Rachel YanTemitope TiamiyuLaura Battaglia

Francesco Messina

SMARTPHONE INDUSTRY

How many of you used smartphones 5 years ago?

QUICK QUESTION

How many of you are using smartphones now ?

Amazing product!

Relevant topic for U.S. college students- Smartphones vs Non-smartphones

Past vs Future- Technology- Global trends

WHY SMARTPHONES?

INDUSTRY STRUCTURE

A SHORT HISTORY

•1992: IBM developed “Simon”, the first mobile phone to incorporate PDA (personal digital assistants) features

•1996: Nokia released Nokia 9000, a palmtop computer-style phone combined with a PDA from HP

•1997: Ericsson released the GS88, first device to be labeled as “smartphone”

A SHORT HISTORY

•2000: The touchscreen Ericsson R380 Smartphone was released. First to use an open operating system, Symbian Os

•2002: RIM released the first BlackBerry, which was the first smartphone optimized for wireless email use

•2007: Apple released the first generation of iPhone, the first mobile phone to use a multi-touch interface

… New Smartphone Generation

WHAT IS A SMARTPHONE NOW?

A smartphone is a mobile phone built on a mobile operating system, with advanced computing capability connectivity.In addition to digital voice service, it usually provides:

Text messaging and e-mail High-speed data access through Wi-Fi and

mobile broadband Web browsing Video cameras MP3 player and video playback and calling Possibility to run free and paid

applications

HARDWARE VS. SOFTWARE

Smartphone hardware manufacturers compete primarily based on one of two models:

1. manufacturing their own hardware and licensing the software that runs on the smartphone from another firm

E.g. Nokia (Windows Phone)

2. manufacturing the hardware and developing the proprietary software that runs on the device

E.g. Apple (iOS), RIM (Blackberry)

OPERATING SYSTEMS (OS'S):

Three forms:

PROPRIETARY LICENSABLE OPEN SOURCE

• Developed in-house by smartphone manufacturers

• It allows to differentiate and integrate with the hardware

• High costs and time consuming

• E.g. iOS (Apple)

• Any manufacturer can use these OS on his devices

• Reduced cost of developing an OS

• Licensing can be expensive also

• E.g. Windows Phone (Microsoft)

• Free and freely customizable OS

• Highly developed OS at no cost

• E.g. Android (Google)

SALES AND MARKET SHARES OF SMARTPHONE MANUFACTURERS

BRAND 2012 UNITS SOLD

2012 MARKET SHARE

2011 UNITS SOLD

2011 MARKET SHARE

1. Samsung 215.0 M 31.4% 90.9 M 18.7%

2. Apple 135.8 M 19.8% 93.1 M 19.1%

3. Huawei 55.2 M 8.0% 20.0 M 4.1%

4. Nokia 35.0 M 5.1% 77.3 M 15.9 %

5. ZTE 34.9 M 5.1% 12.0 M 2.5 %

6. RIM 33.2 M 4.8% 52.5 M 10.8 %

7. Sony 31.9 M 4.6% 26.8 M 5.5%

8. HTC 31.5 M 4.6% 44.6 M 9.2%

9. LG 27.6 M 4.0 % 23.3 M 4.8%

10. Lenovo 24.9 M 3.6% - -

Others 93.2 M 8.9% 45.5 M 9.4%

TOTAL 686.7 M 100% 486.0 M 100%

WHAT WE CAN SEE..

1. The smartphone market is a growing market: It grew 41% from 2011 to 2012

2. Smartphones accounted for 39% of all mobile handsets sold

3. There are 1.31 billion active smartphones in the world

4. Samsung and Apple are the major players

5. Huawei makes strong gains and is World's #3

MARKET SHARES OF SMARTPHONE MANUFACTURERS:

31.4%

19.8%8.0%

5.1%

5.1%

4.8%

4.6%

4.6%

4.0%

3.6%

8.9%

SamsungAppleHuaweiNokiaZTERIMSonyHTCLGLenovoOthers

HHI (of the first 10

players):

1668

BARRIERS TO ENTRY

Relatively high:

1. ECONOMIES OF SCALE

2. INTELLECTUAL PROPERTY

3. BRAND LOYALTY

4. NETWORKING

BUT THE DEGREE OF RIVALRY IS HIGH:

1. DIFFERENTIATION: significant between home and business users

2. ECONOMIES OF SCALE: almost no scalability to create more software

3. PRICE: consumers generally value quality significantly over price

4. PLAYERS: switching from traditional cellphone industry

ADVERTISING STRATEGIES

TYPES OF ATTRIBUTES

Search attributes Online reviews

Experience attributes Online reviews

Our focus is on these three players: Apple Samsung Blackberry

PERSUASIVE ADVERTISING

• Advertising strategy deployed is to attract and retain their clients, building long term relationships with customers through “differentiation”

• Ads emphasize on the perceived quality of both the phone and the brand

Based on the company’s competitive advantage Samsung: Size, Ease of transferring files Apple: “Incredible design”, “thin”, “smart”. iPhone trend Blackberry: Culture, Diversity, Business

Product attributes: Also via ads

INFORMATIVE ADVERTISING

Samsung and Blackberry attacks Apple in order to steal market share

Apple doesn’t respond Blackberry versus Apple

http://www.youtube.com/watch?v=LwxNNsmGhVI

COMPARATIVE ADVERTISING

It comes very often when the ad is bundled with a network provider plan.

Usually it is a sketch or a short story.

HUMOUR APPEAL

CELEBRITY INVOLVEMENT

Bundling with network carriers

Ad is about a story or a sketch, at the end the smartphone is shown along with the details of the plan.

Direct Competition

All compete on price: Samsung and Blackberry

Advertising based on quality and reliability of network service: More so, true for the iPhone: AT&T: “the iPhone downloads fastest on AT&T’s 4g” Sprint: “truly unlimited data for your iPhone…only on Sprint”

NETWORK CARRIERS

THE TWO MAJOR PLAYERS…

captured 50% of all Smartphone sales in 2012

ADVERTISING CAMPAIGN

“ THE NEXT

BIG THING”

“IT’S THE MOST AMAZING IPHONE YET”

“FINALLY”

"THE B

IGGEST

THIN

G TO

HAPPEN T

O

IPHONE S

INCE

IPHONE"

Powerful brand: goes after the mainstream marketTop rising brand of 2012According to Interbrand, the Apple logo is now valued at

$75.56million.Advertising expenditures: $333MHardly responds to commercial attacks from

competitorsMarket share of 19.8% in 2012 vs. Samsung’s 31.4%

Huge sales in developed regions like North America Limited presence in high-growth emerging markets such as

Africa

APPLE

Rated second in phones Top technology brand of 2012 Advertising expenditures: $401M Speed in launching new products Of 700 million units shipped, Samsung shipped a

record 215 million smart phones worldwide Became more assertive with carriers – to distinguish

itself from other android phones. Captured 31.4% market share in 2012. Mostly attacks Apple, in order to steal market share.

SAMSUNG

INTERBRAND BEST GLOBAL BRANDS, 2012

Apple Samsung

2012 Placement 2 9

2012 Brand value $75.56M $32.89M

2012 Units sold 135.8M 215M

2012 Market Share 19.8% 31.4%

RAW DATA ANALYSIS

RAW DATA ANALYSIS

27 TV ads analyzed (source YouTube) Players taken into account:1. Apple (11 ads)2. Samsung (10 ads)3. BlackBerry (6 ads)

Products advertized:1. iPhone 5, iPhone 4/4S2. Samsung Galaxy S3/S2, Note II, Nexus3. BlackBerry Z10, Torch 9800, Curve Q8350

CODING TEMPLATE

APPROACH OF ADVERTISING [INDUSTRY]

59.3%

40.7%

Informative

Persuasive

Comple-mentary

Memory jamming

APPROACH OF ADVERTISING APPLE

27.3%

72.7%

Highly PersuasiveInformative

Persuasive

Complementary

Memory jamming

Extreme strategy

Apple’s approach is sometimes complementary rather than persuasive.

Maybe it could be arguable, but we think that the persuasive approach is prevalent since the aim is to charge a very high price and change consumers’ preferences.

PERSUASIVE OR COMPLEMENTARY?

APPROACH OF ADVERTISING SAMSUNG

90%

10%

Highly InformativeInformative

Persuasive

Complementary

Memory jamming

Extreme

strategy

APPROACH OF ADVERTISING BLACKBERRY

66.7%

33.3%

More balanced strategyInformative

Persuasive

Complementary

Memory jamming

PRODUCT FEATURES DESCRIBED IN THE ADS

63.6%

36.4%

Apple

Ads explaining phone characteristics

Ads with no phone characteristics

SamsungAn ad without phone characteristics is not

an ad for this player!

Very hard to find a Samsung ad with no features presented.

Reason: Samsung wants to communicate the technological superiority of its products.

PRODUCT FEATURES DESCRIBED IN THE ADS

PRODUCT FEATURES DESCRIBED IN THE ADS

83.3%

16.7%

BlackBerryAds explaining phone characteristics

Ads with no phone characteristics

HOW MANY CHARACTERISTICS PER AD?

Apple Samsung Blackberry0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2.27

3.1

3.5

# o

f ch

ara

cte

risti

cs

per

ad

(avera

ge)

Why BlackBerry on average shows more product characteristics in its ads?

Because it mainly addresses the target market segment of business people, who demand apps relevant to their daily job.

Here is the incentive to show in detail many applications of the phone.

HOW MANY CHARACTERISTICS PER AD?

COMPARATIVE ADVERTISEMENTS

7

20Comparative

Non-compar-ative

27 ads

5 Direct

27 ads

2 Indirect

5 direct ads where the competitor product is:1. Mentioned2. Shown3. Criticized Ex: “iPhone 5 has a sketchy battery” by

Samsung

2 indirect ads where:1. They allude to distinctive characteristics of the

competitor. Ex. Size of the screen between iPhone 5 and

Galaxy S3 Apple claims (proportionate is good) Samsung argues (big is good)

WAR OF COMPARISON

BRAND FOCUS

Apple Samsung Blackberry0%

10%

20%

30%

40%

50%

60%

54.5%

20.0%

50.0%

% o

f ad

s w

ith

an

em

ph

asis

on

th

e b

ran

d

Mean

HIGH QUALITY PERCEIVED

Apple Samsung Blackberry0%

20%

40%

60%

80%

45.5%

70.0%

50.0%

% o

f ad

s w

ith

a s

tro

ng

em

ph

asis

on

th

e

qu

ality

of

the p

rod

uct

Price is never mentioned in the ads, except for bundled ads with network providers

In the U.S. contracts make people less aware of the cost of the phone

No tricks in the ads: long-term relations with customers

LAST REMARKS FROM OUR ANALYSIS

CORNELL SURVEY

Smartphone Non-smartphone0

10

20

30

40

50

60

70

80

90

Do you have a smartphone or non-smartphone?

% o

f Res

pond

ents

DID YOU BUY YOUR PHONE BECAUSE SOMEONE RECOMMENDED IT TO YOU?

(FRIENDS, FAMILY, ONLINE REVIEWS, ETC.)

Yes No0

10

20

30

40

50

60

% o

f Res

pond

ents

IF NO PEOPLE AROUND YOU ARE USING SMARTPHONES, WOULD YOU STILL BUY

THEM?

Yes No Only at a cheaper price0

10

20

30

40

50

60

70

80

% o

f Res

pond

ents

HOW WELL DO YOU REMEMBER THE IPHONE ADVERTISEMENTS?

Don't remember at all Remember company and product but not ad

Remember ad0

2

4

6

8

10

12

14

16

Smartphone Non-smartphone

# of

Res

pond

ents

WhiteThinSimpleCool

SmartInnovativeSophisticatedBrilliant

USE ONE WORD TO DESCRIBE WHAT YOU RECALL FROM IPHONE

ADS?

Persuasive advertising:- All positive attributes and impressions

No comparative advertising- Do not compare itself to other brands

HOW WELL DO YOU REMEMBER THE SAMSUNG GALAXY ADVERTISEMENTS?

Don't remember at all Remember company and product but not ad

Remember ad0

2

4

6

8

10

12

14

16

18

Smartphone Non-smartphone

# of

Res

pond

ents

FastGoodBig

EasyFancy

USE ONE WORD TO DESCRIBE WHAT YOU RECALL FROM SAMSUNG

GALAXY ADS?

HumorHumorousSlogan:EvolutionThe next big thing is already hereComparative advertisingEverything the iPhone does and more.Apple

WHICH SMARTPHONE REPRESENTS HIGHER SOCIAL STATUS TO YOU?

iPhone Samsung Galaxy0

5

10

15

20

25

30

Smartphone Non-smartphone

# of

Res

pond

ents

InvestmentsAdvertising StrategiesGlobalization

RECOMMENDATION

APPLE INC.Sto

ck P

rice

(U

S$)

Time

SAMSUNG ELECTRONICS CO. LTD.Sto

ck P

rice

(Kore

an$)

Time

Search attribute- features

Persuasive advertising- product diff erentiation- slogans

Better execution of advertisements (e.g. Blackberry)

ADVERTISING STRATEGIES

Successful story: SamsungAim for places with low brand loyaltyIntense advertising efforts

GO GLOBAL!

THE END

Questions?