Minority Report: Feature/Dumb Phones Become Endangered Species

According to the latest Nielsen Report, smartphones now claim the majority of the mobile phone market with a share of 50.4% in Q1 2012. Of the 50.4%, Google’s Android OS makes up 48.5%, while Apple’s iOS has 32.0%. Together, Android and iOS compose over 80% of the smartphone market.

As far as sales are concerned for Q1 2012, NPD has reported that Android sales are up at 61.0% of purchases with iPhones at 29.0%. Things shifted quickly from Q4 2011 where Android and iPhone were neck-to-neck with 49.0% to 41.0% respectively (Nielsen reported Android with 46.9% vs iPhone with 44.5%, which narrows the gap compared to NPD). This boost in iPhone sales is attributed to the release of the iPhone 4S across the US’s three major carriers: Verizon, AT&T, and Sprint. Apple still remains the number one hardware manufacturer, however (as they enjoy to point out at their keynotes).

This leaves feature phones, often dubbed dumb phones, relics of the past. When asked when Android will have a feature phone variant, Eric Schmidt, executive chairman of Google, Inc., said at MWC 2012 that he doesn’t understand why the Android smartphones won’t be the feature phones of tomorrow. This is certainly good news for cell phone carriers who enjoy inflated data prices to increase revenue per customer. When looking at Moore’s Law (really a rule of thumb), it’s almost certain that the smartphones of today will be the “feature phones” of tomorrow. Android already competes heavily on price, allowing customers with low willingness-to-buy access. Some Android phones are even offered for free with a new 2 year contract. Apple is not as competitive in the pricing arena although it does leave multiple generations of iPhones on sale at the same time to attract different customer segments.

The growth of the smartphone market in developed parts of the world, the US and Europe in particular, has become too large for businesses to ignore. Both the United Kingdom and Spain’s adoption rate have broken past 50% and now the US joins them. Key factors for this acceleration in growth of smartphones across these markets are the proliferation of 3G and 4G LTE networks, innovations in device functionality and applications, and aggressive pricing. While high end smartphones continue to stay around the $200-$300 price range on contract in the US, many of the older models become more affordable or even free. The younger generation is quickly adopting smartphones. More than two out of three people ages 25 to 34 have a smartphone.

The younger generation will be consumers for the longest period, so all businesses need to be aware of this emerging market and be ready to take advantage of it. These smartphones provide users with all of the information contained on the internet in their pocket. This allows users to instantly check restaurant ratings via Yelp! or price check a product against Amazon.com. Discontent over service can spread virally across through social networks. For a service business, all it takes is one bad customer service instance to be recorded and put on YouTube to ruin your brand.

With smartphones, people will always have information at their fingertips. People will always be connected to the internet and their social networks. The question businesses need to ask themselves is how they can take advantage of this trend to improve their business. The future is here: Are you, your business, and your IT infrastructure ready for it?

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