November 2, 2012
Apple’s renowned customer loyalty is showing signs of weakening, suggesting that the brand may be losing its edge as an innovator in mobile.
A new report from Strategy Analytics reveals that iPhone owners, who are famously loyal to the Apple brand, are less sure that their next phone purchase will come from Apple. The news is the latest in a growing list of potentially worrisome developments that suggest the brand’s mobile lead is weakening, including that Google has caught up with Apple on the application front.
“Apple is no longer offering the level of innovation in its products like it did when it changed the smartphone market with the introduction of the initial iPad,” said Paul Brown, London-based director of the user experience practice at Strategy Analytics.
“Additionally, there has been negative press after recent device launches, most recently around maps and product quality,” he said.
“This is creating more uncertainty, and leading to some users questioning whether or not they will remain with Apple. In order to stop the decline, Apple needs to be seen as a lead innovator again by the leading-edge early adopters.”
The innovation edge
The Strategy Analytics report, “iPhone Owner Loyalty Declines: Is Apple Losing its Innovation Edge?,” found that 88 percent of U.S. iPhone owners plan their next phone purchase to also be an iPhone, which is down from 93 percent last year. In Western Europe, the number declined from 88 percent last year to 75 percent this year.
Mr. Brown underscored that it is only those who are unsure about which brand they will purchase next that has increased while those who say they definitely will not purchase an iPhone next has remained low.
The idea that Apple may have lost its edge in being a technology innovator also happens to be the focus of a new ad campaign from Samsung, which depicts the people waiting online outside a store to purchase a new phone that is presumably an iPhone as coveting the features of the new Samsung Galaxy SII as demonstrated by a couple of hipsters standing outside the line.
In another version, a young, Samsung phone owner holds a spot on the iPhone line for his parents.
The new iPad mini
Other signs also suggest Apple’s mobile might may not be as strong as it once was.
This week, Apple announced the departure of Scott Forstall, a long-time employee who led the team that developed iOS. Mr. Forstall’s exit has been simultaneously interpreted as a good sign for Apple and as the loss of an important visionary. Only time will tell what the impact will actually be.
However, Mr. Forstall’s departure also highlights the ongoing pain Apple is feeling as a result of its decision to remove Google Maps from the recently released iOS 6 in favor of Apple’s own Maps program, which has received numerous complaints from consumers.
Mr. Forstall headed the team that developed Apple Maps.
Additionally, Google has reported that it now offers 700,000 apps, the same number as Apple, meaning iOS can no longer claim to have the largest ecosystem of apps for consumers.
“In terms of apps, while total number is important as a benchmark number, it is not the be-all-end-all,” Mr. Brown said. “Yes, with more apps, it will mean that consumers have a greater choice, but with catalogs the size of both Apple and Android, it then becomes an issue of discoverability.
“Whichever company can help consumers to discover apps that are most relevant to them in a simple and intuitive way may have an edge,” he said.
Apple's edge in voice search is also under attack, as Google has just released a new Google Search app for iPhone and iPad which includes enhanced voice search that answers questions using Google's search results.
At the same time that Apple is facing several challenges, there are also numerous signs that it is still one of the biggest mobile success stories.
For example, iOS continues to dominate on the mobile advertising front.
Opera’s recent third-quarter State of Mobile Advertising report found that iOS continues to lead among mobile operating systems when it comes to commanding the highest effective cost per thousand impressions, or eCPMs. The eCPM for the iPad was $4.42 and for the iPhone, $1.48. In comparison, the eCPM for Android dropped during the third quarter to $0.88, below RIM’s eCPM of $10.6.
Additionally, any decline in loyalty has not been reflected in a fall off in sales so far.
The iPhone 5 has reportedly been selling well as has the new iPad mini.
The company’s most financial results revealed that Apple sold 58 percent more iPhones during its most recent fiscal quarter compared with a year ago for a total of 26.9 million. Sales of iPads were up 26 percent.
The company recently unleashed a slew of new products — including the new iPad mini. It is Apple’s largest lineup of new releases ever. If it can address any customer loyalty issues, this means its large base of existing customers will be in the market for more Apple products this year and next, putting the company on track to generate over $200 billion in revenue next year.
“It is still too early to tell what [the decline in loyalty] will mean — there are still a lot of people buying Apple devices,” said Noah Elkin, principal analyst at eMarketer, New York . “It is not a huge decline — if it were a 15 percent decline, then Apple might have cause for alarm.
“The results also don’t show that Android is being viewed as any more innovative necessarily,” he said.
“You have to look at innovation as not a constant upward curve but something that looks more like a staircase. You have periods of innovation and periods where the innovation gets consolidated and then continued growth from there.”