Roger Entner, Senior Vice President, Research and Insights, Telecom Practice
While public awareness of Apple’s iPhone has been significant since its summer 2007 launch, its influence on consumer purchasing decisions remains up for debate.
To try to better understand the iPhone phenomenon, I took a look at the most recent data from The Nielsen Company’s Mobile Insights survey, which asks 25,000 wireless users every month (a total of 300,000 per year) about their wireless attitudes and experiences, including why they chose their current wireless service.
When the results of 1st quarter of 2009 are compared with the 3rd quarter of 2006 as a control for the “iPhone-effect,” some interesting insights emerge. Q3 2006 was the last quarter without solid iPhone news that could sway consumers in their purchasing behavior.
| Factors For Choosing A Wireless Carrier | ||
|---|---|---|
| RANK | 3rd Quarter 2006 | 1st Quarter 2009 |
| 1 | Price | Price |
| 2 | Network Quality | Family Plan |
| 3 | Reputation / Recommendation | Payment Option |
| 4 | Previous experience with the operator | Free In-Network Calling |
| 5 | Family Plan | Network Quality |
| 6 | Payment Options | Reputation / Recommendation |
| 7 | Specific Phone | Specific Phone |
| 8 | Customer Service | Previous experience with the operator |
| Source: The Nielsen Company | ||
At first glance, the most striking difference between 2006 and more recent data is what changed and what did not. Price remains the most important factor in choosing wireless service. Yet, even with the prominence of the iPhone, surprisingly the availability of a specific phone stayed flat as the 7th most important factor. While increasing in importance from 2.9% to 6.4% handset-choice alone did not bump up in the rankings. It seems that what makes for an outsize share of newspaper headlines, and congressional and regulatory attention, leaves the average American cold.
Not as surprising, economic factors are increasingly important. Family plans that let consumers call other family members for free and free in-network calling have shot up to near the top. Payment options, including pre-paid and unlimited calling and texting offers, are also substantially more important.
This translates into opportunity for:
- Pre-paid providers such as Tracfone
- Unlimited providers Boost Unlimited, Metro PCS, and Leap, each who offer unlimited calling and texting for as low as $40 per month
- The two largest wireless operators in the U.S. Verizon Wireless and AT&T due to the larger free calling circles
Perhaps the most unexpected outcome is the declining importance of network quality as a major factor from 2nd to 5th place. A testament to the success of its consistent advertising message, the number of consumers who perceive Verizon Wireless as having the best mobile network has shot up over the last two years and it leads its closest competitor now by an almost 2:1 margin. Consumer perception of the carrier’s quality has shot up over the last two years and it remains the single-most important reason consumers choose them. While handsets represent popular topics of conversation, economic factors are actually the major driver in the purchasing process.
[...] economic concerns are becoming even more important in the midst of the recession, according to a new report by Nielsen. Every month, the company surveys 25,000 wireless customers, asking why they chose their [...]
[...] between 2006 and more recent data is what changed and what did not,” Entner wrote in a blog post. “Price remains the most important factor in choosing wireless service. Yet, even with the [...]
[...] users diverging into two camps — A new report by Nielsen says that while plenty of people buy iPhones while complaining about AT&T’s service, more [...]
[...] users diverging into two camps — A new report by Nielsen says that while plenty of people buy iPhones while complaining about AT&T’s service, more [...]
[...] users diverging into two camps — A new report by Nielsen says that while plenty of people buy iPhones while complaining about AT&T’s service, more [...]
[...] users diverging into two camps — A new report by Nielsen says that while plenty of people buy iPhones while complaining about AT&T’s service, more [...]
Most of the users surveyed do not have smartphones. If you surveyed just cellular phone users who use smartphones, I think the results of the survey would be very different, and the availability of specific phones would rank much higher – perhaps #1. And since smartphone owners spend more money on their cell phones than other cellphones users, they are more important to the cell phone companies than their numbers would suggest.
As smart phones spread to a larger segment of the population, phone availability will becomes a bigger issue for more and more users. Plus, users of restricted smartphones are less likely to switch carriers, and that will cause other users who want to be on the same carrier as those smartphone to switch to the smart phone user’s carrier.
[...] When Choosing a Carrier, Does the iPhone Really Matter? – Specific phones are way down the list of reasons wireless buyers make a choice, based on a [...]
[...] Nielson claims to ask 25,000 cell phone users each month “about their wireless attitudes and experiences” and the change from 2006 to 1st quarter 2009 is pretty remarkable. Price has remained number one, but in 2006 the second factor was Network Quality, today its family plan. Third in 2006 was Reputation/Recommendation, today payment options. -Artcle [...]
[...] users diverging into two camps — A new report by Nielsen says that while plenty of people buy iPhones while complaining about AT&T’s service, more [...]
[...] noch wichtiger, als sie es heute ist, doch sie rangiert immer noch vor dem Mobiltelefon (vgl. Blogeintrag von Hentner, engl.). Entner begründet dies damit, dass die Netzwerkqualität in der öffentlichen Wahrnehmung [...]
[...] When Choosing a Carrier, Does the iPhone Really Matter? – Specific phones are way down the list of reasons wireless buyers make a choice, based on a [...]
[...] Nielsen [...]
[...] interesting to look here and see just how drastically critical points have changed with regard to what people are looking at [...]
[...] report says money is main issue for choosing wireless service When Choosing a Carrier, Does the iPhone Really Matter? | Nielsen Wire Nielsen (Yep, the tv people) recently did some polling, and found that the top four issues people [...]
What’s missing here is folks who buy the iPhone because it is far more than a phone. As far as mobile devices go, it’s hard to top!
Scott
Averages across broad population is useless in marketing when segmentation is most important. People who rank price as #1 criteria are innately NOT going to purchase a $100 phone plus data service.
Also, “specific phone” is a very vague criteria. Besides the iPhone, there is very few phone that people ask by name. I also disagree that “specific phone” in 2006 is a valid representation of whether iPhone is important or not. Before iPhone, there were other phones that were the cool phones. Remember the Razr? I know, that may not be 2006. But, iPhone could very well now fill the void of being the new cool phone, which means the availability of the current cool phone matters, and whoever carries it matters.
Also, the data does not support the question that’s being posed. If the question is “does iPhone matter”?, then the question should be if all else equal, would you choose a specific carrier because of the iPhone availablity.
I wouldn’t dismiss this data too quickly. It reflects a high-level look at carrier selection drivers that senior execs can use to gauge in broad terms what motivates consumers the most.
I think the conclusion from this data is not that the iPhone doesn’t matter, is that it doesn’t drive subscriber growth for a carrier as much as one might expect given all of the hype around it. There is no doubt Apple has accelerated our arrival into a new era of awareness for mobile Internet and applications, but there are still a lot of mobile users out there who are indifferent to smartphones and the iPhone.
Assuming that about 25% of the installed mobile phone base are smartphones, and about 17% of those smartphones are iPhones, that’s means a little over 4% of all mobile phones are iPhones. And while smartphone share will continue to grow quickly, and probably iPhones, that still is a very small segment of carriers’ subscriber bases today. One can argue that having the iPhone and smartphones in its phone lineup is very important for carriers, it is not a major factor for a vast majority of mobile users today. As a carrier, if you want to grow your subscriber base today you must first be competitive on pricing, family plans and payment options.
Yes, marketers must increasingly target specific segments with tailored messages and offers, and yes the driver rankings for these segments (e.g. smartphone users, high-ARPU users) may be different from the rankings.
But my feeling is that they won’t be significantly different. Price sensitivity among smartphone users was obviously a major consideration in Apple’s iPhone pricing, as it is now with carriers’ data plan pricing. Price will always be a significant factor with any segment, especially in today’s economy. I think network quality is also still very important to mobile users. Its ranking likely fell because 1.) it is now considered a hygiene factor that all carriers are roughly meeting, or at least perceived to be meeting; 2.) carriers’ continued advertising focus on plans and prices; 3.) increased interest in smartphones due to Apple, RIM, etc.; and 4.) a very tight economy. Good network quality is now one of those things people don’t think about unless they don’t have it.
[...] Over the past few months, the government’s interest in the practice of handset exclusivity has intensified. On the heels of Congressional hearings in July, Verizon Wireless agreed to dial back its exclusive deals with cell phone manufacturers to accommodate smaller carriers. This week the FCC, which has already begun a review of handset agreements, has made the issue a focus of its regular monthly meeting. But no matter what the setting or circumstances, whenever U.S. lawmakers and regulators discuss competition in the wireless industry, the elephant in the room these days is almost always the iPhone. [...]
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