebranded under the Prime service, with one important distinction: music, movies, and TV shows purchased in digital form from Amazon.com would not count toward a customer’s Cloud drive usage. This would encourage users to get their media from Amazon rather than from other sources, increasing revenue.

The services would be offered to any customer, but to help spur adoption, we propose the creation of an Amazon tablet, which would tie in well with the new Amazon Prime and other Amazon offerings.

Amazon Portal

Amazon’s tablet, dubbed the Amazon Portal (name is up for debate… we’re also considering Amazon Stream), would serve as a gateway to the customer’s media, files, apps, and social networks. Using the Android OS with Amazon’s Appstore and Kindle services both preinstalled, the device already rivals the functionality of most competing tablets. Adding the storage and content provided by Prime Media and Prime Cloud, the Amazon Portal becomes an instant heavyweight in the tablet market. The target selling price for the Amazon Portal would be $500, to compete with the Apple iPad. Since Amazon does not have the manufacturing power to create such a device, it would need to outsource the hardware to another company. We believe that Samsung is the best partner for this due to its incredible manufacturing capacity and experience in creating tablets. 

Specifications

The Amazon Portal would maintain the majority of the internal components of the iPad, including the 10-inch screen, while adding an SD card reader. There would be 16GB of internal storage on every Portal, and any additional storage would have to be added by the customer via SD card. Limiting internal storage to 16GB would encourage customer to store their media, which takes up most of the storage space, using Amazon Prime. Alternatively, customers could forgo storing media completely and instead opt to subscribe for Amazon Prime’s Media component, eliminating the need for significant internal storage. The device would be offered with an optional 3G antenna. Subscription plans for 3G services would need to be negotiated with AT&T and/or Verizon, but should remain competitive with iPad pricing.

Pricing

A 32GB WiFi-only iPad 2 reportedly costs approximately $330 in materials, and most of the same components would be used in the Amazon Portal. Even after adjusting the price to account for an SD card reader and smaller internal storage, we believe that the approximate cost of materials would remain near $330. After adding an estimated 20% markup that Amazon would pay to Samsung for manufacturing the device, Amazon is left with approximately $100 per tablet to cover soft costs such as labor, shipping, marketing, etc. We believe that Amazon should sell the Portal without a profit margin, settling instead for a powerful market and customer base for the company’s other services.

It is important to note that the focus of our two proposals is on turning Amazon into a Software-as-a-Service platform for any Android tablet, not specifically on creating an Amazon tablet. A large percentage of the SaaS side of Apple’s iPad is duplicated by Amazon service. The Amazon Appstore allows Amazon to curate Android apps that provide the best value to customers, just as Apple’s App Store does. Amazon’s Kindle service is platform-agnostic, unlike Apple’s iBooks. The iTunes Store is rivaled by Amazon’s immense and ever-expanding library of digital content. Tying these services together in one device provides a compelling value proposition, and allows Amazon to reap greater profits.

To understand my philosophy of customer service, you first need to grasp a concept: I have a philosophy of customer service. Why do I have a philosophy of customer service? Because everyone who has ever worked in a support role does, whether they realize it or not, and particularly if they’re in technical support. In the course of doing the job, employees develop certain mannerisms and habits that slowly become the template for helping customer after customer. I worked for three years in a university walk-in help desk, alongside dozens of other students. Each of us had our own methods, mannerisms, go-to solutions, and lines that helped customers in different ways. Each of those routine tools is evidence of an approach to a service job that is unique for every person.

The philosophy I’ve developed comes from years of helping students, friends, family, colleagues, and complete strangers with technical problems. Each time I serve a customer, I try to provide the best service that customer has ever received, from any service, ever. Here a few of the rules I work by:

1) Understanding the problem is just as important for the customer as understanding the solution. When something goes wrong with a piece of technology, it’s frustrating. People start putting blame everywhere. It was the OS. It was the application. It was the hardware. It was you. If you teach the customer about the problem, it ensures two things. First, they put the blame in the right place. Second, they gain a little bit of understanding about the product or service, which generally works out better for the company. Customers tend to gravitate toward products that they understand, and they tend to break well-understood products less frequently.

2) Understanding the customer is just as important as understanding the problem. Technology is only as good as how it gets used, and every person uses technology in a slightly different way. Understand what your customer is trying to do, and you can offer up a number of solutions that benefit the customer far more than a quick fix. Few people use the whole feature set of a given product or service, and figuring out which ones a particular customer uses the most can lead to great service opportunities.

3) Go the extra mile. I was going say “deliver what you promise, when you promise it” for this rule, but that’s just not good enough. Meeting expectations is a minimum, and doing the minimum isn’t part of my philosophy. You should do everything in your power to help the customer. Rules about what you can and can’t do for a customer exist for a good reason, but it’s sometimes very important to stop and think about bending them. If it’s a minor inconvenience to you to remove a minor inconvenience for the customer, do it. Manage your customers’ expectations, and be realistic about them, but don’t give yourself a gigantic margin for error. The old adage “under-promise, over-deliver” is a good place to start, but great service is promising realistically and still managing to over-deliver.

4) Be human. People far prefer interacting with human beings to interacting with machines, so don’t act like one. People can tell when you’re reading from a script, or saying something you’ve said 10 times a day for two years. Your voice is your greatest asset in making every customer feel like they’re receiving personalized service. Watch your tone and your inflection, be kind and not condescending, and use their name. If you make a mistake, apologize and fix it. It’s easy for a company of any size to seem impersonal. People don’t connect with companies; they connect with people. Make that connection, and you and your organization will reap the benefits.

5) It’s not just customer service, it’s customer experience. You are one part of a much larger effort to provide a compelling experience for customers. Keep that in mind, and utilize your communication window with the customer to see if there is anything you can do to improve their overall experience or the experience of future customers.

6) You represent your whole organization. Never forget that. Direct interaction with a customer happens at just a few touchpoints during his or her entire relationship with the company, so it’s critical that each interaction is exceptional. A customer losing faith in the company leads to them losing faith in the product, which hurts the bottom line. In my work at my university’s walk-in help desk, I was always aware that for each customer I helped, I became the face for all the hundreds of people within the IT department. My success earned a customer’s faith in those people, and my failure lost it. For you, it’s call after call after call. For a customer, this may be the one and only time they ever reach out for service. Make their experience spectacular.