Mobile phone aftersales - why does it take so long?

The market experience from the car industry can provide a good insight on what will happen to the mobile business dynamics. As all know, new product sales is not where carmakers cash in, on the contrary, the profit is still to be earned in the aftersales. In the car business, the aftersales makes the big bucks that pay the big costs on R&D and advertising.

In the car business, this revolution took place a long time ago - price competition cut down the slim profit margins and higher costs on R&D (which never slowed down) obliged carmakers to re-think their business model dramatically.

Today, besides the classic handling of warranties, product registrations, standard operating procedure manuals (for service and assistance) and product recalls; the car business operates with a full fledged aftersales service : spare parts, accessories, consumables (oils and filters, for example) and other 3rd party products (tires, for example), including equipment, merchandising, financing products, insurance policies, etc..

In the mobile phone industry, the business model is changing as we speak. The pressure from network operators for sophisticated solutions (fully customized in terms of user interface, form factors and in some cases device exclusivity) at a faster pace (implying a shorter product life cycle and higher costs on R&D) is only profitable if the maker succeeds to sell million of units worldwide – that doesn’t always happen.

Phone makers put currently great effort on sales of entry-level models in poor but highly populated countries like Russia, China, Mexico, India and other – this is vital to assure big sales volumes and pave the way for a higher brand penetration, for medium and high end devices.

High-end mobile phones are in many cases a big burden, the cost of development and production are too high and sales figures in most cases low. Flagship models are a needed burden, as they project the brands success and advancement in the business conferring prestige to the phone maker. Can this burden turn into a revenue generator? Of course, it can.

Why haven’t we seen Nokia or Sony Ericsson distributing directly their products yet (via their corporate website) – they do not want to step into network operator or retailers toes? That is silly. The public in general is not expecting to find cheap (subsidized) phones there but on the other end the consumer knows that they are not trapped with a locked device, or have the user interface from the operator (who can control the type of services the user accesses – one such example is Vodafone Life).

The aftersales is an area phone makers have not yet thought seriously. Here as in the car business, the phone makers can boost revenues on developing their aftersales division: providing a service and assistance store locator, selling accessories, merchandise and fashion articles, spare parts, software upgrades, third party application software (for consumer and enterprise users) and hardware (memory sticks, and other). There is also the opportunity to develop cool campaigns and promotions and further sell more.

It is a win-win situation the aftersales. The brand sells more, the user makes better (and full) use of its device, the network operator will gain on traffic revenues, third party suppliers will sell more - and the most important of all, the Customer might buy the next mobile phone from the same brand.

The aftersales is key, determining how successful a maker is on keeping Customers satisfied (using the equipment at full potential), whilst boosting revenues for the company and its partners. The bottom line is to not only have satisfied Customers, but also make them return, to buy again.