Consumer Smart Phones

ChangeWave Research: Consumer Smart Phone Trends

Consumer Smart Phones: 90 Day Outlook

Samsung Momentum Rebounds; Apple Demand Remains Strong

Jean Crumrine and Lusy Lisyanova

Overview: Back in September our ChangeWave smart phone survey showed the new Apple iPhone 5S and 5C launches causing a surge in consumer planned buying. But which manufacturers now have momentum?

Our December 10 – 27survey of 4,248 consumers has taken a fresh look at smart phone trends going forward, and finds Samsung’s momentum reboundingafter a tough fourth quarter as interest in phablet devices continues to rise. Apple demand also remains strong.

This surveyfocused primarily on the North American smart phone market (88% of respondents are from the U.S)and also looked at customer satisfaction and OS demand. ChangeWave Research is a service of 451 Research.

Apple vs. Samsung: Next 90 Days North American Demand

Apple continues to lead among respondents planning to buy a smart phone in the next 90 days, with one-in-two (48%) saying they’ll get an iPhone.

Although this is down from the momentum surge in the wake oflast quarter’s5S and 5C releases, thetrend is similar to what we typically see in the aftermath of new iPhone releases, as the following chart points out.

Note when we asked respondents who plan on purchasing an iPhone to tell us which model they’re most interested in buying, the 5S (73%) dominates.

Following last quarter’s decline, Samsung (19%) has regainedits momentum – with a 5-pt jump in planned buying going forward.

The Galaxy S 4 (45%) is still the most popular Samsung model consumers plan on buying, but there is significant demand for the Note 3 phablet (18%) as well.

Other Manufacturers.While it still trails by a wide margin,Nokia (4%) is up 1-pt this quarter to their highest level of the past five years –encouraging news for Microsoft as it finalizes the acquisition of Nokia’s devices and services business.

HTC (2%) is seeing a slight 1-pt uptick, while Motorola (4%) is unchanged –but both remain near their all-time ChangeWave lows.

BlackBerry’s share of planned smart phone purchases (2%) is stuck at its second lowest level ever in a ChangeWave survey.

OtherSmart Phone Trends

Overall Purchasing. In the aftermath of the holiday shopping season and the momentum generated by the new iPhone launches, overall smart phone purchase plans are settling back this quarter. A total of 14.5% of respondents say they plan on purchasing a smart phone going forward, the same as six months ago.

Customer Satisfaction. Apple continues to outperform in terms of smart phone customer satisfaction – 68% of all iPhone owners say they’re Very Satisfied with their phone.

Percentage of Respondents Very Satisfied with their Smart Phone – By Manufacturer

Samsung remains in second place with a strong 55% Very Satisfied rating, followed by 43% for Nokia. Motorola (39%) edges out HTC (36%) for fourth, while BlackBerry (21%) has experienced a 9-pt hit sincethe previous survey and comes in last once again.

Mobile Operating Systems

Among consumers planning to buy a smart phone in the next 90 days, the Apple iOS (49%; down 14-pts) remains the number one preference. As expected, that number is down from the spike we saw at the time of the iPhone 5S and 5C releases. Another three-in-ten (30%) planned buyers say they’d prefer to have the Android OS on their new phone – up 7-pts.

In an encouraging sign for Microsoft, after slipping last quarter Windows Phone 8 (6%) is up 2-ptsand is just shy of its year ago high immediately after their new OS release. In contrast, BlackBerry OS (2%) is unchanged from last quarter and only 1-pt above its all-time low.

OS Customer Satisfaction. We also took a look at OS customer satisfaction ratings based upon the operating system consumers have on their smart phones. Apple remains the clear leader here – with 68% of iOSusers saying they’re Very Satisfied.

Windows Phone 8 operating system (48%) and Android OS (48%) are now in a dead heat for second place, and both remain far ahead of the satisfaction rating for BlackBerry OS (23%).

Adding to the Canadian company’s woes, when we asked current BlackBerry owners about their future smart phone purchasing plans, only 23% say they plan on buying a BlackBerry smart phone in the future.

Note: ‘Don’t Know/Other’= 33%.

In comparison, twice as many (45%) say they’re switching away from BlackBerry phones – with Apple (16%) benefitting most, followed by Android (9%).

Continued Momentum for Big Screen Smart Phones

Since 2012 ChangeWave surveys have consistently shown strong consumer interest in larger-screen size smart phones. After a pause last quarter likely due to buyer demand for the iPhone releases, the current survey shows another major leap in ‘phablet’ demand. Two-in-five (40%) planned smart phone buyers say they’re most interested in buying a 5 inch screen or larger (up 8-pts).

Samsung continues to dominate in this space, with three-in-five planned Samsung buyers (58%; unchanged) saying they’re most interested in purchasing a 5” screen or larger device.

But as the number of large screen devices from other manufacturers continues to rise, we’re also seeing a leap in the percentage of non-Samsung planned buyers (35%) interested in purchasing a phablet – up 9-pts since September.

Cannibalization of Tablets. The phablet phenomenon continues to pose a threat to other products – with tablets in particular showing vulnerability.

We asked phablet owners who also have a tablet device about how the use of their tablet has changed since purchasing the larger-screen phone.

Half (49%) of those who own both devices say they’re using the tablet Less Frequently since buying their phablet, compared with just 14% More Frequently.

In another positive sign for phablets, satisfaction among owners remains very high, with 62% reporting they’re Very Satisfied with their device. Another 31% say they’re Somewhat Satisfied.

A Look atiOS 7 and iTunes Radio

iOS 7.It’s been a little over three months since Apple released iOS 7, its latest smart phone operating system. To gauge consumer reactions we asked iPhone owners using the new iOS which features they find most useful.

Control Center (29%) and Multitasking (29%) are tied as the top choices, while the Camera (27%) – which allows easy access to shooting formats and offers new filter options – comes in a close second.

Music Streaming Services – Impact of iTunes Radio. One new feature of iOS 7 is the iTunes Radio music streaming service. While we found strong potential for itin our previous survey, the service had only just become available. Now that consumers have had time to try the new service, we again asked consumersabout their use of music streaming services.

Past 90 Days.Among those using music streaming services in the past 90 days, Pandora (54%) still dominates but iTunes Radio (27%) ranks a strong second.

Next 90 Days.Importantly, when we look at planned use of music streaming services, iTunes Radio emerges as the big momentum winner. Three-in-ten (29%) respondents say they’re planning to use iTunes Radio over the next 90 days – up 6-pts from September. At the same time, while Pandora (48%) still has a big lead, it’s down 2-pts from previously.

Other popular services, including iHeartRadio (13%; up 1-pt), Sirius XM Internet Radio (12%; down 2-pts) and Spotify (11%; unchanged) are little changed.

As we said in our previous report, the Apple brand and existing customers represent a powerful base to help launch a new service. We again took a closer look at planned future usage of the top music streaming services among iPhone owners vs. Non-iPhone owners.

Apple iPhone owners (46%) remain nearly four times more likely to say they’ll use iTunes Radio in the next 90 days than non-iPhone owners (12%).

The percentage of iPhone owners who plan on using Pandora (47%) in the next 90 days is down 6-pts from our September survey.

Mobile Payment Apps

The use of mobile devices for making payments has expanded rapidly as new technologies make the process easier and more reliable, but many consumers still have concerns. We asked respondents about their interest in using mobile payment appsto make purchases, in lieu of traditional methods of payment.

The results show strong interest, with 22% saying they’re likely to use mobile payment apps over the next 90 days (7% Very Likely, 15% Somewhat Likely). Those who use iOS (26%) or Android OS (21%) are more likely to use mobile payment apps than Windows Phone OS (17%) or BlackBerry OS (6%) users.

Bottom Line: Our latest smart phone survey shows Samsung regaining momentum among consumers after a tough fourth quarter, while Apple demand remains strong three months after itsnewest iPhone releases.

We’re also seeing encouraging signs for Microsoft. Windows Phone 8 OS maintainsa strong customer satisfaction rating, and although it ranks third overall in OS preferences, it’s at its highest level since launching more than a year ago. An uptick in planned Nokia buying is also positive for Microsoft as it finalizes acquisition of the Finnish company’s devices and services business.

The survey results remain grim for BlackBerry, which continues to be stuck near its lowest levels ever in a ChangeWave survey. Moreover, nearly half of current users say they will not purchase a BlackBerry smart phone in the future.

Interest in large-screen devices is surging to the highest level since we began tracking the trend in 2012. Samsung remains best positioned to gain here, but interest among non-Samsung buyers is increasing as well – as other manufacturers offer new phablet devices.

Summary of Key Findings

The ChangeWave Research Networkis a group of 25,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Table of Contents

Summary of Key Findings...... 9

The Findings...... 11

Next 90 Days: Smart Phone Manufacturer Demand...... 11

Overall Smart Phone Purchasing...... 15

Smart Phone Customer Satisfaction...... 16

Mobile Operating Systems ...... 17

Momentum Continues for Big Screen Smart Phones ...... 19

A Look atiOS 7 and iTunes Radio ...... 21

Other Smart Phone Findings ...... 24

ChangeWave Research Methodology...... 29

About ChangeWave Research...... 29

About 451 Research...... 29

The Findings

Introduction:Back in September our ChangeWave smart phone survey showed the new Apple iPhone 5S and 5C launches causing a surge in consumer planned buying. But which manufacturers now have momentum?

Our December 10 – 27survey of 4,248 consumers has taken a fresh look at smart phone trends going forward, and finds Samsung’s momentum rebounding after a tough fourth quarter as interest in phablet devices continues to rise. Apple demand also remains strong.

This survey focused primarily on the North American smart phone market (88% of respondents are from the U.S) and also looked at customer satisfaction and OS demand. ChangeWave Research is a service of 451 Research.

(A) Next 90 Days: Smart Phone Manufacturer Demand

Apple continues to lead among respondents planning to buy a smart phone in the next 90 days, with one-in-two (48%) saying they’ll get an iPhone.

Although this is down from the momentum surge in the wake of last quarter’s 5S and 5C releases, the trend is similar to what we typically see in the aftermath of new iPhone releases, as the following chart points out.

Note when we asked respondents who plan on purchasing an iPhone to tell us which model they’re most interested in buying, the 5S (73%) dominates.

Planned Apple
Buyers:
Next 90 Days / Current
Survey
Dec ‘13
Apple iPhone 5S / 73%
Apple iPhone 5C / 8%
Apple iPhone 4S / 8%
Don't Know / 11%

Following last quarter’s decline, Samsung (19%) has regained its momentum – with a 5-pt jump in planned buying going forward.

The Galaxy S 4 (45%) is still the most popular Samsung model consumers plan on buying, but there is significant demand for the Note 3 phablet (18%) as well.

Planned Samsung
Buyers:
Next 90 Days / Current Survey Dec ‘13
Samsung Galaxy S 4 / 45%
Samsung Galaxy Note 3 / 18%
Samsung Galaxy S III / 9%
Samsung Galaxy S 4 Mini / 4%
Don’t Know/ Other / 23%

Other Manufacturers. While it still trails by a wide margin, Nokia (4%) is up 1-pt this quarter to their highest level of the past five years – encouraging news for Microsoft as it finalizes the acquisition of Nokia’s devices and services business.

HTC (2%) is seeing a slight 1-pt uptick, while Motorola (4%) is unchanged –but both remain near their all-time ChangeWave lows.

BlackBerry’s share of planned smart phone purchases (2%) is stuck at its second lowest level ever in a ChangeWave survey.

Who is the manufacturer of the Smart Phone you plan on buying?

Current Survey Dec ‘13 / Previous Survey Sep ‘13 / Previous Survey Jun ‘13 / Previous Survey Mar ‘13 / Previous Survey Dec ‘12 / Previous Survey Sep ‘12
Apple (e.g., iPhone) / 48% / 63% / 44% / 40% / 50% / 71%
Samsung (e.g., Galaxy S 4, Note 3) / 19% / 14% / 26% / 27% / 21% / 13%
Motorola (e.g., Moto X, Droid Maxx) / 4% / 4% / 1% / 5% / 4% / 2%
Nokia (e.g., Lumia 1520, Lumia 1020) / 4% / 3% / 3% / 2% / 3% / 2%
LG (e.g., Google Nexus 5, Optimus G) / 3% / 2% / 2% / 1% / 3% / 0%
BlackBerry (e.g., Z30, Q10) / 2% / 2% / 4% / 7% / 4% / 1%
HTC (e.g., One, One X+) / 2% / 1% / 3% / 2% / 2% / 1%
Don't Know/Other / 16% / 11% / 16% / 16% / 14% / 11%

(B) Overall Smart Phone Purchasing

In the aftermath of the holiday shopping season and the momentum generated by the new iPhone launches, overall smart phone purchase plans are settling back this quarter. A total of 14.5% of respondents say they plan on purchasing a smart phone going forward, the same as six months ago.

Apple continues to outperform in terms of smart phone customer satisfaction – 68% of all iPhone owners say they’re Very Satisfied with their phone.

Percentage of Respondents Very Satisfied with their Smart Phone – By Manufacturer

(D) Mobile Operating Systems

Another three-in-ten (30%) planned buyers say they’d prefer to have the Android OS on their new phone – up 7-pts.

In an encouraging sign for Microsoft, after slipping last quarter Windows Phone 8 (6%) is up 2-pts and is just shy of its year ago high immediately after their new OS release.

*In surveys prior to Sep ‘12 the response choice was either Windows Phone 7 or Windows Mobile

In contrast, BlackBerry OS (2%) is unchanged from last quarter and only 1-pt above its all-time low.

OS Customer Satisfaction

We also took a look at OS customer satisfaction ratings based upon the operating system consumers have on their smart phones. Apple remains the clear leader here – with 68% of iOS users saying they’re Very Satisfied.

Windows Phone 8 operating system (48%) and Android OS (48%) are now in a dead heat for second place, and both remain far ahead of the satisfaction rating for BlackBerry OS (23%).

Note: ‘Don’t Know/Other’= 33%.

In comparison, twice as many (45%) say they’re switching away from BlackBerry phones – with Apple (16%) benefitting most, followed by Android (9%).

(E) Continued Momentum for Big Screen Smart Phones

What screen size are you most interested in buying?

Current Survey Dec ‘13 / Previous Survey Sep ’13 / Previous Survey Jun ‘13 / Previous Survey Mar ‘13 / Previous Survey Dec ‘12
Less Than 3 Inch Screen / 1% / 0% / 2% / 1% / 3%
3.0-3.9 Inch Screen / 14% / 12% / 12% / 14% / 18%
4.0-4.9 Inch Screen / 46% / 55% / 51% / 52% / 52%
5 Inch Screen or Larger / 40% / 32% / 36% / 33% / 27%

Samsung continues to dominate in this space, with three-in-five planned Samsung buyers (58%; unchanged) saying they’re most interested in purchasing a 5” screen or larger device.

Cannibalization of Tablets

The phablet phenomenon continues to pose a threat to other products – with tablets in particular showing vulnerability.

We asked phablet owners who also have a tablet device about how the use of their tablet has changed since purchasing the larger-screen phone.

For “Phablet” owners who also own a Tablet, which of the following best describes how the use of your Tablet has changed since purchasing your “Phablet”?