SMARTPHONE INDUSTRY Rachel Yan Temitope Tiamiyu Laura Battaglia Francesco Messina QUICK QUESTION How many of you used smartphones 5 years ago? How many of you are using smartphones now ? WHY SMARTPHONES? Amazing product! Relevant topic for U.S. college students - Smartphones vs Non-smartphones Past vs Future - Technology - Global trends INDUSTRY STRUCTURE A SHORT HISTORY 1992: IBM developed “Simon”, the first mobile phone to incorporate PDA (personal digital assistants) features • 1996: Nokia released Nokia 9000, a palmtop computer-style phone combined with a PDA from HP • 1997: Ericsson released the GS88, first device to be labeled as “smartphone” • A SHORT HISTORY 2000: The touchscreen Ericsson R380 Smartphone was released. First to use an open operating system, Symbian Os • 2002: RIM released the first BlackBerry, which was the first smartphone optimized for wireless email use • 2007: Apple released the first generation of iPhone, the first mobile phone to use a multi-touch interface • … New Smartphone Generation WHAT IS A SMARTPHONE NOW? A smartphone is a mobile phone built on a mobile operating system, with advanced computing capability connectivity. In addition to digital voice service, it usually provides: Text messaging and e-mail High-speed data access through Wi-Fi and mobile broadband Web browsing Video cameras MP3 player and video playback and calling Possibility to run free and paid applications HARDWARE VS. SOFTWARE Smartphone hardware manufacturers compete primarily based on one of two models: 1. manufacturing their own hardware and licensing the software that runs on the smartphone from another firm E.g. Nokia (Windows Phone) 2. manufacturing the hardware and developing the proprietary software that runs on the device E.g. Apple (iOS), RIM (Blackberry) OPERATING SYSTEMS (OS'S): Three forms: PROPRIETARY • • • • Developed in-house by smartphone manufacturers It allows to differentiate and integrate with the hardware High costs and time consuming E.g. iOS (Apple) LICENSABLE • Any manufacturer can use these OS on his devices • Reduced cost of developing an OS OPEN SOURCE • Free and freely customizable OS • Highly developed OS at no cost • E.g. Android (Google) • Licensing can be expensive also • E.g. Windows Phone (Microsoft) SALES AND MARKET SHARES OF SMARTPHONE MANUFACTURERS BRAND 2012 UNITS SOLD 2012 MARKET SHARE 2011 UNITS SOLD 2011 MARKET SHARE 1. Samsung 215.0 M 31.4% 90.9 M 18.7% 2. Apple 135.8 M 19.8% 93.1 M 19.1% 3. Huawei 55.2 M 8.0% 20.0 M 4.1% 4. Nokia 35.0 M 5.1% 77.3 M 15.9 % 5. ZTE 34.9 M 5.1% 12.0 M 2.5 % 6. RIM 33.2 M 4.8% 52.5 M 10.8 % 7. Sony 31.9 M 4.6% 26.8 M 5.5% 8. HTC 31.5 M 4.6% 44.6 M 9.2% 9. LG 27.6 M 4.0 % 23.3 M 4.8% 10. Lenovo 24.9 M 3.6% -- Others 93.2 M 8.9% 45.5 M 9.4% TOTAL 686.7 M 100% 486.0 M 100% WHAT WE CAN SEE.. 1. The smartphone market is a growing market: It grew 41% from 2011 to 2012 2. Smartphones accounted for 39% of all mobile handsets sold 3. There are 1.31 billion active smartphones in the world 4. Samsung and Apple are the major players 5. Huawei makes strong gains and is World's #3 MARKET SHARES OF SMARTPHONE MANUFACTURERS: 8.9% 3.6% 4.0% 31.4% 4.6% Samsung Apple Huawei Nokia ZTE RIM Sony HTC LG Lenovo Others 4.6% 4.8% 5.1% 5.1% 8.0% 19.8% HHI (of the first 10 players): 1668 BARRIERS TO ENTRY Relatively high: 1. ECONOMIES OF SCALE 2. INTELLECTUAL PROPERTY 3. BRAND LOYALTY 4. NETWORKING BUT THE DEGREE OF RIVALRY IS HIGH: 1. DIFFERENTIATION: significant between home and business users 2. ECONOMIES OF SCALE: almost no scalability to create more software 3. PRICE: consumers generally value quality significantly over price 4. PLAYERS: switching from traditional cellphone industry ADVERTISING STRATEGIES T YPES OF ATTRIBUTES Search attributes Online reviews Experience attributes Online reviews Our focus is on these three players: Apple Samsung Blackberry PERSUASIVE ADVERTISING • Advertising strategy deployed is to attract and retain their clients, building long term relationships with customers through “differentiation” • Ads emphasize on the perceived quality of both the phone and the brand INFORMATIVE ADVERTISING Based on the company’s competitive advantage Samsung: Size, Ease of transferring files Apple: “Incredible design”, “thin”, “smart”. iPhone trend Blackberry: Culture, Diversity, Business Product attributes: Also via ads COMPARATIVE ADVERTISING Samsung and Blackberry attacks Apple in order to steal market share Apple doesn’t respond Blackberry versus Apple http://www.youtube.com/watch?v=LwxNNsmGhVI HUMOUR APPEAL It comes very often when the ad is bundled with a network provider plan. Usually it is a sketch or a short story. CELEBRIT Y INVOLVEMENT NETWORK CARRIERS Bundling with network carriers Ad is about a story or a sketch, at the end the smartphone is shown along with the details of the plan . Direct Competition All compete on price: Samsung and Blackberry Advertising based on quality and reliability of network service: More so, true for the iPhone: AT&T: “the iPhone downloads fastest on AT&T’s 4g” Sprint: “truly unlimited data for your iPhone…only on Sprint” THE TWO MAJOR PLAYERS… captured 50% of all Smartphone sales in 2012 ADVERTISING CAMPAIGN “FINALLY” “IT’S THE MOST AMAZING IPHONE YET” APPLE Powerful brand: goes after the mainstream market Top rising brand of 2012 According to Interbrand, the Apple logo is now valued at $75.56million. Advertising expenditures: $333M Hardly responds to commercial attacks from competitors Market share of 19.8% in 2012 vs. Samsung’s 31 .4% Huge sales in developed regions like North America Limited presence in high-growth emerging markets such as Africa SAMSUNG Rated second in phones Top technology brand of 2012 Advertising expenditures: $401M Speed in launching new products Of 700 million units shipped, Samsung shipped a record 215 million smart phones worldwide Became more assertive with carriers – to distinguish itself from other android phones. Captured 31 .4% market share in 2012. Mostly attacks Apple, in order to steal market share. INTERBRAND BEST GLOBAL BRANDS, 2012 Apple Samsung 2012 Placement 2 9 2012 Brand value $75.56M $32.89M 2012 Units sold 135.8M 215M 2012 Market Share 19.8% 31.4% RAW DATA ANALYSIS RAW DATA ANALYSIS 27 T V ads analyzed (source YouTube) Players taken into account: 1. Apple (11 ads) 2. Samsung (10 ads) 3. BlackBerry (6 ads) Products advertized: 1. iPhone 5, iPhone 4/4S 2. Samsung Galaxy S3/S2, Note II, Nexus 3. BlackBerry Z10, Torch 9800, Curve Q8350 CODING TEMPLATE APPROACH OF ADVERTISING [INDUSTRY] Informative 40.7% 59.3% Persuasive Complementary Memory jamming APPROACH OF ADVERTISING APPLE Highly Persuasive 27.3% Informative Persuasive 72.7% Complementary Memory jamming Extreme strategy PERSUASIVE OR COMPLEMENTARY? Apple’s approach is sometimes complementary rather than persuasive. Maybe it could be arguable, but we think that the persuasive approach is prevalent since the aim is to charge a very high price and change consumers’ preferences. APPROACH OF ADVERTISING SAMSUNG Highly Informative Informative 10% Persuasive 90% Complementary Memory jamming Extreme strategy APPROACH OF ADVERTISING BLACKBERRY More balanced strategy Informative 33.3% Persuasive 66.7% Complementary Memory jamming PRODUCT FEATURES DESCRIBED IN THE ADS Apple 36.4% 63.6% Ads explaining phone characteristics Ads with no phone characteristics PRODUCT FEATURES DESCRIBED IN THE ADS Samsung An ad without phone characteristics is not an ad for this player! Very hard to find a Samsung ad with no features presented. Reason: Samsung wants to communicate the technological superiority of its products. PRODUCT FEATURES DESCRIBED IN THE ADS BlackBerry Ads explaining phone characteristics 16.7% 83.3% Ads with no phone characteristics HOW MANY CHARACTERISTICS PER AD? # of characteristics per ad (average) 3.5 3.5 3.0 3.1 2.5 2.0 2.27 1.5 1.0 0.5 0.0 Apple Samsung Blackberry HOW MANY CHARACTERISTICS PER AD? Why BlackBerry on average shows more product characteristics in its ads? Because it mainly addresses the target market segment of business people, who demand apps relevant to their daily job. Here is the incentive to show in detail many applications of the phone. COMPARATIVE ADVERTISEMENTS 7 5 Direct 2 Indirect 27 ads Comparative 20 Non-comparative WAR OF COMPARISON 5 direct ads where the competitor product is: 1. Mentioned 2. Shown 3. Criticized Ex: “iPhone 5 has a sketchy battery” by Samsung 2 indirect ads where: 1. They allude to distinctive characteristics of the competitor. Ex. Size of the screen between iPhone 5 and Galaxy S3 Apple claims (proportionate is good) Samsung argues (big is good) % of ads with an emphasis on the brand BRAND FOCUS 60% 50% 54.5% Mean 50.0% 40% 30% 20% 20.0% 10% 0% Apple Samsung Blackberry % of ads with a strong emphasis on the quality of the product HIGH QUALIT Y PERCEIVED 80% 70.0% 60% 40% 50.0% 45.5% 20% 0% Apple Samsung Blackberry LAST REMARKS FROM OUR ANALYSIS Price is never mentioned in the ads, except for bundled ads with network providers In the U.S. contracts make people less aware of the cost of the phone No tricks in the ads: long-term relations with customers CORNELL SURVEY Do you have a smartphone or non-smartphone? 90 80 % of Respondents 70 60 50 40 30 20 10 0 Smartphone Non-smartphone DID YOU BUY YOUR PHONE BECAUSE SOMEONE RECOMMENDED IT TO YOU? (FRIENDS, FAMILY, ONLINE REVIEWS, ETC.) 60 % of Respondents 50 40 30 20 10 0 Yes No IF NO PEOPLE AROUND YOU ARE USING SMARTPHONES, WOULD YOU STILL BUY THEM? 80 70 % of Respondents 60 50 40 30 20 10 0 Yes No Only at a cheaper price HOW WELL DO YOU REMEMBER THE IPHONE ADVERTISEMENTS? 16 14 # of Respondents 12 10 8 6 4 2 0 Don't remember at all Remember company and product but not ad Smartphone Non-smartphone Remember ad USE ONE WORD TO DESCRIBE WHAT YOU RECALL FROM IPHONE ADS? White Thin Simple Cool Smart Innovative Sophisticated Brilliant Persuasive advertising: - All positive attributes and impressions No comparative advertising - Do not compare itself to other brands HOW WELL DO YOU REMEMBER THE SAMSUNG GALAXY ADVERTISEMENTS? 18 16 # of Respondents 14 12 10 8 6 4 2 0 Don't remember at all Remember company and product but not ad Smartphone Non-smartphone Remember ad USE ONE WORD TO DESCRIBE WHAT YOU RECALL FROM SAMSUNG GALAXY ADS? Fast Good Big Easy Fancy Humor Humorous Slogan: Evolution The next big thing is already here Comparative advertising Everything the iPhone does and more. Apple WHICH SMARTPHONE REPRESENTS HIGHER SOCIAL STATUS TO YOU? 30 # of Respondents 25 20 15 10 5 0 iPhone Smartphone Samsung Galaxy Non-smartphone RECOMMENDATION Investments Advertising Strategies Globalization Stock Price (US$) APPLE INC. Time Stock Price (Korean$) SAMSUNG ELECTRONICS CO. LTD. Time ADVERTISING STRATEGIES Search attribute - features Persuasive advertising - product dif ferentiation - slogans Better execution of advertisements (e.g. Blackberry) GO GLOBAL! Successful story: Samsung Aim for places with low brand loyalty Intense advertising efforts THE END Questions?