The release of the iPhone 7 has been greeted by the customary media coverage and hype. But for all the talk of AirPods and waterproofing we should look at who these articles are talking to – the people who are actually going to buy the devices.
It is now almost a decade since Apple revolutionised the mobile market with the release of the iPhone’s first iteration. In the UK it tore up the rulebook and scattered the then powerhouses; BlackBerry now appears to be a spent force while Microsoft’s phone business – the manufacturer formerly known as Nokia - is like a resistance outfit in the hills backed by big money; it’s not going away but it’s not making many inroads either.
Instead in Britain we have the new established and polarised order. When it comes to operating systems it essentially now boils down to Android and iOS and when it comes to devices it’s really a straight battle between Apple and Samsung.
However, there is not too much battling going on. Samsung and Apple both have very loyal customer bases. Apple’s is slightly more so (with 85% of iPhone customers saying their next phone will from the manufacturer), but Samsung’s scores on this front are also strong (73%) and comfortably outstrip any other competitor. And given Apple only caters to the higher end of the market with their premium products, Samsung offering a range of devices that cater to different audiences has engendered a wide spread of loyalty.
As it stands, only Apple and Samsung are currently net beneficiaries of customer churn. Most other brands customers state that they aspire to move to Samsung or Apple. Given Apple is focused on the higher end of the handset market it is not surprising that there is less churn towards them and more towards Samsung. Our data shows that they essentially evens when it comes to movement between each other, with 5% going from Apple to Samsung and 6% going in the opposite direction.
We see the increasingly binary nature of the handset market with new device launches. Six months ago, Samsung released the Galaxy S7 and S7 Edge. Three quarters (75%) of those planning on buying one were existing Samsung customers. Given the wide portfolio of higher and lower end devices the company offers, this figure is particularly impressive.
Similarly, our figures show that 95% of people buying the iPhone 7 will already be Apple customers, with the remaining 5% coming from Samsung (3%) and the other manufacturers (2%). These levels of retention highlight how polarised the device market is – for both Samsung and Apple the pool is getting increasingly deep without really getting that much wider.
Apple has a large number of customers in a position to buy the iPhone 7. Just over a third (36%) of iPhone owners can get a new iPhone whenever they like as they are on Pay As You Go, SIM only or have finished their contracts. How many of them will is another matter.
While it would be easy to assume that the brand would be looking to engage those with older models of iPhone, in fact the opposite is true. In June, before the release schedule for the latest handset was known, we asked current owners whether they would buy a “future iPhone”. The data shows that those who currently own an iPhone 4 or 4S are more likely to want an iPhone 5/5S/5C or 6/6 Plus next (with just 3% expecting to get the latest iteration). It is a similar story among iPhone 5, 5S, and 5C owners who favour the iPhone 6 models over the new model (just 17% plan to get the latest iPhone).
Instead, those who bought the iPhone 6/ 6 Plus represent the core group for the newest model, with 84% planning on doing so. These are not so much early adopters as Apple aficionados who have to have the latest iterations of the brand’s devices. They will also be approaching the end of the two-year contracts they took out when they got the last iPhone launched.
Given the state of the market it is clear that much of the hype around phone launches is less to do with converting rivals’ customers and more about using the loud hailer of the media to promote the new features and innovations to existing owners. Or, to be more precise, the smaller group of existing customers in a position to trade up. While many of these features could well become industry standards within a couple of years, the brand first needs to bed them in with their existing customers. The chances are that they will.
Image from PA