Carrier, Pricing Leave IPhone Slightly Vulnerable

by Aaron Baar, Jun 23, 2009, 2:48 PM

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With its overwhelming popularity and cool cachet, it seems like there's almost no stopping the iPhone. But still, there are barriers on the path to purchase for some consumers, most notably price and carrier.

According to consumer tracking information from The NPD Group, 42% of people who do not own an iPhone cited its price -- which until a few weeks ago cost $199 -- as their reason not to buy one. (The leading reason, cited by 55% of the consumers, was "lack of interest.") The survey of more than 1,500 consumers was taken, however, prior to Apple's decision to lower the price of its iPhone 3G to $99 earlier this month.

"One of the leading reasons given for not wanting the iPhone was that it was too expensive," Ross Rubin, NPD's director of industry analysis, tells Marketing Daily. "The halving of the price of that handset should help Apple drive the customer base."

The other two barriers to purchase were the handset's exclusivity with AT&T Wireless and the data plan pricing associated with it. According to NPD, 18% of the respondents said the data plan was too expensive, and 21% said they didn't want to switch carriers. (Carrier loyalty was particularly strong among Verizon Wireless customers, Rubin says.)

"There are reasons to believe this won't lead to a total shift [to AT&T and the iPhone]," Rubin says. "We now have other carriers that have phones with features similar to the iPhone. There are lots of reasons why consumers may want an alternative device."

Maybe so, but loyalty among those who already own an iPhone is particularly strong. According to Crowd Science, 82% of current iPhone users are loyal to the iPhone brand. Moreover, 40% of BlackBerry users -- still the smartphone market share leader, according to NPD -- said they would switch to an iPhone with their next purchase. (Conversely, only 14% of non-BlackBerry users would switch to the BlackBerry product.)

"There's very little BlackBerry envy," John Martin, CEO of Crowd Science, tells Marketing Daily. "[Apple's] satisfaction scores are amazing, particularly just three years in."

With the first generation of iPhone buyers approaching the end of their two-year contract agreements, Crowd Science's numbers would suggest there's very little to stop Apple from keeping iPhone customers as their contracts expire. (Further evidence of Apple's strength: the company's announcement Monday that it had sold one million of its newest phone, the 3G S, in its first three days of release), BlackBerry maker RIM may have to settle for being the "big No. 2 player," Martin says.

"It's a huge, huge market. They have to weather the storm in the short term," he says. "I hope RIM and/or [Pre maker] Palm get their act together. It would be sad to have it just be a one-horse race."

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