Professional Documents
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Irridium
Irridium
THE IRIDIUM
STORY:
A MARKETING
DISCONNECT?
54 I M M S u m m e r
2000
Product
Iridium's most visible product of what is
essentially a service offering is the phone set.
With its distinctive knobby antenna, the Iridium
handset was clearly identifiable from the myriad
of other wireless telephones on the market.
Unfortunately, that was not the only distinctive
feature. Weighing in at about one pound, the
Iridium phone felt like a piece of lead when
compared with contemporary PCS phones that
weigh a couple of ounces. Even worse was the
brick mimicking shape of the phone that made it
awkward to carry on your body or pack in a
briefcase and, as a consequence, difficult to
quickly access in order to take incoming caUs.
These problems were exacerbated by the fact
that in order to capitalize on the touted benefits
of this system a worldwide traveler needed to
carry a bag of attachments whose use was not
always readily apparent. As bad as the design of
the phone wasat least when compared with
PCS offeringthe initial quality of the transmission service proved even worse. Potential customers who tried to access the satellite network
frequently found completion rates low and
dropped call rates high.
While it never reached capacity, the system
was only equipped to serve about 25,000 callers
at a time. When callers did get through voice
quality frequently proved to be substantially
Pricing
The price for becoming the proud owner of
an Iridium phone was, at least initially, a whopping $3,000. While the price of the phone set
did eventually come down to about $1,500, this
was still far more expensive than traditional
analog cellular phones or even the newer PCS
phones where some service providers were
practically giving phones away in order to signup customers. Still, the cost of the actual Iridium
phone was only one portion of the fee structure.
The otherthe one with the most profit potentialwas airtime charges. Iridium's airtime
charges ranged from as high as $4 to $9 a
minute. A $9 a minute call might not be such a
bad deal if you were stuck in the middle of a
Borneo jungle, the Sahara desert, or an ice flow
off Antarctica, but when domestic wireless rates
are down to pennies a minute, it's mighty hard
to justify the frequent use of a system that is up
to 10,000% more expensive.
Place
Of course the beauty of the Iridium system
was that the Iridium telephone could be transported anywhere a person could travel and, at
least in theory, be used. But the phone was valuable only as a communications device where
service was provided. The implied, though not
explicitly stated, promise of Iridium was you
could use it anywhere in the world.
Unfortunately, it turned out you could not
use it in some of the most obvious places in the
world like inside buildings or moving cars. Due
to line-of-sight requirements between the handset and orbiting satellites, users of the Iridium
system were required to maintain a clear path
between the two objects. This meant you had to
stop your car or exit the building to ensure a call
would connect to the system. In addition, there
were large sections of Europe, Asia, and Africa
where service linkages could not be established.
POTENTIAL
CUSTOMERS WHO
TRIED TO ACCESS
THE SATELLITE
NETWORK FREQUENTLY FOUNO
COMPLETION
RATES LOW ANO
OROPPEO CALL
RATES HIGH.
Promotion
One of the bright spots in this otherwise sad
tale is found in the advertising created to convey
Iridium's message to consumers. For those of
MM S u m m e r
2000
I 55
caselNpoint
THE IMPLIEO,
THOUGH NOT
EXPLICITLY
STATEO, PROMISE
OFIRIOIUMWAS
YOU COULO USE
IT ANYWHERE IN
THEWORLO.
56 I M M S u m m e r
2000
Target Market
The real tragedy of this lack of international
marketing sophistication is that while the advertising and public relations campaigns generated
roughly one and a half million inquiries, most of
these went unanswered. The niechanisms for
promptly responding to an inquiry with followup calls or visits were never established by
many of the partners. As the novelty generated
by the early announcements of the Iridium system wore off, these hot leads cooled and were
lost. Out of this initial pool of 1.5 million potential subscribers, only about 20,000 eventually
signed up, just over a 1% close rate. Even this
number is suspect as some of these subscribers
were provided free or highly discounted services
to induce trial.
Market Entry
One of the critical marketing and engineering decisions was the adoption of a target
launch date. In order to beat other fledgling goanywhere telecommunication firms to market.
Conclusions
Imagine having to continuously carry
around a one-pound phone nearly as large as a
brick. Imagine having to pay exponentially
higher airtime charges than available through
other sources. Imagine poor transmission quality where conversations cut in and out. Imagine
falling into zones where there is no service
available. Sound like the reasons for Iridium's
death knell? Perhaps, but these were exactly
the same kinds of issues the cellular telephony
industry had to address in the middle to late
'80s and even into the early '90s. Even by the
standard of (Gordon) Moore's Law, it was not all
that long ago these problems plagued the industry. And yet, despite these problems, an industry that AT&T only a decade earlier had written
off as too small to ever be of any consequence,
is now thriving. Even as Iridium's fortunes sink,
a handful of other firms including ICO Global
Communications backed by GM and Hughes,
Globalstar Telecommunications Ltd. backed by
Loral Space and Communications Ltd., and
Ellipso backed by Mobile Communications
Holdings Inc. are struggling to avoid the mistakes of the market leader. Will any or all of
these firms succeed where Iridium has failed?
Or will the industry echo the life cycle of the
videodisk where a good idea failed before successfully being resurrected 15 years later with
OUT OF THIS
INITIAL POOL
OF 1.5 MILLION
POTENTIAL
SUBSCRIBERS,
ONLY ABOUT
20,000
EVENTUALLY
SIGNEO UP,
JUST OVER A 1 %
CLOSE RATE.
MM
Summer
2000
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