Why AT&T’s IPhone 3G Launch Failed.

Like everyone else who is afflicted with gadget fever, I rushed out to buy an iPhone 3G on the friday release date. I spoke with an apple store friend and was told there were plenty of phones in stock, but I took a brief swing around a nearby AT&T wireless store on my way to the Apple store. While fulling expecting the AT&T store to be out of stock, it doesn’t hurt to ask of course. My 2 minutes spent with the AT&T sales rep left me absolutely flummoxed.

Apple Store in Palo Alto, CA

Apple Store in Palo Alto, CA

(photo courtesy of Elliot Ng)

A little context first, as there’s something to be learned from this. You’ve no doubt looked up at the header and noticed “Sales 2.0” at the top there. It’s not just a cute phrase. To me, Sales 2.0 is sales and business development as it exists today in a world of network effects. For those new to this, Web 2.0 is all about network effects: when you upload a picture to Flickr, you’re not only creating a value by sharing pictures with your friends, you’re indirectly creating value (network value) for Flickr, whose repository of pictures and associated metadata (tags) is now larger (and thus more valuable). The full story of how Tim O’Reilly and others started this is beyond the scope of this post and even this blog, but you can read all about it if you like.

The point here is that in a network effects world, crowdsourcing becomes your primary sales lead generator. This is just common sense – most people making a big ticket purchase scour the web to take the collective temperature of existing owners.I’d go so far as to say that if you work for a sales VP who believes in buying lists and cold calling, then you need to find a new job.

So when blogger Chris Pirillo tells anyone reading that he feels stupid for trusting AT&T wireless sales reps, the network effects immediately and permanently act against AT&T’s sales success. Which brings me back to why I was flummoxed when I spoke to the AT&T wireless sales troglodyte yesterday. Here’s an impressionistic transcript of my exchange with an AT&T sales troglodyte:

Me: “Hi, I’m here for the same reason everyone else is.. are you out of stock?”

Troglodyte: “Yes we are…”

Me: “Ok thanks, bye.”

Troglodyte: “Wait! By now every store in town is likely sold out completely. We’re are already taking orders for the remaining shipments, and we’ll reserve those for folks who sign up. If you don’t sign up, I’m afraid it may be a month or more before you get one, as even the manufacturers are depleted at this point. Trust me, there’s no faster way to go.”

Me (incredulously): “Umm.. I’ll go to the Apple store, thanks.”

This is laughably transparent self-interest on his part, and has generated sales-stalling network effects for AT&T. Sure enough I picked up a phone from the Apple store, who had plenty in stock. So guess where I’m taking my wife when she’s ready to switch to an iPhone?

Now I submit this is what should have happened:

Me: “Hi, I’m here for the same reason everyone else is.. are you out of stock?”

AT&T guy: “Yes we are…”

Me: “Ok thanks, bye.”

AT&T guy: “By the way, you might get lucky with the Apple store up the road. Check with them or with Apple’s availability website if you’d like.  Their lines may be long, however. If you would prefer to not wait in line for hours, I’ll personally order one for you and get it to you instead as soon as possible. Here’s my number in case you strike out over there.”

Now granted Apple probably sent AT&T smaller shipments, and their running out couldn’t have been avoided. However, the point here is not availability but relationship management. Had AT&T sales management trained its staff to be sensitive to the network effects of linked customers, the result would have been trust gained, possibly a relationship developed. They’re not dealing with isolated consumers here. They’re dealing with a smart mob.

Are you listening AT&T?

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This entry was published on July 12, 2008 at 4:26 PM. It’s filed under Uncategorized and tagged , , . Bookmark the permalink. Follow any comments here with the RSS feed for this post.

32 thoughts on “Why AT&T’s IPhone 3G Launch Failed.

  1. I’m so incredibly disappointed. To know that it’s happening in more than one place means that it was a mandate handed down from on high.

    For shame, AT&T.

  2. Shame on you, AT&T!
    They really are dealing with a smart mob way not caring of what the subscribers think in future about it..

  3. walter on said:

    They did the same thing last year. Even worse, they allowed people to stand in line for hours, long after it was obvious they didn’t javevneaely enough supply. On top of that their staff acted jaded about the iPhone excitement and repeatedly joked I’m front of customers that they thought the iPhone was inferior and overpriced. Like you I learned never to visit an ATT store again. A year layer, I still tell this store to everyone that asks for phone-buying tips.

  4. Rodney on said:

    Just go get yourself a nice Treo and get over it. iPhones are really not all that great anyways.

  5. Don’t succumb to the US mentality of “I gotta have it now” and you won’t be dissapointed…

    An old bull and a young bull were standing atop the hill looking at all the cows in the valley below when the young bull, full of vigor to get his game on said…”c’mon, lets run down to the valley and mate with two of those cows”…the old bull in his patience and wisdom replied “no boy, let’s take our time and walk, then we can mate with them all…”

    LOL…get it boys? Don’t be in such a hurry to have the latest and greatest…don’t fall prey to the marketing hype…I have a blackberry and can do all the things an iphone can do..besides listen to my DMR music from itunes…that is… at a far lesser price… Oh..and yes..I have an iPod, and IMac..and love them both…I’m just patient enough to wait…try it sometimes…it’s kinda liberating…

    have a latte’ and give it some thought…’k?

  6. I’m really sorry that happened to both you and Chris. I know my parents went into the AT&T store by our home about an hour after it opened and they were already sold out… I know this isn’t much consultation, but by the time they are more readily available, Apple/AT&T should have all these activation bugs out of the way… Hope you can find one soon!

  7. podcastips on said:

    I think the same thing. I am very dissapointed in at&t and think that this should be taken more seriously by the owners.

    Visit my site for podcast tips. podcastips.wordpress.com

  8. applesux on said:

    you’re a moron, apple is the one that sets the stock limits per store, not at&t so it is apple’s fault your local at&t store didn’t have the quantity to secure for you. and, the activation process, yeah that was apple’s problem too, the itunes server was uploaded, this not only affected at&t’s ability to activate the phone but if you took it home you still couldn’t activate and if you had an old iphone and wanted to get that days’ update, you couldn’t do that either, as a matter of fact i still can’t get just an ipod update without an itunes time out due to system overload. hey chris are you listening, it was apple that dupped everyone into taking the 2g at the crazy high price even after at&t offered to subsidize like they are on this model, hence the only reason this is as cheep as it is, not because your beloved apple decided to drop the price to be cheeper for you.

  9. Applesux, I’m not sure that the poster is bashing AT&T for the fact that they didn’t have enough supply on hand to meet the iPhone 3G demand – rather, the way they handled the opportunity to make future sales and leave a lasting positive impression for the customer (who could potentially be a future customer, but likely now won’t because of the piss-poor way they handled the sell out yesterday).

    By the way, I too was stuck with the network time out boo-boo on my 2g iPhone yesterday and read a helpful tip on the Apple discussion boards and was able to restore and unbrick my phone pretty quickly after that. (But to be honest, I’m not really sure what I was thinking downloading the update the day of the launch anyway – that wasn’t a genius move on my part. I *knew* there would be demand!!!).

  10. jennylu on said:

    Hi Eric,
    I’m a teacher from Australia and came across your post from the wordpress page. It’s this kind of approach to working in the business world that I think we need to be teaching our kids about in schools today. We need to be leveraging these Web 2.0 tools and way of thinking in our classrooms so that students move into the world of work prepared for the new ways of the world.
    Jenny Luca.

  11. Seriously? The 3G launch FAILED because a self-interested AT&T employee didn’t suggest for you to go to Apple. What a worthless article. I thought this would be an article about the pre-release of 2.0, which was a little faulty, but more of the blame would lie on anxious fanboys than Apple or AT&T even there.

    Honestly, I thought the launch went incredibly

  12. anocelot4u on said:

    How smart can this mob be? Sprint has had 3G for over a year and is working toward 4 G – Sells several devices that put the iPhone to shame. AT&T is dealing with self-serving zealots.

  13. Eric,

    Great post. The sort of customer service you suggest to AT&T is very much the direction all retailers should be moving.

    This sort of thing has been happening in libraries for years. If we don’t have a book, CD, DVD, or other item in our collection we always offer to get the item from a library that does have it. If someone needs it immediately we always suggest other places to get it. While we’re non-profit and AT&T is surely not, the concept of using a network for the benefit of the customer leads to a feeling that we are there to help and to be a hub in the future for their printed and digital media needs.

    Profitable businesses should learn from this model of customer service.

    -Zach Underwood

  14. fictionalart on said:

    I like your viewpoint on sales approach.

    I got stuck on “smart mob” though.

    How smart could they be running all over town buying iphones?

  15. Chris P – Exactly. As one of my colleagues put it, “it’s standard operating procedure”. SOP doesn’t apply here when you’re dealing with networked people. Funny that a communications company of all things doesn’t realize this.

    I’m sorry you felt pushed into it. Any chance you can cancel and get a phone from Apple?

  16. Cory, My thinking here is that the launch didn’t fail as much as AT&T’s launch specifically failed. They failed to win the goodwill of their customers by trying to herd them. While it may grab a few buyers today, those buyers are not likely to return in the future.

    They simply assume their customers don’t know any better. In a networked world however, word travels fast.

  17. Zach, Jenny, Kyle, Barry, and others – thanks for joining the discussion!

    Fictionalert – the individual nodes may be “irrational”, I maybe am! But the collective is smarter than the individuals that make it up.

  18. We here at AT&T see value in customers. And if their money doesn’t go from wallet to AT&T official store representivive on the AT&T official store payroll then we see that customer as void and send hitmen to kill him/her. In other words “No” we are not listening and don’t need someone smarter than us giving us friendly advice.

    – ME TALKING NOW –
    Great post, yea it will be a bit for companies to get a hold of themselves and accept a new field of marketing, but at least someone is thinking!

  19. Shame on AT&T for this behaviour but a bigger shame on Apple for climbing in bed with these scumbags and giving them exclusive service rights.

  20. alexliew on said:

    Well this is how business works. No one gives a damn about you and you don’t give a damn about them too. But i still love iphone ! Unique, elegant , and at the same time, looks cool!

  21. nowadays everyone are after money and profits. who cares? anyways its the modern era and people are tryin to update themselves with cool gadgets so that they are not left behind! iphones are cool gadgets and i can’t wait to own one. wonder when it’ll be available in my country!
    cheers dude!

  22. Pingback: Why AT&T’s IPhone 3G Launch Failed. | MashTopic

  23. Pingback: Why AT&T’s IPhone 3G Launch Failed. | All Your Latest News

  24. drkshadow17 on said:

    all everyone wants is MONEY!!!! Even in my State peoples bought the new iPhone and were disappointed by it. They’re saying its not working as great as they hoped it would. But what can you expect???? Apple is a great company in my words. But thats just my opinion

  25. AT&T is very interested in network efforts — as they apply to Congress. I’m confident they don’t give a f**k about CRM, or even customers really. I will use a carrier pigeon before I buy an iPhone as long as the gadget is tied to Big Brother and his newly immunized corporate submissives.

  26. Number of early adopters = 3G failure.

  27. Darren on said:

    Just wanted to add that at my AT&T store they didn’t tell anyone that the phones were out of stock until you were at the counter. I got to the counter and asked for the 16gb black… she said that they ran out but they will put me down for direct fulfillment. The entire time people are talking about just going to the apple store, and the Operations Manager of AT&T for my area just said that the lines would be out of control and there would be no point to even try.

    They were slamming apple pretty good about how bad the store was and the service was.

    I kind of was mad when they didn’t tell us that they ran out and let us all continue to stand in line… If I would of known, I would of went to the apple store!

  28. the order line on said:

    I debated on whether to track down, past work, to the apple store vs around the corner to my local AT&T store.
    BAD MOVE !! When I got there it was about 7:45am and the line was about 40-50 deep.
    Well, thinking it’s like everywhere, I stayed. We asked a rep that came out to view the line how many units did they have in stock and was told that “policy wouldnt allow them to say”
    What, I’m in this line 50 deep and if you only have 25 units, let me get outta here and find another. MAKES TOO MUCH SENSE !! Less than ONE hour in, the rep announced that were out of phones. I fell for the order fulfillment line. Waited another hour for that. Went to work 3 hrs later, thinking everyone ordering the phone. EIGHT hours later, decided to track down the street to the Apple store where their line was LONG. I figured ordering. I go up to the attendant at the front and she said, “out of phones ?? no, we’ve been going strong all day.” So, here I am after approx 3 hrs of waiting around and all I have to show for it is a freaking receipt for a phone that “should” be here within a week. Someone needs to wake AT&T up!!!
    While they might be the only U.S. carrier, they competition is going to be fierce when the contract renewal time comes around. I’ve been with AT&T for 10 years, never waited in line for a hour for anything, (never felt it was worth all that. This experience didnt that feeling in the least. Next time, if I get that excited about a product, I’ll just lay down, until the feeling goes away.

  29. Archangel Law on said:

    This is why rushing to get a product the same day is a mistake..

  30. andrew on said:

    I am glad to hear that the 3G launch was less than successful.. I have been waiting for mthe opportunity to purchase one since the announcement of the $199 price. Well, come to find out i had to be on AT&T’s “upgrade” list or i had to pay $399. I had service with AT&T years ago and had to switch to Cingular when AT&T got out of the wireless market. I then switched back to AT&T with the BellSouth buy out. In all I have been with them for around 10 years and have spent on average $120 to $180 per month during that time. I was very mad when I found out that I was unable to qualify for the upgrade because I had used too many off network towers (even though I paid extra for no roaming and no long distance). What an injustice! I could have been a customer from another carrier or a new customer and gotten the $199 price. I will now be searching for a new carrier…as I think AT&T does not care about their loyal customers. I hope the 3G continues to falter as well as AT&T.

  31. Pingback: LK’s pennultimate iPhone rant « The Semi-Daily Grind

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