Seller’s Remorse

“No, you don’t tell me what to chill. My mother tell me to chill. I sit here, I draw people telling me to chill out all the time. You don’t tell me what to chill. I chill you.”  — Vietnamese Artist, “Cellular,” New Line Cinema, 2004

Around the globe, most people have (or want) a smartphone.

Those who don’t want one have burner phones (and I don’t even want to know what they’re used for).

IDC recently reported that smartphone sales were up 52 percent for the year, but Apple and Samsung marketshares slipped … victims of their own success.

First, let’s set the record straight.

Apple has 100 percent of the iOS smartphone market.

Samsung has about 70-80 percent of the 100-plus version Android smartphone market.

Together, they have about 50 percent of the smartphone market. 

The other 50 percent is dominated by LG, Lenovo and ZTE, followed by a few companies you vaguely recall and hundreds of little no-names who are knocking out knock-offs. 

The market is so big – and growing – even Alcatel and Huawei are showing double/triple-digit growth.

Of course, they’re all trying to steal the iPhone and Galaxy marketshares because the two take a whopping 90 percent of the smartphone sale profits. 

In a few countries – South Korea, Australia, Norway, Sweden, North America (Canada and U.S.) – more than 50 percent of the populations use smartphones. 

Over the next couple of years, folks in the rest of the world will slowly come to expect to be constantly connected.

Smartphone Creep – We look around at the people we work with, associate with and it seems everyone has a smartphone–in fact, one of the latest generations. But globally, there are still huge selling opportunities for phones with the right features, right capabilities, right look/feel and the right price. 

The smartphone market is probably the best study of what’s right, wrong and so-so in business …ever.

We give a lot of lip service to “think globally, act locally;” but most of the time, it’s just talk.

The people in the really big markets – China, Africa and India (1B population each) – can’t afford the top-end phones

To date, smartphones have been pretty predictable when it came to the target customer – age groups and household income.

Profiles – While the study covers smartphone consumers in the Americas, the age and household income is quite similar in other countries–especially when it comes to first-time purchases. By offering a broader range of price/performance smartphone options, manufacturers can capture more first-time users and encourage present users to upgrade to newer, more enhanced devices. 

Now, we’ve entered a period where the companies really have to work for their sales because what marketing and Wall Street BSers want most–people upgrading their phones every time the company wants to do a refresh—isn’t happening.

So they have to go after Geoffrey Moore’s Chasm early/late majority and laggard consumers or they steal the other guy’s customer like the mobile carriers do.

And the marketing cost to do it is rising … rapidly. 

The lawyer saw the expenses and said, “Okay, fine …  I’m getting out my checkbook”

In addition, marketing people have to understand global economics, individual countries’ GDP (gross domestic product) and consumer optimism as it relates to global and local economy, because they have a strong influence on what consumers are willing to invest on a go-everywhere, do-everything device.

Fortunately both indicators are improving around the globe.

Positive Direction – All of the major countries are showing an improvement in their GDP (gross data product) or at least a leveling off of the decline. This improvement – even if slight – has caused consumers to be more optimistic about future trends and purchase products they’ve wanted but couldn’t justify in tough economic periods. 

But there are still local differences like the average annual income and usage preferences.

Removing the device cost from the equation for a moment there’s the question of the apps they want and the apps they need in their country.

That’s what crippled Blackberry and hasn’t been a whole lotta’ help to Nokia … regardless of the price.

People buy the overly powerful computer-in-the-pocket to stay in touch with friends/family and for more productive work.

Smart Choices – Even in China, where people spend a major portion of their monthly income to purchase a smartphone to stay in touch with people and improve their productivity, the first applications they download and use most are games, news, entertainment. Similar patterns emerge in every corner of the globe. 

Still, the most popular/widely used apps – regardless of country or OS – are games and news. 

In China, 56 percent of the users are wrapped up in games, followed by online entertainment and/or news. 

Social media sites are quick to say they drive heavy mobile usage because people don’t want to suffer from FOMO (fear of missing out).

All of them are used, but they don’t drive the bandwidth usage carriers need to increase profits.

3 Minutes or 3GB – It didn’t take wireless carriers long to understand that the three-minute phone call requires more bandwidth than three GB of data, but they also have seen that people are communicating more across the data paths than over voice. And by packing more data onto the line, they can improve their bottom line.

That’s why smartphone sales and game, entertainment and news apps are more important to carriers than the phone. 

They keep folks online, keep them connected and keep them using the other important stuff that’s available like cloud storage for photos, videos.

Growing Opportunities – While mobile PCs and tablets are forecast to produce flat to moderate sales increases over the next few years, the do-everything, go-everywhere smartphone is projected to deliver solid unit growth. In many countries, the smartphone is the only computing/communications device they own. 

All the device producers are working like crazy to produce the next WOW-factor, high-profit smartphone that will kick the iPhone and Galaxy to the side of the road.

Like Mooney said, “27 years. 27 years without this!”

 But most won’t invest in differentiating themselves or their devices and will settle for huge chunks of the market growth with small (very small) margins. 

If they were global/local smart, they’d take a long, hard look at Samsung’s global playbook and what they’re doing in the next big “hot” market – China.

Remember, there’s a long history of “non-love” between the two countries, so they took their time with what now seems to be a thorough Chaebol (family owned conglomerate run with military-like discipline) plan.

Samsung has been determined to not make the mistakes of Japanese manufacturers and remain insular while adapting their plans/activities/products to the local markets.

While it appears Apple is planning a low-cost worldphone, company and local executives meet with Chinese leaders and the state-owned telecom companies and adapt products to meet their unique requirements, needs. 

While we’re happy with our Galaxy smartphone, Samsung has models to tempt the high- and low-end customers in the various markets. 

The reasoning is pretty flawless.

Upgrade from a feature phone to one of their economic smartphones with limited features/capabilities and give them the best service/support possible (your mileage may vary) to produce a sound customer relationship. 

When the customer can afford to upgrade, he/she will look for the brand they’re happy with.

Ready to Upgrade – While hundreds of millions of people can barely afford a flip or feature phone, they all want to take advantage of the smartphone’s broader features and capabilities. Satisfaction with their present company’s device makes the firm’s upgrade their first choice and it’s the one they recommend to others. 

That’s why Ethan said, “He’s the one on the cell phone, you idiot.”

And as research by Temkin Group recently pointed out, they’ll not only build customer loyalty but will get added customers because of word-of-mouth recommendations.

The hundreds of “hometown” producers will focus on making the devices cheap and … well, that’s about it.

Apple will be Apple and the rest will sell their flavor of the month Android or Windows smartphones.

Samsung?   

They already have local market activities going on in the other two billion-person countries – India and Africa – as well as Russia, Brazil …

When you want support you won’t hear them respond like Jessica, “You’ve got the wrong family! You’ve got the wrong family!”

# # #

G.A. “Andy” Marken

President

Marken Communications, Inc.

Andy@markencom.com

 

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