Is The Best Way To Ensure Success To Lock In Your Customers?

from the never-knew-dear-abby-gave-advice-to-tech-companies dept

Tue, Mar 6th 2007 8:01am — Carlo Longino

The downslide of Palm is a long-running tale, and the latest development is another round of rumors that the company is up for sale. Nokia has been mentioned as a possible buyer, even though such a deal wouldn't make a lot of sense, with Motorola and a private-equity buyout also mentioned. A story from BreakingViews in the WSJ laments the fall of Palm, saying it happened because the company "failed to build competitive barriers around its devices, so consumers weren't locked into its products." In short, it says the ability for Palm users to easily export their contact data from the devices made it too easy for them to switch to devices made by its rivals. Palm's made plenty of missteps along the way, but this really isn't one of them. Companies that can't compete any other way rely on barriers like this to force customers to stay. The article cites the example of the iPod, but badly misses on the lock-in part, not citing the role music bought from iTunes plays, but rather the bizarre idea that if users got a different brand of music player, they'd have to re-rip all their CDs. It falls further off the track when it cites the Motorola RAZR, saying it offered "insufficiently sticky features" to keep users from switching away. The RAZR didn't sell on features, it sold on design, and playing to fashion means playing to a clearly fickle market. In any case, it also ignores the realities of the handset market, where many users switch devices on a fairly regular basis. Locking in your customers isn't the way to keep them. Perhaps instead, companies should spend their energies on creating the best and most innovative products they can, making customers want to use their products, rather than simply feeling forced to.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

19 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

James, 6 Mar 2007 @ 8:00am

Lock in customers?
Spot on as usual Carlo.
[ link to this | view in thread ]
whargoul, 6 Mar 2007 @ 8:33am

Product Lock in
The moment I feel like I'm being locked into a product is the moment I start looking for alternatives.
[ link to this | view in thread ]
Anonymous Coward, 6 Mar 2007 @ 8:45am

Just make an oath to yourself: I swear that whatever my degree of success and power in life, I will never, ever, make a business decision designed to create customer lock-in. Its an abhorrent and unethical practice. Theres lots of abhorrent and unethical stuff that can give your business an edge, but we don't do those things. Itll take a couple of generations of oathmakers to purge this practice from the field of business, but we can do it.
[ link to this | view in thread ]
Enrico Suarve, 6 Mar 2007 @ 8:52am

Thats not why I stopped using one
My Palm Tungsten is in my desk draw not 2ft away from me - the same place its been gathering dust for well over a year

If anything I stopped using it for exactly the opposite reason - it got to be too much hassle keeping it in sync, with the conduits constantly failing to do their job properly

To produce little apps for it was problematic and awkward and I really couldn't be bothered learning a whole new architecture just to do that

If it had been more cross-compatible it would have probably lasted longer and I'd have probably bought a new model (I did actually quite like it when it was working)

At least some data could be transferred - if this hadn't been possible I would never have bought one in the first place

So at least for me LockIn=LockOut
[ link to this | view in thread ]
Kyle Johnson, 6 Mar 2007 @ 8:58am

Lock-in Has Worked Well for MS
Gee, lock-in as a business strategy can't be all bad. Look how well it's worked for Microsoft. It seems almost every product they make has a great set of import tools, but almost never any kind of export tools. It's like a roach motel. Your data goes it but it never comes out.
[ link to this | view in thread ]
misanthropic humanist, 6 Mar 2007 @ 9:04am

gutter journalism
Go work in any electronics retail outlet for a week and the question you will most frequently hear from potential customers is "Does it work with X?"

There is more diversity in the technology market than ever before and customers are quite wise to compatability issues. Interoperability is the clincher in any gadget sale these days. It's surprising that a publication with the reputation of the Wall Street Journal is so utterly out of step with modern thinking.

But, cynically speaking, the WSJ has become a pop rag. Its hidden agenda is to mislead casual investors into the margins while those in the know are pouring their money into the future of technology, open standards and open source.
[ link to this | view in thread ]
Anonymous Coward, 6 Mar 2007 @ 9:12am

Re: gutter journalism
Well. IF you can pull it off, an island of non-interoperability is a profitable place to be. But your products and services have to be so damn good nobody much craves for the interoperation. Maybe thats what the WSJ is aiming at.

This notion relies on archaic business models anyway which need purging. So--you need to lock down your hardware, so your software division is assured a market? Why are your hardware and software divisions the same company anyway? This is basically 100% intimate collusion between two firms which ought to be separate. Actually--didnt palm split into a hardware and software companu? And now theyre not faring well? Maybe thats what the WSJ sees. Even still, to anyone in the trenches, its obviously a slimy practice which is doomed to extinction.
[ link to this | view in thread ]
Neumann, 6 Mar 2007 @ 9:22am

Re: Lock-in Has Worked Well for MS
Not so sure about that, at least in the area of PIM's. My Windows Mobile Smartphone can export contacts to Outlook and from there out to any number of file formats, like XML. I can't really speak for interoperability for them though as the majority of PIM's I've owned have been Windows Mobile Powered.
[ link to this | view in thread ]
Tycoon, 6 Mar 2007 @ 10:16am

Re: gutter journalism
But, cynically speaking, the WSJ has become a pop rag. Its hidden agenda is to mislead casual investors into the margins while those in the know are pouring their money into the future of technology, open standards and open source.
Well, if that isn't the biggest load of horse dung to appear on this site in a long time, I don't know what is. Take off your tinfoil hat and get a clue, bozo.
[ link to this | view in thread ]
DittoBox, 6 Mar 2007 @ 10:39am

Re: Product Lock in
Couldn't agree more!
[ link to this | view in thread ]
DittoBox, 6 Mar 2007 @ 10:41am

Re: Re: gutter journalism
Rather than insulting the guy you could always argue your point?
[ link to this | view in thread ]
Buzz, 6 Mar 2007 @ 10:45am

That's what I was thinking.
I was gonna say: this whole scenario sounds a LOT like Microsoft.
[ link to this | view in thread ]
DentalChicken, 6 Mar 2007 @ 10:46am

lockin schmockin
I have been a palm user from Palm II until the Treo 650. I have hacked the snot out of each unit I have owned and have absolutely loved the product for its massive collection of nerds making the strangest little apps and hacks. 2 months ago, with great heaviness in my heart I bought an HTC Dash Smartphone and have not looked back since. (you can edit the registry for G-Ds sake!) Palm, so smug in its market domination, was not ever ready for the juggernaut that is Microsoft Pocket PC. It was fat and slow to respond to an eventually, legitimate, determined, well funded competitor in the market. Eventually through its own mismanagement and poor market response, shat on itself for so long that it became obsolete. Period. Capitalism and competition in action. This article in the WSJ saddens me. Did this guy ever even own either product? So strange.
[ link to this | view in thread ]
Anonymous Coward, 6 Mar 2007 @ 10:49am

Re: Re: Re: gutter journalism
Rather than making a baseless claim about the newspaper and the future of technology investment you could always argue your point?
[ link to this | view in thread ]
Anonymous Coward, 6 Mar 2007 @ 12:34pm

Just to be clear, iTMS customers will have to write their downloaded music to CD and then rip that CD if they want to use a non-iPod music player. This may seem like a non-issue now, but wait a year or two when teenagers will have built a music collection without ever buying a CD. They will be locked into the iPod or face a mammoth task of transitioning to a different platform.

Apple customers should cross their fingers and hope that Apple continues to be such a great company with a great product, otherwise all those sheeple are going to be really bummed when DRM and proprietary formatting locks them out of their own music collection...
[ link to this | view in thread ]
Matt, 6 Mar 2007 @ 4:42pm

As far as the iTunes example goes I use an iPod and iTunes in spite of the fact that I am locked in. Not because I am locked in.
[ link to this | view in thread ]
rahrens (profile), 7 Mar 2007 @ 4:21am

BS
Once you've ripped your CDs to your iPod, you do NOT need to re-rip them to CD to transfer them.

Ripping them in the first place puts them into your iTunes library, and they are stored in folders in the iTunes Library folder.

If you want to transfer them to another program to use with another player, since they HAVE NO DRM, you can just move them to that other player's library, or import them using that other player's software. Most will do that. If it won't use AAC, then use iTunes to translate them into mp3's, then transfer them.

There is no need to re-rip them, unless the other player's software forces you to do that, in which case, it's not Apple forcing you, it's that other player.

Lame.
[ link to this | view in thread ]
RastaTech, 8 Mar 2007 @ 3:49pm

Completely the opposite
the WSJ guy has it completely wrong. I've owned a palm since the first VisorPhone, and i still have a Treo 650. I won't buy another Palm product though, because the palm os SUX. And it sux not because the vendor didn't build in enough 'lock in', but because they could never decide if it should be a proprietary or open source OS. If palm had put the garnet OS into GPL, it would likely not be so sucky and unreliable as it is now.
Palm should have opened its os; it could have become the linux of handhelds if it had done so. Now it's set to join Amiga and DEC as iHasBeens.
[ link to this | view in thread ]
Sramana Mitra, 21 Mar 2007 @ 6:05pm

Palm & Dell
My 2c: http://sramanamitra.com/blog/727
[ link to this | view in thread ]