NPD: Smartphone Sales Reaching Critical Mass

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According to the NPD Group, smartphones accounted for 31% of all handset sales in the fourth quarter of 2009 (up from 23% for the same period in 2008). However, with nearly two-thirds of all smartphone purchases at $150 or less, year-over-year revenue growth for manufacturers was down from the previous year. Consumers' appetite for smartphones is continuing unabated, but thanks to dropping prices, companies' margins on those phones are getting smaller and smaller.

According to the NPD Group, smartphones accounted for 31% of all handset sales in the fourth quarter of 2009 (up from 23% for the same period in 2008). However, with nearly two-thirds of all smartphone purchases at $150 or less, year-over-year revenue growth for manufacturers was down from the previous year. According to the NPD Group, smartphone year-over-year revenue growth was 21%, down from the 37% posted in the fourth quarter of 2008.

"We've seen several popular models released under the $100 price point, including the iPhone 3G, and that's contributing to the popularity of smartphones," Ross Rubin, executive director of industry analysis at NPD, tells Marketing Daily. "Smartphones are moving beyond the early technology adopters to a broader consumer market."

According to the company's latest smartphone market update, consumers (particularly iPhone and BlackBerry Curve users) relied heavily on recommendations from family and friends or bought handsets owned by people they know. Consumers also mentioned high-customer service ratings as a factor in buying a smartphone over a feature phone. (Buyers of feature phones, meanwhile, cited ease of use as a key purchase criterion.)

"There's a lot of complexity in using [smartphones] and choosing them," Rubin says. "Even though the companies have invested in TV advertising, consumers are relying heavily on recommendations for them."

Also, with so many carriers offering exclusivity on the smartphone models, smartphone buyers were more likely than the average phone customer to choose the phone before choosing their wireless carrier. "Bolstered by the brands of their hardware and operating systems, smartphones have established strong identities in the marketplace," Rubin says. "That means more consumers now have specific models in mind when choosing their handsets."

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