Table of Contents
The Consumer Behavior Problem
When choosing the smartphone that best fits their needs, consumers are given choices between many brands. Among those brands are the market leaders including Apple, Samsung, and Google; as well as secondary brands like LG, HTC, and Motorola. Each brand has its own qualities that separates it from the others. Both material and sentimental values including brand identity, product quality, operating system, storage, camera, and cost are all major factors that drive smartphone sales. To fully understand Apple’s consumers, market share, and trends, it is important to analyze consumer purchase behavior; specifically brand loyalty and consumer needs. Competitors are beginning to find ways to draw consumers away from the tech giant, and Apple must do whatever it can to retain market share.
The release of the iPhone X in November of 2017 was a milestone for Apple smartphones. The new iPhone was unlike any before it; it had no home button, no headphone jack, and OS capabilities surpassing its predecessors. (Hastleton) Apple’s brand loyalty is a driving factor in its overall success. Steve Jobs built Apple with core values that provoked consumer’s emotions and needs. What continues to lead consumers to purchase the newest models and drive market share can be easiest understood by looking at the law of diffusion of innovation.
According to the law, developed and popularized by Everett Rogers in 1962, five major roles are played by consumers in the initial purchase opportunity. (Yurtoğlua) These are the innovators (2.5%), early adopters (13.5%), early majority (34%), late majority (34%), and laggards (16%). (Yurtoğlu) It is noted by Simon Sinek in his Ted Talk that in order to achieve “mass market success”, you must successfully reach 15-18% market penetration. (Sinek) Apple’s ingenuity is widely accepted by innovators and early adopters, but where Apple finds success is in its early majority, the group of consumers that allow Apple to “cross the chasm”, in the words of Geoffrey Moore.
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Apple is much more than a hardware company. The startup computer company has found its way into a variety of industries including books, music, tv, and software to name a few. This diversification can create a real challenge for a company so popularly known for its iPhone. Samsung finds its competitive advantage in its ability to focus on hardware while relying on Google’s Android operating system for software. (Beattie)Due to the relative simplicity of Samsung’s operations, it has recently been able to drive pace and innovation to compete with Apple; releasing the Samsung Galaxy S line on a yearly basis. As competing companies continue to find their advantages it begins to “close to gap and eliminate the premium Apple can charge for its products.” (Beattie) In conclusion, Apple brand loyalists will continue to support Apple if the high standards continue to be met. If Apple however, falls behind under Tim Cook (CEO), consumers will have better purchase options at a fraction of the price.
SWOT Analysis
Strengths
- Brand Loyalty
- Leading Technology
- Improved battery life
- iPhone X dual 12 megapixel camera
- Touch I.D. and Apple Pay
Weaknesses
- High cost (Google, Samsung, HTC offer affordable competition)
- Non removable battery
Opportunities
- Expanding into Asian markets
- Increased dependence on technology
- Tim Cook filling the role of Steve Jobs
- Always room for improvement
Threats
- Cheaper Brand Smartphones
- Free Android Operating System
- Rising Labor Costs
The Consumer
According to a Nielsen study conducted in Q3 2016, smartphone ownership for the 18-24, 25-34, and 35-44 age groups based in the United States was 98%, 97%, and 96%, respectively (“Millennials Are Top Smartphone Users”). The Android operating system (OS) dominated 51% of the smartphone market with Apple’s iOS claiming 43%. The remaining 6% was occupied by Windows Phone, Blackberry, and “Other” (“Millennials Are Top Smartphone Users”). The Android OS can be found on smartphones produced by Google, HTC, Huawei, LG, Motorola, Samsung, and Sony, to name a few.
As for Apple’s iOS, Apple is the only manufacturer that utilized this operating system. Nielsen noted that 45% of the US-based respondents owned an Apple mobile device with another 32% owning a Samsung device (“Millennials Are Top Smartphone Users”). On a global scale, however, the International Data Corporation (IDC) released mobile phone data from Q2 in 2018 which listed Samsung as having the greatest market share followed by Huawei with Apple occupying the third position (“Smartphone Rankings Shaken Up Once”).
In August 2018, a survey was conducted by PC Mag to understand why consumers take the leap and move to another operating system. 2,500 US-based consumers responded over a three-day period. 18% of the respondents made the transition to iOS from Android and 11% made the switch to Android from iOS. The survey’s reasons for switching included: Better User Experience, Better Features (Camera, Design, etc.), Better Prices, More Apps, Better Customer Service, Faster Software Updates, and Other (Griffith).
Respondents who claimed to switch from iOS to Android voiced that a better user experience, better features, and better prices were their main reasons for switching. The values for those categories were 30%, 24%, and 29%, respectively. As for those who made the transition from Android to iOS, 47% said a better user experience was the deciding factor. Better features claimed 25% and better prices covered 11% of the group (Griffith).
As mentioned above, smartphone ownership is prevalent among the 18-24, 25-34, and 35-44 age groups. Millennials and Gen Xers are the primary consumers; however, in terms of contribution to the global smartphone market, a monetary value is not available at this time. Statista claims that smartphone sales totaled 478.7 billion USD in 2017 and that by 2021, 40% of the population worldwide will own a smartphone (“Topic: Smartphone Industry Analysis”). While the global smartphone market has been relatively stagnant, even turning negative in past quarters, growth is expected.
Ryan Reith, Vice President of IDC, believes that first-time buyers fuel the growth in the developing markets. With the prevalence of smartphones in the marketplace, younger generations have greater access to the advanced technology. As with all markets, smartphone consumers tend to hold values and attributes highly which sway their decisions. As noted in the PCMag survey above, user experience, features, and price play an important role in making a purchase decision or determining whether or not to switch handsets.
Focus Group
In conducting a focus group the main goal was to gain conversational data on why consumers make the decision to switch from an Apple Iphone to one of the many android related options. This question was posed to determine the reasons individuals make choices when purchasing a cell phone. What of those choices are most important to them and why or why not Apple Iphone has met those needs.
Opening questions included how many of the attendants have owned and Iphone in the past and how many currently own an IPhone. These were opening questions to get the group on board in understanding what direction the rest of the questions were going to go. Responses in the first group were 6/6 had previously owned Iphones but only 1/6 still currently did and in the second group it was 7/7 on both accounts. Which allowed for better overall data because both groups were composed of like minded individuals. Leading to 100% percent of previous ownership and 61% of current ownership. Even though this is a small sample size this still shows a huge drop in percentage in the consumers questioned.
Questions that followed. If you do not currently own an Iphone but have previously can you tell me overall what was the main reason you chose to switch and we will get more in depth later on? The general responses were that the individuals that chose to switch did so based on the main reason of the camera and camera options being available were better on many of the Android phone options. However many of those who had switch were willing to admit that they missed some of the features there previous Iphones had to offer such as battery life, Durability, and available support for the product.
- What is your general opinion of Apple’s iphone and Apple as a company?
Overall responses varied but one of the respondents who is a T Mobile employee had some interesting insight on the subject. Hes take was that Apple has much better hardware because they invest the time and money to make it perfect. However if you purchase an Iphone if you want all of your devices to function together Apple pushes you to also own the rest of their products. They also seem still be trend setting with being the first company to remove the headphone jack and then others to follow. This was done to increase water resistance as well as to generate a better aesthetic and better use appeal when listening to music.
However he will not use an iphone because Android is more open source and is more customizable. The rest of the groups take was based around price and that it is difficult to justify owning an I phone or any apple products due to this as well as the overall amount of other stuff you need to purchase to use its devices at full functionality. As well as some were unwilling to switch or switch back because they did not want to have to learn a new operating system. Respondents that currently own an Iphone and always have admitted to liking having an iphone because all of their friends do and like to have all of their products be the same brand.
The rest of the questions focused on what are your opinions of the different options and application options offered between Apple and Android?, What is your main deciding factor on purchase of a Smartphone?
Opinions varied in responses for these questions but he general consensus was that if you are into having full control over your devices android is the way to go you can essentially install whatever you want on the device with minimal work. Such as emulators which you cannot get on Iphone allowing you to play previous years Gameboy games. The play store has more options available. (However the T mobile employee admitted that the Apple Store is better regulated).
The main deciding factors for most was cost with a good camera and even though one of the owners owns an Iphone he does not purchase new devices he buys refurbished previous model Iphones not because they are an accessory but because they are durable and remain functional longer. The T Mobile employee who was much more tech savvy then the rest of the group said his deciding factor was related around the sensors in the phone that control GPS, Barometers and Gyroscopes that overall increase the functionality of the phone was well as available tech support on the device. (still would not own an Iphone)
Conclusion
Question: What is everyone’s feeling about where the cellphone market currently is and were it is heading in relation to Apple or Android?
This question was posed a little too broadly and required some narrowing however it generated some high quality responses. The group agreed that technology she be based around the creation of convenience and efficiency and that Apple does not seem to follow this rule. This can be seen in the removal of the headphone jack and the requirement of dongles etc to fully use the product. This does not adhere to the basis that technology is built on, the creation of more efficient life. Apple seems to be more directly focused on capitalizing on their brand loyalty and sucking people into buying the add ons necessary.
Other factors to consider that the T Mobile employee brought the attention is that Apple spends aggressively more time than Android companies in phone development but this means that the phones are starting development generally 1 to 2 years ahead of the Android companies who take 6 months for development. This allows Apple to perfect their product but they will not have the newest technology present in their phones. Hence why camera technology seems to be falling behind and they will not be the first company to have 5G or Satellite access when it is released. AS we move forward the group agrees that eventually the Smartphone market share will start to drop similar to how the Laptop has as smartphones become more and more capable and satellite technology becomes the standard.
This focus group was designed to help determine why individuals make the choice to switch from Iphone to Android. If you ignore the rest of the qualitative data unrelated to this question it can be determined individuals choose to switch due to Iphone cost, Iphone being behind due to long production times, Iphone Lack of customizability, Forced use of all Apple Products, Apples non adherence to technology being used for life efficiency and Focusing on it solely as a consumer product to generate profit. lastly Iphone camera and camera functions not being as good as some Android phones offered.
These responses were put into quantitative form below and you can find the minutes from the focus group questions at the back of the back of the document.
Survey
As our other main way of gaining primary research we decided to conduct a survey, trying to get as many people with different demographics involved as possible in an attempt to gain more (unbiased) information about current smartphone preferences and opinions as well as get a feel for what veers consumers decisions about their smartphone purchases. The survey questions asked included:
- What is your age?
- What is your gender?
- What kind of phone do you use?
- How old is your current smartphone?
When it comes to smartphones the most important quality to me is:
- I am willing to pay more in order to stick with a brand that I like
- I prefer all of my technological devices to stay the same brand
- I would be willing to switch brands based on decreased cost
- I am pleased with my current brands customer service
- I am influenced by what devices my peers are using
Based on the results of the survey there was a total of 64 participants with the average age range of 14-23 years old (at 63.49%) and female (70%). The results showed that 70% of the participants were iPhone users, samsung coming in second at 15.6%. This shows us that (at least based on the survey) iPhone dominates the smartphone market by far. Pulling in other sources to back up this data, statistica.com shows that 43.5% of smartphone users have iPhones. Although this doesn’t prove that they completely dominate the market it shows that iPhone is still a major force in it.
Our results also showed that 44.44% of the participants owned phones that were 1-2 years old. 25% owned phones that were brand new as well as 25% whose phones were 2-3 years old. Only 4.6% of participants owned phones that were 4 years or older. This shows us that the highest percentage of participants own phones between 1-2 years old. One of the reasons for this could be due to the cost of a new phone vs. an older model (as shown in question 5 where when asked what the most important quality is when looking for a phone, price was rated the highest of importance, just above brand and durability which were tied for second).
Recommendations
From the data gathered and viewed in relation to why individuals switch from Apple Iphone to Android based to devices it is safe to say that this is done for an array of different reasons the main ones however being.
- Cost
- Camera
- Android personalization
- More can be done with Android
- Removal of Headphone Jack
- Apple being behind with new technology
If you look at all of these factors there are some that apple can and cannot change. Apple position has always been to release a product that is extremely visually appealing with quality hardware at high cost. In gathering secondary data in conversations with a T Mobile employee consumers are willing to purchase the most expensive phone available because it makes them feel like they have the best device on the market regardless if this is the case or not. When samsung came out with the Note and it was more expensive than Iphone many switched.
Then switched back when Iphone became more expensive. Apple position on price should not change due to this consumer trend. However there are reasons why people switch that Apple needs to be more wary of including removal of the headphone jack and being behind with new technology. Frequently apple begins development so early on their devices that they do not get the newest camera or the best connection speeds. It would be recommended that Apple find a way to move these features to the end of the production process allowing them to adopt the new technology as it is released where consumers would prefer to have the best camera and 5G when it comes out.
The removal of the headphone jack may have been done because augmented reality and VR changes are coming soon but it has still created backlash from consumers. Apple could benefit during this transition period offering both options and maybe incentivising customers who purchase phones without a headphone jack with free set of airpods.
References
- Consumer Purchase Behavior – Analysis of consumer purchase behavior and brand loyalty.
- Mass Market Success – Simon Sinek’s perspective on achieving mass market success and market penetration.
