Smartphone Market Update for Fall 2016
We recently conducted a study of US and UK consumers to better understand some new dynamics in the smartphone market. To round out our study we included 456 consumers who we have profiled as early adopters/early tech enthusiasts, and 1052 consumers we have profiled as our mainstream representative sample.
The smartphone market may be mostly settled. However, it is still never boring. In this study, we explored the changing dynamics of a carrier, and Apple, payment plans allowing consumers to pay anywhere from $15-$32 per month for the smartphone of their choice. We have long sought to understand how these payment plans would impact the buying cycles of smartphone owners. Also in this study is a new element that focuses on Samsung’s brand and whether the recent issues around the Note 7 have impacted brand sentiment toward Samsung and brought to mind concerns over buying a Samsung smartphone in the future. Also new, is a look at consumer sentiment around the Google Pixel. While still early, we asked consumers to share their views on the Pixel from what they have seen or heard. This is where having the early adopters/early tech enthusiasts in our panel was extremely helpful. While the full outcome and cohort analysis of this study is available to our clients, I want to share the top line results of several areas of interest.
iPhone and iOS Lead in US
When we look at the US and the UK, most observers note there is a duopoly. In both these markets only Samsung and Apple have the dominant smartphone share of the active installed base. However, when we drill down into brand ownership, the iPhone has a 13.2 percentage point lead over Samsung in the US with the iPhone having 45% smartphone brand share to Samsung’s 32%. Having tracked this for several years, the gap has continued to widen YoY. In the UK it is a more even picture with Samsung having a .5% point advantage over Apple by brand installed base.
When it comes to operating systems, many of us who track the market have known it is a close call between Apple and Android in the US market when it comes to OS share. I can now say with confidence that Apple’s iOS has taken the majority share of the US smartphone market. Here is what the current OS share landscape looks like in the US.
iOS at 48% share in the US is the highest we have seen in the past few years. For reference, in spring when we ran this same brand ownership question both Android and iOS were nearly neck and neck. A few catalysts for iOS to gain and overtake Android were with increased business users switching from Blackberry to iPhone, consistent quarterly switchers from Android over the past year, and a shift in first time smartphone owners to go with an iPhone over Android brands.
We maintain our belief that Apple will continue to take share from Android as time seems to benefit Apple. When we look at the length of ownership of a smartphone, we find the longer a consumer has owned a smartphone, the more likely they are to own an iPhone. We asked consumers which smartphone brand was their first. In our study only 26% of consumers in our sample said their first smartphone was an iPhone yet 45% of that sample own an iPhone today. When we dig into the details, it is clear those who did not own an iPhone as their first device but acquired their first smartphone between 2007 and 2012 have a much higher propensity to be iPhone owners today than those who got their smartphone in 2013 to present. This way to look at the market is a key reason why we see the popular Leaky Bucket theory of Android continuing to play out.
Samsung’s Note 7 and Brand Impact
For obvious reasons, we were quite keen to understand the brand impact to Samsung in the eyes of every day consumers post the Note 7 recall. We asked a series of questions around how much this issue would impact their decision to buy a Samsung in the future as well as some brand sentiment questions. I want to focus on the brand question since I feel it is the most relevant to gauge what the long-term impact of the Note 7 recall could be.
To be clear, we maintain a strong brand is hard to achieve and once a company establishes a strong brand it will not disappear overnight. Our conviction from the beginning was that Samsung’s brand could withstand this issue at large. Even after conducting this study we still hold to that belief.
For the sake of balance, we did not include any existing iPhone owners in this question set but instead looked specifically at Android owners and owners of different Android brands. What we found was 28% of Android owners indicated this issue caused them to have a more negative opinion of the Samsung brand. It is key to distinguish this number is lower when we isolate existing Samsung smartphone owners, but much higher when we isolate owners of other smartphone brands. This confirms what we originally believed that Samsung owners would likely remain loyal to Samsung at large, but the biggest impact is on prospective consumers who may have been considering brands other than Samsung for their next smartphone.
Existing Samsung owners still indicated a high likely hood to repurchase a smartphone from Samsung. They also stated in our brand sentiment questions, that an overwhelmingly large percentage of existing Samsung owners still believe Samsung makes the best smartphones on the market. At this point in time, using the data we have, we do not foresee the Note 7 causing a mass exodus from their current smartphone base. We do, however, see this impacting their growth prospects to acquire customers from other brands.
What’s a Pixel?
In what should shock absolutely no one, 73% of mainstream consumers in the US and the UK indicated they did not know enough about Google’s new smartphone to form an opinion. Luckily, we have an early adopter/early tech enthusiast panel to help us gain some early insights from. Only 20% of those in our early adopter panel indicated they were not familiar enough with the Pixel to form an opinion.
When it came to current brands in the market our respondents believed the Pixel would challenge most believed it looked like a challenger to Samsung while only a small percentage thought it looked like a viable alternative to the iPhone. Most interestingly our study suggests Google has some convincing to do that they have credibility as a smartphone maker. Even though most of our respondents were not familiar enough with the Pixel to offer an opinion, 26% of mainstream consumers and 38% of early adopters said Google would have to prove to them they are a credible smartphone maker before they would even consider looking into it.
The Refresh Rate Debate
We explored a range of questions and catalysts that cause consumers to upgrade their existing smartphones and key reasons why they hold onto them as long as they do. There is a large debate about refresh rate cycles lengthening. While we certainly acknowledge the cadence is not as precise on a 24-26 month cycle as it used to be, all the data we have still suggested consumers are maintaining a 24-30 month cycle.
As would be expected this cadence remains relatively consistent for those who are on payment plans from their carriers or from Apple vs. those who are not. Meaning as more consumers jump on payment plans offered by their carrier and Apple, we may see stabilization in the refresh cycle even if the perceived pace of innovation, or reasons to upgrade, slows down.
Compared to last fall, this fall and holiday quarter are shaping up to be a bit more interesting. With new players, a potentially larger iPhone upgrade cycle than originally anticipated and Samsung’s recent issues, we could be on the cusp of a few key turning points in the market.
Other topics we explored:
– Ecosystem stickiness between iOS and Android
– Interest and catalysts for brand loyalty
– Individual carrier subscription and payment plans
– Intent to upgrade
– Catalysts to upgrade and barriers to not
– Category sentiment and brand sentiment