That is the amount that AT&T will put behind their launch of the Nokia Lumia 900. Most of us don’t get to spend $160 million on media over our entire careers, so it might be better to put it in perspective. AT&T spent $450 million on wireless advertising in Q1 2011 according to Kantar Media (www.kantarmedia.com). If their media budget stays the same in 2012 and we assume the $160 million would be spent over 6 months, it would represent almost 20% of all wireless advertising. Over 3 months it would be 36% of the entire budget. Would you put this much “wood behind the arrow” for a wireless phone that has a one-year life if you were AT&T?
Before we address that question directly, let’s first put some things in context.
The Key Issue in High Technology Branding
There are many differences between most fast-moving consumer packed goods (FMPG) and slow-moving high technology consumer goods (SMTG), but a key one is the almost immediate obsolescence of high technology purchases. As soon as you buy a _____ (insert any name here), there will be another version, or another competitive product with “better” specs. This is true for hardware and software alike and, as a marketer, you have to utilize your budgets carefully. Additionally, FMPG products do not mess with their “formulas” without careful and extensive research. Even then, things can backfire (New Coke). In contrast high technology products must frequently change, add features and evolve, or they will die.
There are three core approaches to branding products discussed below: House of Brands, Branded House and Branded House of Brands.
House of Brands
In FMPG markets is it very common to build a product brand. It is feasible to do so because the product costs are low, the margins are high (enabling large advertising and promotion budgets) and the purchase rate is frequent. Examples abound: Tide, Betty Crocker, Doritos, etc. Most consumers don’t know the companies behind those brands: P&G (Tide), General Mills (Betty Crocker), Doritos (PepsiCo). All of these companies have many, sometimes hundreds of brands This approach is known as building a “house of brands”
Branded House
In more capital-intensive consumer goods, which have lower margins and longer purchase cycles, the company name or brand is very often used as the dominant brand and the products or product families become subordinate brands. This can also be true where the number of products is large but no product is dominant. Typical examples here would be Virgin, Nike, Maytag and Ethan Allen. The advantage of this approach is that the products and services are subsets of the overall corporate brand. Products can be added, modified or dropped, but the corporate brand endures. Another consideration is that the media budget for these types of products does not often permit individual product branding.
BMW, Mercedes and Audi are interesting examples because over time the three automakers subordinate brands have also achieved high recognition. There are many models in each of them, but BMW’s 3-series, 5-series and 7-series, Mercedes’ C-Class, E-Class and S-Class and Audi’s A4, A6 and A8 have brand equity in their own right. However, the parent brand still takes precedence. 3-series means nothing, but BMW 3-Series does.
Branded House of Brands
This approach, also known as “House Blend” can be used where, in addition to the house brand, over time the development of a product brand becomes feasible based on success, or upon acquisition.
A good example would be Kraft brands, where are both house brands like Kraft Macaroni and Cheese and Kraft Singles, as well as, product brands like Velveeta and Philadelphia Cream Cheese.
Mobile Phone Brands
To be blunt, mobile phone branding is an oxymoron. Vendors give different names to the same phone for different carriers. Marketing teams must have come from outer space with no understanding of building brands, brand architectures or brand naming. To be less harsh, the carriers “ruled” for decades and with the exception of Motorola and Nokia, handset vendors were simply unbranded suppliers. Apple changed everything when they entered the market.
AT&T and the Nokia Lumia 900 versus the iPhone
It is clear that AT&T is trying not to be “just an iPhone” vendor but this expenditure on a single product is far out of line with prudence, especially because it is one of the first Windows 7 phones. But perhaps there is a reason which we will discuss shortly.
Apple has done a masterful job of competing in the wireless market. Their share of the smartphone market has climbed from slightly more than 25% in Q4 2010 to 43% in Q 2011. Android still leads with 48% but from a consumer viewpoint, Apple is a single company with one model in two colors (no consumer really cares about the network technology used in their cell phones. Android share is highly fragmented among six major and many minor vendors and scores of models, brands and names.
Apple’s brand is consistent: iPhone. The only difference in the current lineup is purely based on color and storage, with 3 sizes available, but they are all iPhone (4s and 4) and now they operate on all major carriers
Among the competing vendors, Samsung and Nokia seem to be making strides toward unifying their portfolios by developing sub-brands (Lumia and Galaxy respectively). Time will tell to see if they can keep focus, or whether they wander off.
In Nokia’s case, they still have 13 product names (April 2012) and just reported a staggering $1.6 billion loss in Q1 of 2012. So why is AT&T pouring $150 million into advertising for the Lumina 900?
How do you get $150 million to make more sense?
There are several reasons that make the expenditure/investment more reasonable:
- AT&T does not want to be reliant on Apple anymore than it has to (See: Apple’s Dominance has Carriers Cheering Nokia Windows Phone). It needs a major product success from another vendor and the Android platform is simply too fragmented to supply that possibility.
- It’s a major product launch for AT&T AND Microsoft AND Nokia. When allocating budgets, you do put much of your money up front to make an impact.
- Can you say Co-op? I’m sure there is major funding from Microsoft who really needs a success in the mobile space. Ditto Nokia who doesn’t want to go any further down the RIM path. My estimate is that 50% of the ads are funded this way.
Given AT&T’s large budget, if I am correct, their ante is “only” $75 million, slightly less than 20% of their quarterly budget and much more defensible. I have seen the ads and they really don’t make an impact as far as I am concerned. What do you think?
