Analyst Angle: Don’t stop the music . Why features and functions sell phones and why they don’t

Editor’s Note: Welcome to our Monday feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry. In the coming weeks look for columns from Jupiter Research’s Julie Ask, Current Analysis’ Avi Greengart and iGR’s Iain Gillott.
Consumer sentiment-that nebulous beast marketers continually hunt-is an elusive prey. Pardon me if I wax slightly poetic and very frustrated, but sometimes I wish consumers would just fess up to being illogical, petty and emotional. In wireless, for example, they say that few things are more important to them battery life when choosing a mobile phone, and then they go bonkers for the latest slim, low-battery-life phone just because it’s also available in a particularly lovely shade of puce.
The problem, of course, lies not with them but with us as market researchers. We have basically one tool for understanding what people think: we ask. In return: people lie. Or rather they answer based on how they believe themselves to be, not how they really are. I do it too. I’ll tell you that fuel efficiency is really important to me when I pick a car, but I can’t deny that the pickup truck parked in my driveway tells a different story.
For marketers looking to understand what drives purchase and captures consumer attention, one of the few ways around this problem is to ignore what consumers say and look at what they do. At Compete, we focus our time on watching how consumers shop not just asking them about their shopping habits.
When it comes to the features and attributes of mobile phones, the results bear out that music rules, even if only 3% of respondents to a recent Compete survey said they currently use their phone as a music player. Consumers are 1.4 times more likely to consider a music phone than predicted by looking at how many phones in a carrier’s portfolio feature this capability, and that’s before the launch impact of a certain much-hyped music phone I promised myself I wouldn’t discuss this week.
Compete calculates consumer interest in specific features by observing online research of mobile phones. By measuring the number of people clicking on product information for every phone offered by carriers and grouping that research by the phones’ feature sets, we can understand which features draw shoppers into stores and capture their attention while there.
For example, music phones represented 56% of consumer research time in the second quarter of 2007. During this same period, only 41% of the handsets offered by carriers were marketed as having music player capabilities. As a result, interest in this feature was 1.4 times greater than predicted by looking at music phones’ share of carrier portfolios.
It is important to compare interest in a feature to the share of the portfolio it represents. A feature present on every phone will attract 100% of consumer research, because every phone shoppers look at will have that feature. Music phones, however, consistently draw interest solidly beyond the levels predicted by their share of carrier’s portfolios.
Features like this, which attract more interest than their share of portfolio, are the features that carriers can effectively highlight in advertising and marketing to attract consumers. Verizon has increasingly pursued this strategy, selecting one device each month to feature across their marketing materials and highlight extensively in stores. Usually these devices have been used to highlight specific service offerings such as Vcast or Verizon’s song-identification service.
For handset manufacturers, tracking the relationship between share of portfolio and share of interest can provide insight into how carriers will shift their portfolios over the coming months. Carriers will continually look to add handsets with features that draw outsized attention while pruning their features that under-whelm. These shifts in portfolio represent an opportunity to gain a larger piece of carrier’s device line-up.
The clamshell form factor is a good example of this. As carriers have increasingly focused their portfolios around this design, interest in clamshells and their share of the portfolio have finally come into alignment. In the last week of June (excluding the iPhone impact), 58% of the devices offered by major carriers were clamshells, and 56% of consumer research was around this form factor. This does not mean we’ll be seeing fewer clamshells at carriers. In fact, it means the share of clamshells in a carrier’s line-up is just about right for now. As a result, any new clamshell phone carriers offer will have to replace an existing one.
Music phones, on the other hand, represent an opportunity where manufacturers can still displace non-music phones in the carrier portfolios. Since consumer interest in a music phone outstrips the share of the carrier’s portfolio, we expect carriers to continue replacing non-music phones with music phones in the short to medium term. As in any market shift, this turbulence opens up the door for outsiders to displace incumbents, much as Nokia was famously displaced at many carriers with the initial shift to clamshell designs.

Of course, the process of device selection is substantially more complicated as carriers and handset manufacturers look to provide devices that each appeal to increasingly thinly sliced segments of the population. Just as we cut survey data into profiles and segments, so must observational data be segmented by what people do, rather than what they say. The results show the true nature of consumers-what they want and value-without even asking them.
Compete Inc is marketing services company that helps companies better use the Internet to understand consumer behavior. For more information, sign-up for the Wireless Vantage, Compete’s free newsletter at http://www.competeinc.com/signUp/, read Compete’s general interest blog at http://blog.compete.com/, or e-mail Miro at wirelesspractice@compete.com. E-mail RCR Wireless News at rcrwebhelp@crain.com.