The Case of the Canny Cellphone Laggard

Angus suspected the lowered price his customers demanded wasn’t justified

Angus’ Suspicions

Angus, a canny Scot, is VP R&D at specialty-corp. His company supplies a key dielectric material used in cellphone base stations. HIs customers use 1G, the first generation of wireless phone technology. 1G uses analog technology standards.

2G, a second generation technology uses digital technology standards. It does not use dielectric materials. Customers, citing the expected adoption of 2G, demand a price decrease.

Angus suspects the switch from 1G to 2G won’t be as fast as customers imply. Before approving a major switch in technology, standards committees move with caution.

Angus’s Solution

Angus, is an accidental marketer with a Ph.D in Engineering. He knows that price is near the bottom of buying criteria for specialty products.

Hype about the impending change from 1G to 2G obscures what is going on behind-the-scenes. Angus engaged me to do a customer research project to go behind-the-scenes. He wants to know what is going on in commercialization of the 1G to 2G. The research will help him understand pricing options and timing.

Behind-the-Scenes in the Switch from 1G to 2G: Executive Summary

First I built a list of 250 knowledgable individuals in the mobile technology market. Then following the Rule of 30 method1, I called people on the list. Each respondent heard that the client had invented a dielectric material.

The trigger for the switch would be positive results of an obscure test of TDMA , a leading 2G technology (TDMA=Time-Division Multiple Access). One respondent gave me the name of an engineer involved with the test. The engineer didn’t pick up his phone when I called him for two weeks.

Finally, on an early morning call we had a 20 minute conversation. Yesterday he had returned from the test site. The results were positive.

“The California tests showed the TDMA system met engineering and business expectations. My company will switch to 2G in four years.

Yet, my company, like our competitors, will continue roll out 1G base stations. We can’t lose momentum in capturing new users in the surging mobile technology market.
      Mgr., Hardware Planning … GTE Communications

A month later the CTIA chose the TDMA system as the North American standard for digital systems technology. Federal regulations use the CTIA’s recommendations. (CTA=Cellular Telecommunications Industry Association.)

Outcome

  • Angus raised the price of his dielectric material.
  • For four years he collected extraordinary, specialty product, profit margins.

This week:
Angus and I touch base from time to time.
      He said: “i’m now on a committee to set standards for 6G materials!”

Endnotes

  1. My work followed the Rule of 30 method 
  • Blind study 
    In a blind study the respondent does not know who commissioned the study. Respondents can tell the truth. There is no incentive to lurch into a price-negotiation stance with the researcher.
  • Gathered intelligence through 30 conversations with experts in the mobile telecommunications industry. They were from a random sample of 250 knowledgeable individuals.