Is decoupling the best way to keep the smartphone customer?

Jul 10, 2013

That 'everybody' includes telcos, device manufacturers and, probably, most users. Possibly the only ecosystem segment rejoicing in its speeding up are the component manufacturers who get to sell more bits more often, but even there the pace of change must make investment decisions tricky.

Device manufacturers themselves are finding it difficult (unless they're the winning ones: Samsung and Apple). The problem there is that the development cycle is now way longer than the marketing cycle which means that if you're in catch-up mode (BlackBerry, Nokia) you just can't catch up. Your dominant competitor has its newest version out before you've even copied the one before. It's hopeless.

As for telcos - they have, up to now, somewhat relied on device obsolescence to keep the tills ringing, but according to mobile specialist, WDS, after absorbing its recently completed study on device obsolescence, the pace of change is now causing real damage to the customer relationship.

According to Tim Deluca-Smith, Vice President of Marketing at WDS, the lifespan of a flagship smartphone is now less than half that of the average two-year mobile contract, and that's where the problem is. It leaves the contract customer locked into a device that he/she knows is soon to be superseded and in the fashion world - which now is today's smartphone market - that means the user ends up hating the tatty old thing after just 6 months of ownership.

Indeed at 6 months there is a measurable dip in overall satisfaction with the 'deal', says WDS, and by the end of the first year, only half of the customers - now only halfway through their two year contracts - are 'highly satisfied'.

Says Dulcea-Smith: "When we did the attitude measurement and mapped that against tenure we had a real 'Aha moment'. We saw the device satisfaction and the price satisfaction fall together. So we did a bit of qualitative research to discover that the actual smartphone market life (the time across which it's feasible to sell it) is now down to nine months."

As a customer’s repurchase intent is heavily influenced by device satisfaction this is a slow death to customer loyalty. By the end of the first year, only 38 per cent of customers could guarantee that they wouldn’t switch operator at the end of their contract period. This was despite an overall improvement in network performance satisfaction over the same period (from 60 per cent to 67 per cent).

Little wonder that at one year in, most customers view their device and its contract as a prison sentence rather than as a source of gadgety delight.

According to Deluca-Smith, the answer to the problem may well be what is, by some accounts, a growing trend - decoupling the phone from the service contract and giving the customer the option of buying outright or paying it off over different time periods to suit. It's back to the old hire-purchase concept and it means that the customer can pay off and upgrade when it suits, without having to get annoyed at the operator.

The decoupling idea isn't new, but it may now be the best way forward.

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