All Commentary
Friday, January 12, 2007

Pleasing Consumers Isn’t Easy

I love electronic gadgets — not just for their functionality or the toy factor, important as those things are. (Ideally, a good gadget combines both.) I also love them because, for me, they underscore the market’s uncertainty and consumer orientation. I’m an unabashed high-tech-gadget market watcher.

Here’s what’s fascinating. People want to sell us things such as portable music players, mobile phones, and personal digital assistants (PDAs; small electronic calendars, notebooks, and the like). Many of us want one or more of those things, and entrepreneurs know that. But their knowledge is very general. What they are far less certain of are the scads of details involved. How much are we willing to pay? What combination of features do we want? Should a phone play music? Should a PDA be able to make calls? Do you want a camera with that? Should everything be rolled into one electronic Swiss army knife? They don’t know.

What makes it all so interesting is that many of us don’t know either.

And they can’t ask us because what we say may not reflect what we will do. It’s not that we would lie, but rather that answering a questionnaire is far different from making real-world choices and tradeoffs. Lots of products have done well with focus groups and then bombed in the market. Someone outside Ford must have said he liked the Edsel. Does anyone recall the New Coke?

No, entrepreneurs can’t rely purely on surveys and contrived situations. They have to find out the hard way. They have to take risks, invest money, and bring products to market, where we flighty, unpredictable, merciless consumers get to put thumbs up or down. As consumers we’re all Simon Cowells.

I confess this subject is on my mind this week because Apple Inc. (formerly Apple Computer Inc.) has introduced its iPhone (due in June), which combines an advanced iPod music player and an Internet communicator with a mobile phone in a stunningly innovative package that is worked almost entirely from a touch screen. (I am judging the iPhone from reports of journalists who have handled the prototype. If you want a sense of how innovative the iPhone is, see this description by New York Times technology columnist David Pogue.)

As amazing as the iPhone seems to be, its market success is not guaranteed. Apple’s CEO and master showman Steve Jobs has missed before. Sure, there are Apple devotees who will buy whatever the company puts out. But the real question is whether a given product connects with regular people: whether they find it useful, worth the price, and worthy of incorporating into their lives. Will enough people want an elegant do-it-all frankly amazing electronic device that lacks a physical keyboard, costs $500 and $600, and is available through only one phone network (Cingular, soon to be ATamp;T)? Is it going to tempt serious smart-phone users to give up their Treos and Blackberries? Or music aficionados to give up their stand-alone 30-80GB iPods?

Stumbling in the Dark

For an entrepreneur, it’s a little like stumbling around in the dark. Particularly with cutting-edge hi-tech products, entrepreneurs can’t always see the obstacles to success. Motorola, a leading phone maker, brought out a mobile phone that can play music downloaded to a computer from Apple’s iTunes Store. However, because of all its limitations it bombed.

To complicate things, we consumers find uses for gadgets that their producers never dreamed of. I don’t think the folks at Apple foresaw podcasting, which lets us use iPods to listen to lectures, radio programs, and audio magazines whenever we want.

Mobile-phone makers still aren’t sure if we want our phones to play music or connect to the Internet because, as I’ve said, we aren’t either. (Do we want all those functions competing for the same scarce battery time?) Some people just want a phone to make phone calls. Imagine that.

Will the iPhone’s apparent ease of use change the landscape? Maybe, but maybe not.

That’s where entrepreneurial risk comes in. The daring business people won’t know what we consumers want until we are given the choice. Meanwhile, big bucks ride on our decisions.

I’m reminded of Walter Williams’s clever way of summing up the consumer’s clout: My supermarket manager doesn’t know what I want, when I’ll want it, or how much of it I’ll want. But if he doesn’t have it when I show up, he’s fired. Similarly with the newest high-tech wonders. We don’t know what else we want our phones or music players or PDAs to do. But if you, Mr. Entrepreneur, get it wrong, you’re fired.

All the more reason to rid the economic system of all government intervention and privilege, which primarily serves to stifle competition, protect incumbents, and reduce entrepreneurs’ ability to please us.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.