THE STATE OF THE GOOGLE PIXEL
As a customer, what do you want out of a smartphone? Affordability? Reliability? Strong performance? Customizability? Well, one could argue that the Google Pixel is exactly that. Google prices their Pixel phones very competitively for the Western market starting at just $350 while offering near flagship-level performance.
Pixels also get strong reviews both from users and tech journalists. And Pixels aren’t some sort of sketchy knockoff that you buy from Alibaba either. Pixels come from one of the largest and most reputable companies in the world: Google.
I mean, even if you don’t especially like Google, it might make sense to get a Pixel and enjoy a strong smartphone experience on Google’s dime. As such, you would think that this is the type of product that would explode in popularity.
Google is solving all of the issues that people generally complain about when it comes to smartphones and giving customers exactly what they’re asking for. And to be fair, the Pixel is performing quite well within a niche portion of the population, but it's very much just a niche portion of the population.
Globally speaking, Google doesn’t even control 1% of the market despite having basically infinite resources, being around since the beginning of smartphones, and controlling Android. That’s often pointed to as one of Apple’s largest advantages.
They’re able to control both the software and hardware to create the best experience possible. But, can’t Google do the exact same thing with the Pixel? I’m picking on Google here, but I’m not talking about Google really at all. They’re just the most notable example.
You probably know a bunch of other smartphone models that are even more value-packed. Maybe it’s from Xiaomi or Samsung or Huawei or even the iPhone SE. But regardless of which value-packed smartphone you’re talking about, they all suffer from the same problem: no one buys them.
So, here’s why the Google Pixel is having such a tough time becoming a big player and why you should think twice before giving customers exactly what they want.
SKEPTICAL CUSTOMERS
Taking a look back, Google’s foray into smartphones dates all the way back to the beginning of smartphones in 2009. This year, Google would launch their first ever smartphone: the Android Dev Phone 1 for $400.
They didn’t market this phone very much because as the name suggested it wasn’t made for consumers, it was made for developers. It didn’t take much longer for Google to launch a consumer-oriented phone though.
In 2010, they would come out with the Nexus One but this itself would turn out to be a massive flop. Why you ask? Well, largely because Google was going against the grain. Instead of locking in contracts with all of the big national carriers, Google decided to sell the Nexus One directly to consumers for $530.
Nowadays, this is pretty much standard practice. Everyone knows about retail pricing and contracting pricing for smartphones. But, back in the late 2000s and early 2010s, there was only one pricing model that the average person was familiar with: the contract pricing model as this was the only way to buy iPhones at least within the US.
You would usually pay $100 or $200 upfront for the phone and sign a 2-year contract with AT&T, Verizon, or Sprint. From there, you would pay a set amount every month for 2 years until you paid off the full cost of the smartphone.
The reason Apple did this was to mask the true price of iPhones and make the price a lot more digestible for a market that was seeing smartphones for the first time. It wasn’t till mid-2011 that Apple started selling unlocked iPhones for retail price on their website.
And it really wasn’t till the late 2010s and until T Mobile popularized unlocked smartphones that the average person became aware of the difference between contract pricing and retail pricing. Until then, as far as the average person knew, the price of an iPhone was $200.
That’s what they would have to pay upfront and that’s what they saw everywhere. At stores, on TV, in magazines, in ads, everywhere. So, when Google came in with an unlocked phone in 2009 for $530, the general public was naturally put off by the seemingly high price.
Google’s position within the overall market has changed over the years, but they’re still very much going against the grain. While everyone is selling phones for $800 or $1000, Google is trying to sell phones for 500 bucks, or 600 bucks, but it’s the same underlying issue.
By giving customers exactly what they want, you’re always gonna be going against the industry at large which naturally earns you a lot of skepticism. And thing is, the hardest people to sell to are not people who don’t want your product but the people who don’t trust your product.
If you try to convince these people based on facts, they’ll only be put off more. They’ll start wondering: if your product is truly this awesome, what’s in it for you? What's the catch? And that’s exactly what’s happening with the Google Pixel.
Over the years, Google has built up a reputation as someone who does shady stuff to make money like collecting data and intruding on privacy. So, when Google comes out with a smartphone that seems too good to be true, people immediately wonder why. And they’re not wrong for wondering why.
I mean, it’s not like Google is handing out Pixels at 0 margins as a philanthropic effort. No, they’re handing them out at 0 margin because they’re ok with sacrificing profit to gain market share and they know that they can monetize your use of the Pixel using Google services.
So, they do indeed have ulterior motives. And the problem is that when you go against the grain and give customers exactly what they want, these ulterior movies become more visible than ever.
So, Google is constantly having to fight this uphill battle against consumer skepticism. But that only tells half the story because even consumers who aren’t skeptical don’t want the Pixel.
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ASPIRATIONAL PURCHASE
From the very beginning, the smartphone industry has been somewhat of an aspirational category. Half of this is because of marketing and how smartphones have been positioned over the years. Apple for example has simply leaned more and more into premium branding, especially with the Pro series.
Realistically speaking, Apple knows that the average person won't spring for the pro series. That’s why 80% of their lineup is not the pro series. With that being said though, the pro series is actually extremely important for the rest of Apple’s lineup because it provides context.
It establishes Apple as someone who puts out top-tier pro-level phones. And while you may not be able to purchase the pro series today, it gives you something to aspire to. This is a very common marketing technique used across a wide range of industries.
It’s the same reason why Costco puts a bunch of super-expensive TVs right at the entrance. It asserts that that’s what the most successful Costco shoppers are buying. And by having a Costco membership, you too are part of that “elite” group of shoppers.
It’s the same thing with the American Express black card as well. Most of these items are something that the average person will realistically never get, but the presence of these items is what makes all the difference. So, that’s the marketing side of things.
The other half of the story is simply how smartphones fit into our lifestyles. The average person spends over 3 hours on their smartphones every day, and if you’re on the younger side of things, the number is likely even higher.
As such, people don’t view buying smartphones the same way as buying trash bags paper towels, or some other household item. With these items, most people just get the cheapest option with decent reliability.
With smartphones, however, people see it as more of an investment. They’re gonna end up spending 1000s of hours on this device, so they’re much more willing to spend the extra $100 or $200 and get the better phone even if they don’t need it. And this only makes it even harder for Google to sell the Pixel.
Even if they’re able to overcome the skepticism surrounding the Pixel, consumers still just don’t want it. It’s more than likely that the average consumer would say something along the lines of: It’s great that Google is offering a well-priced competitive option, but for myself, I like getting something a bit more high-end.
And when they say high-end, they usually just mean getting an iPhone for the same price. Hearing this, you might be saying that Google just needs to advertise more. If they just put the Pixel in front of people more often, people will finally get it right?
Well, the truth is that Google has already already been spending hundreds of millions on marketing. Now to be fair, that is 4-5 times less than Apple and Samsung historically, but here’s the deal, Google’s market share is not 4-5 times less than Apple and Samsung. It’s more like 30-40 times less.
Aka, despite being the king of digital ads, Google’s return on advertising spend is garbage in comparison to Apple and Samsung. Now, this could be partially due to the marketing campaigns themselves.
Maybe, Google’s campaigns just aren’t as good. But, I suspect that this has more to do with all of the intangible factors that we’ve been discussing. Apple and Samsung’s flagship phones simply strike a chord with consumers that Google’s budget phones do not because smartphones are often an aspirational guilty pleasure type of purchase, not something that’s strictly objective or logical.
And that brings us into real takeaway of all of this which is that consumers often simply don’t know what they want.
CUSTOMERS DON’T KNOW
We often hear the business mantra that the customer is always right, and in some industries like hospitality and tourism, that’s a great slogan to live by. Even if the customer is technically wrong, it’s better to assume that they’re right to keep them happy.
This mantra doesn’t work as well within the tech or any innovation-driven industry because the truth is that customers have no clue what they really want. Henry Ford has this famous quote that if he had asked customers what they wanted, they would’ve said faster horses.
Steve Jobs very much took this quote to heart as he strongly believed that “People don't know what they want until you show it to them. That's why I never rely on market research. Our task is to read things that are not yet on the page.”
And this sort of mindset is what led to many of Apple’s best innovations. For example, choosing to not use a stylus. Using intuitive methods to zoom in and out by pinching the screen instead of pressing a plus or minus button. Face ID instead of Touch ID, and so on.
Oftentimes, Apple’s products aren’t initially well received by the public because consumers aren’t convinced that that’s what they want. The iPhone X for example was memed as the $1000 emoji machine.
And the AirPods were scoffed at as overpriced Bluetooth headphones. But over time, both of these have become extremely popular. In fact, the entire world is moving towards iOS and Android is bleeding market share. This is especially true in developing countries like India.
As soon as people are able to afford an iPhone, they get an iPhone. And I’m not saying this hype up Apple or anything. Rather, I’m trying to illustrate how people don’t exactly do what they say. If you ask anyone, they’ll say what they want is a reasonably priced reliable smartphone.
But where they actually end up spending their money is an overpriced phone that fulfills intangible values such as status, aspirations, fitting in, and whatever else.
Wrapping Up
The bottom line is that the Google Pixel is a manifestation of what people say they want, not what they really want and that’s why Google has struggled to ever grow past just a niche market.
