The NPD Group: Smartphones Drive More Handset Sales Overall, But Lower Prices Stall Total Handset Revenue Growth

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Recommendations from family and friends and consumer-service ratings lead motivators for smartphone buyers

Although we are seeing more expensive models among the best-selling handsets, carriers are now offering some popular smartphones for less than $100

According to The NPD Group, a leader in wireless market research, driven by promotions and lower prices, smartphones gained market share against non-OS-equipped feature phones. Smartphone share grew from 23 percent of the total handset market in the fourth quarter (Q4) of 2008 to 31 percent in Q4 2009. Nearly two-thirds of smartphones were purchased for $150 or less in Q4 2009, versus less than half purchased at that price level in Q4 of 2008. Thanks to these lower prices, smartphone sales were strong in Q4 2009; however, overall smartphone year-over-year revenue growth reached just 21 percent, which was far less than the 37 percent posted the previous year.

“Although we are seeing more expensive models among the best-selling handsets, carriers are now offering some popular smartphones for less than $100,” said Ross Rubin, executive director of industry analysis for NPD. “As the average price of these highly capable devices continues to fall, the price of data plans and ease of use will emerge as more significant factors to limiting consumer sales growth.”

Based on the latest data from NPD’s “Smartphone Market Update,” when it comes to purchase motivators for smartphones, consumers relied primarily on recommendations from family and friends (29 percent) or chose handsets owned by people they know (18 percent). This finding was especially prevalent among iPhone and Blackberry Curve buyers. Consumers also mentioned high consumer-service ratings as more important in the decision making process for smartphones (17 percent) than for feature phones (6 percent).

When compared to smartphone buyers, feature-phone buyers focused more on ease of use, as a key purchase criterion. Smartphone buyers tend to care more about their phone’s available capabilities, the fact that it leverages the latest technology, and that it is considered to be a “cool phone”.

With many carriers now offering exclusivity on specific handset models, smartphone buyers were more likely than the average phone buyer to choose the phone they wanted prior to choosing their wireless carrier. “Bolstered by the brands of their hardware and operating systems, smartphones have established strong identities in the marketplace,” Rubin said. “That means more consumers now have specific models in mind when choosing their handsets.”

Methodology: The NPD Group compiles and analyzes mobile device sales data based on more than 150,000 completed online consumer research surveys each month. Surveys are based on a nationally balanced and demographically-representative sample, and results are projected to represent the entire population of U.S. consumers. Note: Sales figures do not include corporate/enterprise mobile phone sales.

About The NPD Group, Inc.
The NPD Group is the leading provider of reliable and comprehensive consumer and retail information for a wide range of industries. Today, more than 1,800 manufacturers, retailers, and service companies rely on NPD to help them drive critical business decisions at the global, national, and local market levels. NPD helps our clients to identify new business opportunities and guide product development, marketing, sales, merchandising, and other functions. Information is available for the following industry sectors: automotive, beauty, commercial technology, consumer technology, entertainment, fashion, food and beverage, foodservice, home, office supplies, software, sports, toys, and wireless. For more information, contact us, visit http://www.npd.com/, or follow us Twitter at https://twitter.com/npdgroup.

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