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November 28, 2011

No surprise that smartphone loyalty is tied to apps and services

Smartphones are essentially little computers. So its no surprise that, like the computer industry, the specs arms race is drying up and content is leading the way.

By Cbr Rolling Blog

Consumer ‘lock in’ through their app and service eco-system may do more to keep customers’ loyalty than any other concern. Despite hardware manufacturers pushing a technological arms race, users rate usability far more highly than specs.

According to new research by GfK, a seamless integrated experience across phones, software, services and downloads means that customers find it very difficult to change brands. When your phone is loaded with digital music, movies, books and videogames is this any surprise?

Apple users in particular have said they would find it harder to change their smartphones than it would be to change power companies. For users with both and iPhone and iPad, this figure was 19%.

Apples eco-system divides critics – the company’s vertical integration means it keeps tight controls on what is available, which is key to the seamless simplicity of its products across the whole line. Critics see it as a cynical lock in ploy to stop consumers leaving for rivals.

Customers couldn’t give a damn what either group thinks – they want something that simply works and have been buying iPhones in droves – even in the enterprise space.

So what happens if someone wants to leave? They usually can’t be bothered.

33% of respondents cited concern with disrupting their current smartphone set-up (i.e. the apps and features they use), 29% were concerned about having to learn how to use another type of smartphone. 28% were bothered about how they would move their content (music, video, books, apps) from one type of smartphone to another.

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Using Apple as an example, music and movies usually tend to be in Apple’s proprietary formats, while apps and services are tied to Apple’s App Store platform and cannot be transferred to rival networks. A new phone would require reinstalling all media and content, and repurchasing all your .apps (assuming they are on the other platform)

It also requires a measure of tech savvy-ness to convert video and music to another company’s file format. Apple’s iTunes of course will do all this for you without any tech knowhow. I know I have podcasts and music dating back to my first iPod in 2003 in Apple’s AAC format. I am not going to spend an entire weekend converting them to MP3.

I have around £30 of apps on my iPhone. As much as i loved my work BlackBerry, I certainly am not going to repurchase all those programs (and none of them are available on the BlackBerry store anyhow).

Sony and Microsoft have historically tried and failed to lock in consumers to devices with proprietary file formats and restrictions, such as through the Zune and Walkman brands, and run up against exactly this problem. Content, combined with long term dominance, would appear to be the key in Apple’s case.

More concerning, has it already won the smartphone war?

GpK’s research suggests that the tipping point for loyalty is when a consumer uses seven or more services on their device. Consumers in the US are the most likely to use seven or more services (61%), followed closely by China (56%) and Brazil (53%). In comparison to this, European countries use fewer services on their smartphone; France and Italy (46%), Germany (45%), Spain (43%) and the UK (42%).

Customers are only interested in high powered processors and camera megapixel rates as a secondary concern to the user experience. A quad core smartphone will not play Angry Birds, read email or watch the Simpsons any better. This makes it very hard for any new hardware players to break in without a tie up to a rich content provider.

This follows hot on the heels of GfK’s release last week that showed 84% of iPhone users they surveyed said they would pick the iPhone again.

Apples two major competitors reflect different visions of the market. Google’s Android software saw a 60% loyalty. Android based handsets can replicate Apple’s online ecosystem in terms of media and app offerings, but have no standisation across handsets (Samsung is the dominant hardware supplier, but everyone from LG to Sony uses Android). Meaning less tech savvy consumers need technical knowhow to buy their phone, even if they do like the operating system.

Research in Motion and its BlackBerry shares a vertically integrated model with Apple, but its software and content offerings are sparse and have not kept up with the times. GpK’s research shows that just 48 percent of users are now looking at buying another BlackBerry. The company has had a woeful year that has seen its shareprice collapse by 75%. Its App Store remains a tumbleweed strewn desert when compared to Apple, Google’s and even Amazon’s offerings (Amazon has been rumoured to be launching tis own smartphone next year).

Nokia in its new partnership with Microsoft is hoping that the Windows 8 platform can get both companies back into the smartphone space, and certainly any horizontal integration across the Windows and Office lines of products on desktops and workplaces would be an advantage. But again the partnership’s media and app store offerings are limited compared to its competitors. Its flagship model, the Lumia 800, has been praised but analyst forecasts have lowered sales projections.

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