ChangeWave Research: Consumer Smart Phone Trends

Consumer Smart Phones: 90 Day Outlook

Apple Maps Issue Irrelevant as Massive iPhone 5 Buying Continues; Samsung By Far the Best Positioned to Gain from Windows Phone 8

Paul Carton and Jean Crumrine

Overview: For much of the past year our ChangeWave smart phone surveys have featured surging momentum for Apple and Samsung to the detriment of the other smart phone manufacturers. But with the release of the iPhone 5 and the coming launch of Microsoft Windows 8 phones, how does the smart phone market look going forward?

A September 17-26 ChangeWave survey of 4,270 consumers has taken a close-up look at the latest smart phone demand trends, including intentions to buy the new iPhone 5 and Windows 8 phones. The survey also focused on customer satisfaction, OS preferences, and future demand for the other major smart phone manufacturers. ChangeWave Research is a service of 451 Research.

We note that this survey is primarily North American, with 88% of respondents from the U.S.

Next 90 Days: Smart Phone Market

Consumer smart phone planned buying is at an all-time high for a ChangeWave survey, with 25.2% of respondents saying they plan on buying a smart phone in the next 90 days – nearly double the number who planned on buying last quarter. Moreover, next 90 day buying plans are significantly higher than a year ago at the time of the Apple iPhone 4S launch (18.3%).

Future Manufacturer Share. Consumer buying plans for the individual smart phone manufacturers shows the Apple iPhone 5 driving much of the industry’s short term growth – with 71% of planned buyers over the next 90 days saying they’ll get the iPhone 5, a huge 21-pt leap over the previous survey in June.

The percentage of planned buyers has dropped for most of the other manufacturers, but the near doubling of overall smart phone demand this quarter (from 13.8% to 25.2%) means the outlook is nonetheless holding steady for many of Apple’s competitors.

Samsung. After an unprecedented rise in our previous three surveys – including a 6-pt surge last quarter that corresponded with the Galaxy S III launch – Samsung’s share of planned buyers (13%) is back where it was six months ago. Nonetheless, Samsung is at its second highest level ever in a ChangeWave survey and more than double that of a year ago.

Motorola. The iPhone 5 release has taken a bite out of the Android phone market, and Motorola (2%) correspondingly finds itself down 2-pts in the current survey to its lowest market share since the dawn of the Android explosion back in December 2009.

HTC. HTC (1%) also finds itself down 2-pts in terms of consumer planned buying.

Nokia. After an uptick last quarter, Nokia (2%) remains unchanged in planned buying this quarter – a relative accomplishment in the midst of the current iPhone 5 buying wave. While their overall percentage remains small, the numbers are an encouraging sign – not only for the upcoming launch of Nokia’s Windows 8 smart phones but also for their strategic partnership with Microsoft.

RIM. RIM planned buying (1%) is down 1-pt this quarter and is now tied for its all-time low in a ChangeWave survey.

Customer Satisfaction. Customer satisfaction is a primary predictor of smart phone industry demand, and as in previous ChangeWave surveys the Apple iPhone continues its premier ranking with 72% of iPhone owners saying they’re Very Satisfied with their smart phone.

Second place Samsung has a highly respectable 52% of its customers saying they’re Very Satisfied, followed by Motorola (48%). And in an encouraging sign for their newer models Nokia (44%) has moved into fourth – trading places with HTC (36%) in the process.

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

RIM (21%) continues to come in dead last in the satisfaction sweepstakes – down 1-pt in the September survey to their lowest customer satisfaction rating ever in a ChangeWave survey.

OS Preferences Among Consumers

No surprise here, the Apple OS is the number one preference among consumers planning to buy a smart phone in the next 90 days, with 68% saying they’d prefer to have the Apple iOS on their new phone – up 19-pts since June.

Android OS (16%) is still firmly in second in terms of customer preference – but with so much attention at least temporarily shifting to the iPhone 5, it has declined 14-pts since last quarter.

In an encouraging sign for Microsoft and the upcoming Windows 8 launch, Windows Phone OS (4%) is up 1-pt in buyer preferences since our previous survey. In contrast, the RIM BlackBerry OS (1%) is down 1-pt and to its lowest level ever in a ChangeWave survey.

OS Customer Satisfaction. Apple remains the clear leader in OS customer satisfaction – with 71% of customers using the Apple iOS saying they are Very Satisfied.

The Android OS ranks second, with 46% of users saying they’re Very Satisfied. Windows OS (30%) is third, well ahead of the Very Satisfied rating for the RIM OS (22%).

Importantly, a close-up look at Windows OS shows a substantial difference between the Very Satisfied rating for the newer Windows Phone OS (37%) vs. the 0% Very Satisfied rating for the older Windows Mobile OS.

More on Consumer Reaction to the Apple iPhone 5

Apple’s newest model – the iPhone 5 – became available September 21 with pre-orders starting a week earlier. To gauge overall demand trends we provided a description of the new iPhone 5 model and asked consumers how likely they would be to buy one in the future.

Apple released its next generation "iPhone 5" on September 21st. New features include a 4-inch screen, improved camera, a new iOS 6 operating system and 4G LTE capability. The iPhone 5 costs $199 for the 16GB model, $299 for the 32GB model and $399 for the 64GB model, with a 2-year contract on most of the major carriers.

How likely is it that you will buy a new Apple "iPhone 5" for yourself or someone else (e.g., a family member) in the future?

The results show an unprecedented degree of consumer interest in the iPhone 5, with one-in-three consumers (32%) saying they’re likely to buy it in the future (19% Very Likely; 13% Somewhat Likely).

For perspective, we’ve compared the current Apple iPhone 5 findings with the results of a similar demand question asked at the time of the iPhone 4S launch (October 2011):

Consumer Demand: iPhone 5 vs. iPhone 4S

Likelihood
Of Buying
Apple
iPhone 5
Current
Survey
Sep ‘12 / Likelihood
Of Buying
Apple
iPhone 4S
Previous
Survey
Oct ‘11
Very Likely / 19% / 10.0%
Somewhat Likely / 13% / 11.5%
Unlikely / 60% / 71.5%
Don't Know / 6% / 7.0%

Note that the percentage Very Likely to buy the iPhone 5 is nearly double what it was for the iPhone 4S – which till now has widely been considered the most successful smart phone release in history.

iPhone Owners vs. Non-iPhone Owners. Of course there are major differences between current iPhone owners and non-owners in terms of their likelihood of buying the iPhone 5.

·  Nearly three-out-of-five current iPhone owners (58%) say they’re likely to purchase an iPhone 5 when it becomes available (40% Very Likely; 18% Somewhat Likely).

·  But the percentage of non-iPhone owners who say they’re likely to buy Apple’s newest model is also an extraordinarily high 19% (9% Very Likely; 10% Somewhat Likely).

Reported Problems With the iPhone 5 and iOS 6 Launches

Media attention surrounding the iPhone 5 and iOS 6 launches has, among other things, focused on two issues that have been seen as disappointing some consumers:

·  The additional cost to consumers caused by Apple’s move to a new Lightning port for iPhone 5 charging and data connections

·  Problems associated with the new Apple Maps application

The ChangeWave survey took a close-up look at consumer reaction to each issue:

Apple Lightning Port. Apple’s decision to use the new Lightning port for iPhone 5 charging and data connection purposes rendered previous iPhone chargers incompatible with the new device – resulting in additional costs to buyers. We asked consumers Likely to buy the new iPhone 5 how much of a problem the Apple Lightning port issue is for them.

How much of a problem for you - if any - is Apple's decision to use the new lightning port on the iPhone 5?

Current
Survey
Sep ‘12
Very Big Problem / 6%
Somewhat of a Problem / 31%
Not Much of a Problem / 31%
No Problem at All/Haven’t Experienced Any Problem / 26%
Don’t Know / 6%

The majority of likely buyers characterized it as Not Much of a Problem (31%) orNo Problem At All (26%), although 6% did say it’s aVery Big Problem and 31% Somewhat of a Problem.

Perhaps most importantly, when we asked consumers who said they are Unlikely to buy the iPhone 5 to tell us the reason why, 0% cited the Lightning adapter.

Apple Maps. Apple’s new iOS 6 operating system – which comes pre-installed on the iPhone 5 and can be downloaded for earlier models – includes a new Apple Maps application that replaced the Google Maps app in previous iOS versions.However soon after iOS 6 was released and the iPhone 5 went on sale, media reports began circulating about user dissatisfaction with Apple Maps. Reported problems include inaccurate location searches, distorted satellite imagery, and missing points of interest in major cities.

To gauge the impact of the Apple Maps issue, we asked iPhone 5 and other iOS 6 users if they had experienced a problem with Apple Maps.

Have you experienced a problem with “Apple Maps” on your iPhone?

Current
Survey
Sep ‘12
Very Big Problem / 3%
Somewhat of a Problem / 6%
Not Much of a Problem / 1%
No Problem at All/Haven’t Experienced Any Problem / 90%

Nine-in-ten users (90%) reported it was No Problem at All or they Haven’t Experienced Any Problem, while 3% characterized it as a Very Big Problem and 6% said it was Somewhat of a Problem.

To put this in context, back in the summer of 2010 we surveyed new iPhone 4 owners on the Apple antenna/ reception issue – which at the time had received an unprecedented level of news media focus. In that 2010 ChangeWave survey, 7% of new iPhone 4 owners said the antenna/ reception issue was aVery Big Problemand 14%Somewhat of a Problem. Another two-thirds (64%) reported theyHadn't Experienced any Problem.

Here’s a head-to-head match-up of the iPhone 4 Antenna/Reception problem with the current iOS 6 Apple Maps problem:

In comparison to the iPhone 4 Antenna/Reception issue, the current Apple Maps issue is of marginal concern to iPhone5/iOS 6 users. Simply put, Apple Maps is not considered a problem by the overwhelming majority of users.

Nonetheless could the Apple Maps issue be turning off non-Apple users and causing them to avoid the product? The survey data suggests otherwise.

When we asked consumers who said they were unlikely to buy the iPhone 5 to tell us the reason why, 61% said they were unlikely to buy it because there was No Need – Their Current Cell Phone is Sufficient. In contrast, 0% said it was because of Reported Problems With Apple Maps.

Note that after this ChangeWave survey was completed, Apple CEO Tim Cooke apologized publicly for the problems associated with Apple Maps and announced that Apple was working hard to improve the app.

Customer Satisfaction Ratings: Google Maps vs. Mapquest vs. Apple Maps

We asked survey respondents how satisfied they were with the mapping application that they use most often on their phone. Not surprisingly, Google Maps had the highest Very Satisfied rating (41%) and the lowest Unsatisfied rating (6% Somewhat Unsatisfied).

Apple Maps and Mapquest were tied for second place, with 27% of each service’s users reporting they were Very Satisfied with their mapping application. We note the Unsatisfied rating for Apple Maps users (9% Somewhat Unsatisfied; 2% Very Unsatisfied) was actually a couple of points lower than the Unsatisfied rating for Mapquest users (11% Somewhat Unsatisfied; 2% Very Unsatisfied).

Below are the comparative satisfaction ratings for smart phone owners who use Google Maps or Mapquest most often versus those who use iOS 6 Apple Maps most often.

How satisfied are you with the mapping/GPS app you use most often?

Total Maps
Users / Google Maps
Users / Apple Maps / Mapquest
Users
Very Satisfied / 37% / 41% / 27% / 27%
Somewhat Satisfied / 52% / 51% / 60% / 57%
Somewhat Unsatisfied / 8% / 6% / 9% / 11%
Very Unsatisfied / 1% / 0% / 2% / 2%
Don’t Know / 2% / 0% / 2% / 3%

Later this month, we'll be conducting a follow-up survey of new Apple iPhone 5 owners to, among other things, find out which mapping applications they are using most often on their new device.

Consumer Intent to Purchase Windows 8 Smart Phones

Microsoft is expected to debut their new Windows 8 operating system during October, and several smart phone manufacturers – including Samsung , Nokia and HTC – are expected to release new Windows 8 smart phones shortly thereafter.

To get an early gauge on the upcoming demand for the new mobile OS we asked consumers how likely they would be to buy a Windows 8 smart phone.