Are Consumers Ready (To Pay) For The iPhone?
Written by Ryan Burke (contact - e-mail) -- January 18th, 2007 | Recommend ThisFrom the desk of Compete’s Wireless practice.
With a first glance at holiday shopping behavior, there seems to be a fertile opportunity for the much anticipated iPhone. With over 33% of all wireless phones now being music enabled, Compete found that holiday interest in music phones made up over 53% of all December cellphone shopping interest. There were just over 3 million total music phone shoppers in December, and almost as many iPod shoppers, with 2.7 million consumers evaluating iPods online, something that would seemingly signal a perfect opportunity for a peanut butter and chocolate combination.
Surprisingly, through Compete’s unique perspective of online behavior, Compete found that only 5% of all cellphone shoppers also evaluated an iPod in December, and only 3% viewed both a music phone and an iPod.
This lack of overlap illustrates the clear delineation that currently exists between music players and cellphones, the very gap the iPhone is hoping to bridge. One way to do this is to focus on the current iPod segment, especially since among consumers who shopped for both an iPod and a cellphone, 63% of those cellphones were music enabled.
When Mr. Jobs announced his intention of selling 10 million iPhones in 2008, you would think the current iPod community is ripe for the picking. Maybe, but break out the iBates. Even among the diehard segment of iPod shoppers who said they are very likely to buy an iPhone, only 6% said they would pay over $400.
A week after the historic announcement of the iPhone, Compete behaviorally targeted online iPod shoppers to get their take on the supposed must-haveware. 75% of these iPod shoppers had already heard of the iPhone, and a healthy 20% said they would postpone their next cellphone purchase to wait for it. 20% also said they would postpone their next music player purchase, not bad for a device unavailable for the next six months.
What does this mean for the carriers? The good news for Cingular is that 12% of iPod shoppers said they would be very likely to switch carriers to get the iPhone. The bad news is that of the people who are not willing to switch, over 30% cite Cingular’s service plan pricing, and another 35% cite Cingular’s coverage. Of the people not likely to switch, almost 40% said they had no interest in purchasing a combination music player and phone, and over 55% said their current carrier has cellphones that meet their needs.
It is clear that Apple and Cingular are targeting a niche market with a higher priced, dual threat device, but the biggest barrier remains the price. As the RAZR and the recent influx of consumer oriented smartphones have proven, the magic number seems to be closer to $200, or a couple hundred free iTunes.
For more information please email wirelesspractice@compete.com.
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January 19th, 2007 at 12:26 am
Sure people are taken aback at the cost of this phone. It’s priced for the business elite even though it doesn’t do business apps particularly well. It’s a high powered recreational toy for the early adapters that’s got overpriced Minority Report knockoff written all over it, but how can anyone compain about $600 for what boils down to a simplified UMPC that makes phone calls and has a touchscreen iPod!
I’m curious can you find out are those people you said were interested in music phones MAINLY interested in those phones because of the music features? How many of the cell phone shoppers you mentioned have some incarnation of an iPod already and how many of them would still carry iPods plus cellphones (music or non)?
Though far from a fanboy fluffer, I consider myself a pretty big iPod fan that would quickly put up both my iPod nano and my smartphone on eBay to put some money towards a phone with 8GB of storage and a 3.5 mm headphone jack regardless of the UI.
Add to the music phone some zoomable/pinchable web-browsing, photo management and video playback with multi-touch on a full screen, a slick Apple UI with widgets, maps, email, visual voicemail, intuitive contact management and cover flow and Apple can have my $600!!
I’m not saying it’s perfect (3G, Slingplayer & iSight would help), but c’mon this is more than a $600 dual threat device!
January 20th, 2007 at 6:07 pm
Some dude - definitely good points, and I agree that more than a few folks will probably shell out the $600 for the iPhone. The point is that they probably won’t have to, especially if the rumors about the potential iPhone margins are true, there will be plenty of flexibility to bring the price down pretty quickly. We did some similar analysis when the RAZR first came out at $500 and folks said pretty much the same thing about the price being too high, and now you can get them for as low as $50. The real interesting thing here is how many people said they will switch to Cingular to get one, and make the $2000-2500 2 year investment for the device. We haven’t asked the music phone shoppers how much the music enablement has driven their decision, but I would guess it isn’t the primary factor, especially given that our results showed that almost 40% of the people who won’t switch to Cingular don’t want a combination device at all. At least not yet. Let me know if you have any other questions
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