Analysys Mason’s Connected Consumer Survey 2013 highlights smartphone saturation and need for creative operator approaches

By Eva Weidinger and Ronan de Renesse

Our recent Connected Consumer Survey 2013 of mobile users in Europe and the USA highlights the striking differences between smartphone and non-smartphone users. Operators need to develop new marketing strategies and pricing models to convince their non-smartphone users to upgrade to smartphones. For more information, see our Research Report The Connected Consumer Survey 2013: smartphones, mobile data access and monetisation.

Smartphone adoption is approaching saturation among the contract user base, and those aged 18 to 24

According to our recent survey of 6600 consumers in France, Germany, Poland, Spain, the UK and the USA, 52% of respondents with a mobile handset had a smartphone, making smartphones the dominant device category on operators’ networks. However, the smartphone share of new (purchased in the last 6 months) handsets appears to be declining in France and Spain, which are the markets where overall smartphone adoption is the highest. This could be an early indicator of market saturation.

The emergence of cheaper smartphones (as well as attractive subsidies from operators for new contract subscribers) has driven smartphone adoption in younger age groups. The percentage of respondents aged 18 to 24 who owned or regularly used a smartphone increased from 64% in October 2011 to 77% in October 2012. Operators will need to focus on older user segments if they are to increase smartphone penetration, because we believe that the youth market is rapidly approaching saturation.

40% of non-smartphone users indicated that their next handset will not necessarily be a smartphone, even if prices come down

Overall, the propensity of mobile respondents to buy a smartphone continues to increase – nearly half of our mobile-using consumer survey respondents in this year’s Connected Consumer Survey said they would definitely opt for a smartphone for their next handset purchase, compared to just over 30% last year (see Figure 1). We also looked specifically at the 48% of respondents who do not use a smartphone. A substantial share of these non-smartphone users – 40% – indicated that they do not plan to (or are unsure whether they will) purchase a smartphone next time they acquire a device, even if a smartphone costs the same as a non-smartphone.

Price was less frequently cited as a barrier to purchasing a smartphone in this year’s survey, compared to last year’s results. This is partly because of the wider availability of low-end smartphones, and a larger pool of old smartphone models to choose from – for example, the iPhone 4 and Samsung Galaxy S III.

Of those respondents who do not own a smartphone, the majority (61%) were on prepaid or SIM-only subscriptions, compared with only 36% of smartphone users. Those who do not own a smartphone are also generally older – 50% of the non-smartphone users were older than 55, while only 17% of smartphone users were in this age group.

The significant differences in demographic and purchasing habit differences between smartphone users and non- users present a challenge for service providers looking to upgrade the remaining non-smartphone customers. Handset subsidies do not serve as an incentive in the prepaid and SIM-only market. App-focused marketing campaigns that appeal to younger users will not necessarily be useful in targeting the non-smartphone users – many of whom are older than 55. Device-leasing plans such as Vodafone Red Hot, which target lower-end customers who want the ‘hottest’ smartphones, may not be particularly interesting for an older demographic – our survey shows that 42% of non-smartphone respondents have had their handset for more than 2 years, compared to 7% of smartphone respondents.

Operators must get creative about promoting smartphones to the ‘remaining’ lower-end and older subscriber base

A high share of non-smartphone users on prepaid or SIM-only subscriptions are likely to be attracted by low-end packages that are usually not available on smartphone tariffs. Operators still need to educate non-smartphone users – particularly older ones – about the benefits of owning a smartphone and about how mobile data tariffs are structured, in order to avoid bill shock. Recent innovative operator approaches include offering to pay-as-you-go SIM customers the chance to purchase packages of more data than the token amounts that were previously available. This could encourage more prepaid subscribers to adopt low-end smartphones in order to make best use of the data.

Non-smartphone users continue to attach a lot of value to voice and messaging services, which operators must consider when trying to promote smartphones to these consumers. For example, pre-loaded over-the-top (OTT) communications or social networking apps could be used as an incentive, whether provided by the operator or by a third-party player. Operators may also be able to convince non-smartphone users to upgrade to a smartphone by providing rewards in the form of free voice and messaging credits.

For more detail on our findings and recommendations, please see The Connected Consumer Survey 2013: smartphones, mobile data access and monetisation.

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About the authors and Analysys Mason

Eva Weidinger is Research Analyst and Ronan de Renesse is Principal Analyst at Analysys Mason.

Analysys Mason is a global consultancy and research company specialising in telecoms, media and technology (TMT). Our clients in the TMT sectors operate in dynamic markets where change is constant. We help shape their understanding of the future so they can thrive in these demanding conditions. To do that, our consultants have developed rigorous methodologies that deliver real-world results for clients around the world. In terms of our research, the world’s leading network operators, vendors, regulators and investors subscribe to our research and rely on our insight to inform their decision making.

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