||Smartphone Consumers Are Less Willing to Experiment
Promoting BlackBerry at an event last week, Alicia Keys employed a romance analogy.
"We're exclusively dating again, and I'm very happy," the singer said, referring to her return to the new BlackBerry smartphone after years of dalliance with other brands.
It was an obvious hip-by-association marketing tactic by BlackBerry. But the moment also underscored a sales conundrum that has most phone makers stumped: Consumers aren't as audacious and adventuresome as BlackBerry would have you believe.
Her rekindled love of BlackBerry flies in the face of industry data that say consumers are flocking to better-known brands -- Apple's iPhone and Samsung for Android users -- even as they now have more quality choices in operating systems and phone models than ever.
Some phone makers' failure to ship on time or spend aggressively on marketing are partly to blame. That it's increasingly difficult for consumers -- at least in perception -- to transfer files as they switch operating systems or handsets discourages experimentation. Wireless carriers also can affect sales with merchandising, employee training and store displays.
Apple's iPhone was still the leader in the U.S. in the fourth quarter, with 39% of the smartphone market, according to data released by The NPD Group Friday. Samsung, which means iPhone's main competitor, Galaxy S3, took 30% of the market.
The two companies raised their combined share to 69% vs. 62% a year earlier. Other manufacturers are losing sales and languishing with a U.S. market share percentage in the single digits.
"This cutting-edge market has become so mature that known choices are winning," says Roger Entner, an analyst at Recon Analytics. "People have become so risk averse."
The lack of diversity in consumer purchases could have long-term effects of weakened competition, says Sarah Rotman Epps, an analyst at Forrester Research. "It has very serious consequences," she says. "HTC, Motorola, BlackBerry, Nokia. They're all struggling. It could become like the PC business."
A market hardening for Android
Of course, Apple's case is unique, with its early start in the smartphone business and a loyal customer base that sticks to its universe of apps, iTunes songs and iPad.
But the market is also hardening for Android. In the past, a manufacturer would develop an Android phone and see it named differently by carriers that also spent money for marketing the names. But now manufacturers prefer sticking to one brand name globally across carriers and handle marketing on their own, says David Owens, Sprint's vice president of product development.
This gives deep-pocket companies, such as Samsung, an advantage. The South Korean giant has outspent competitors and can leverage its branding power harnessed from making products across all electronics segments.
"Making washers and driers has helped them," says Andrew Morrison, T-Mobile's vice president of product management.
With clever ads lampooning Apple enthusiasts or featuring a day in the life of basketball star LeBron James, Samsung spent about $4 billion in advertising last year -- a large chunk of it on phones, analyst Horace Dediu wrote on his blog at Asymco.com.
"It might be surprising to note that Samsung spends considerably more than Apple and Microsoft. But it also spends more than Coca-Cola, a company whose primary cost of sales is advertising," Dediu says.
The increasing marketing role of flagship products that compete with the iPhone has also had an effect, says Jeff Bradley, senior vice president of devices at AT&T.
"The thing you have to have is a mainstream big-splash hero," says Bradley. "It's like a big movie premiere. You have a hot two weeks and it goes viral."
Samsung heavily pitched its Galaxy S3 as an ideal iPhone replacement. Other makers failed to generate a similar level of market buzz even though they also released flagship products -- including HTC One X, Motorola RAZR HD and LG Optimus G -- that were generally well-reviewed.
"They're all pretty good," Forrester's Epps says. "It's not about quality. It's about marketing, branding and carrier promotion."
Mike Woodward, HTC's president of North America, says that Samsung's full-court press in advertising hurt its business and vows to spend more on marketing this year. Its shipment of One X in the U.S. was also delayed last year because of U.S. Customs' patent reviews. Of the major phone makers, its U.S. market share slid the most in the fourth quarter, falling to 6% from 14% in a year, NPD's data say.
"HTC doesn't have a long history of building a brand, and we'll start to do that," he says. "It's a marathon, not a sprint."
Maintaining a diversity of brands
Meanwhile, wireless carriers maintain that their main interest is sustaining the diversity of brands and products in their stores. But they continue to drive promotions and merchandising tactics that influence consumers' perception.
"The job of carriers is now more about what's in the store and explaining the product," Sprint's Owens says.
Sprint made "a conscious decision" last year to spread Samsung products broadly across its pricing points, he says.
"Their brand was very good and we felt like our partnership was very strong," Owens says. "It's really been impressive in the last six moths. But don't forget, (the market) flows and ebbs."
T-Mobile, the only U.S. carrier that doesn't sell iPhones, launched "Samsung Galaxy Zone" in its stores last year -- giving it a better display -- even as they reduced the overall number of phones sold.
To sell more Nokia phones, AT&T store sales employees were given a free Lumia 900 phone, according to online Microsoft Windows news site, Wpcentral.com.
T-Mobile also helps promote Microsoft Windows Phones by creating special signs and staff training for HTC 8X.
BlackBerry has two new phone models for its newly launched operating system, BlackBerry 10.
Nokia plans to launch cheaper Windows Phones in hopes of boosting sales to budget-minded customers. In the fourth quarter, it sold 700,000 Lumia Windows Phones in North America, up from 300,000 in the third quarter. But it occupies only about 1% of the U.S. market, according to NPD.
"I firmly believe there's room for a third ecosystem and Windows Phones are gaining momentum," says Chris Weber, Nokia's executive vice president of global sales and marketing. "We have to broaden (our) portfolio: superphones and lower end and everything in between."
(Source: USA Today, 02/04/13)
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