Are Consumers Ready (To Pay) For The iPhone?

From 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.

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