Who's buying the iPhone and why

Who's buying the iPhone and why

Summary: A market report on iPhone purchase demographics points to rapid growth by lower-income consumers and that customers are convergence minded and buying a single device for both communication and digital entertainment. It also shows something new about the place of Apple in the market, especially during tough economic times.

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Obama ‘08 iPhone application launchesA market report by comScore on iPhone purchase demographics points to rapid growth by lower-income consumers. The All About iPhone report says that customers are convergence minded and buying a single device for both communication (voice, SMS and email) and digital entertainment.

At the same time, the report shows something new about the place of Apple in the market, especially during tough economic times.

According to comScore, the fastest growth were in the $25K-to-$50K and $50K-to$75K per year market segments, both around 47 percent. However, the report said that 43 percent of iPhone owners earn over $100K a year.

It pointed out that the lower-end segments were buying the iPhone 3G, which sports a lower entry price than before.

From the press release:

“As an additional household budget item, a $200 device plus at least $70 per month for phone service seems a bit extravagant for those with lower disposable income,” said Jen Wu, senior analyst, comScore, the report’s author. “However, one actually realizes cost savings when the device is used in lieu of multiple digital devices and services, transforming the iPhone from a luxury item to a practical communication and entertainment tool.” ...

... “These data indicate that lower-income mobile subscribers are increasingly turning to their mobile devices to access the Internet, e-mail and their music collections,” observed Mark Donovan, senior analyst, comScore.

“Smartphones, and the iPhone in particular, are appealing to a new demographic and satisfying demand for a single device for communication and entertainment, even as consumers weather the economy by cutting back on gadgets.”

First, there's no real definition of household in the release. My guess is that these are 1- and 2-person households, who put a great value in mobile communications and AV content. And they are interested in increasing their use of mobile Internet applications.

Still, the convergence concept appears to be working.

(Sidebar: I admit that I don't really approve of convergence in technologies such as printers, storage devices and now in mobile devices. Perhaps users might want to save their battery power for talking on the phone rather than watching YouTube videos on a 3.5-inch, 480-by-320-pixel screen -- even if it is beautiful, sharp, and bright. I am a believer in redundancy of features for mobile devices, but then again, I already own several iPods.)

However, Apple and the iPhone are considered by analysts to be the high-priced spread. Why would the low-end segment, regardless of its makeup, pick the iPhone?

The reason is when money is tight and purchasing decisions count, consumers don't want to experiment. They want to make sure that the product they buy will work and they will get the most value from their purchase.

Apple has a 70 percent market share for music players and the combination of the iPod and iTunes Store are solid on both Mac and Windows. It's all easy to use and customers trust the technology and the brand.

Here's the irony: with the success of the iPhone launch and the halo from the iPod, Apple becomes the conservative pick. That is different.

Topics: Unified Comms, iPhone, Mobility, Networking, Telcos

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31 comments
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  • It's fashionable.

    It has nothing to do with being conservative.
    ye
    • Agreed

      What better way for a lower middle class person to impress people that they are more successful than they really are than to own a iPhone. I know several people who own a iPhone specifically for this reason alone.
      soonerproud
      • Are you both serious?

        But really, cmon. I'm poor or cheap or both so I'm going to
        buy a BMW just to show people I'm not. You guys will
        rationalize it all kinds of ways, but will never admit that
        Apple has got it right.

        It's quite simple, an iPhone is a really inexpensive mobile
        Apple computer...and a phone. A bit of a no brainer for a
        lot of people.
        CowLauncher
        • So poor people never

          buy a used BMW so they can impress the neighbors? All you have to do is just go to the poor side of town and you will see many poor people driving Lexus's, BMW's and other cars that were high end when they were new. You will also find plenty of poor people that buy designer labels to impress others. I happen to have been raised on the poor side of town and know exactly what I am talking about.
          soonerproud
          • People on the poor side of town

            don't have to worry about rent, utilities or food because those are
            provided by the taxpayer, so they have the money to buy a BMW.
            frgough
          • The majority

            Are the working poor and receive little to no government handouts with the exception of the Earned Income Credit part of the tax law. I do agree that the US is one of the few countries where what we classify as poor own a lot of luxury items. If we changed the definition of poverty to what real poverty is in most of the world, a lot of these people would be solidly middle class.
            soonerproud
          • And still unable to afford living in their own country.

            Call them what you will. I think the technical deffenition of
            poor is making $12.000.00 a year or less. Now in other
            nations that might be middle class but in those nations
            they probably could afford their rent and other items. In
            this country making in on 12 grand is impossible to
            imagine. What if they get sick? What if they have a serious
            illness? What happens when fuel and food go through the
            roof? Thanks in part to this housing issue rents have done
            so in my area.

            Frankly things have been grim for the middle class and
            poor of this nation. Wages have stagnated or decreased.
            While health care and everything else has risen steadily.
            We are working as hard or harder than every before and
            our buying power shrinks with each passing quarter.

            Can some one explain to me the logic of giving out home
            loans!?! As I see it after the 80's or during the 80's the
            rules changed no longer could you depend on a job if you
            worked hard and the business did well. All of a sudden it
            did not matter how hard or well you worked you could
            become the victim of a merger/layoff. Same thing with
            your spouse. I can't see how a bank can actually depend
            on anyone having a steady income to pay off a home loan
            the rules changed but only for one side of the equation.
            Everyone else gets to play but the old rules except the
            American worker who finds him/herself with no solid
            ground to stand on. Everything is in a state of flux for we
            the people now.

            Pagan jim
            James Quinn
          • Those are usually

            drug dealers.

            Sorry. It's not to impress. It's to spend the untaxed cash.


            Addition: There is no "poor side of town" where I'm from. The entire area is the poor side. :)
            laura.b
        • At $199 the iPhone is no longer priced like a BMW.

          [i]You guys will rationalize it all kinds of ways, but will never admit that Apple has got it right.[/i]

          The iPhone is a nice device. Apple did a great job with it. But let's not kid ourselves that many people buy it because it's fashionable.
          ye
          • Re:At $199 the iPhone is no longer priced like a BMW

            Don't forget the data plan.
            Jandler
        • Actually the majority of BMW buyers...

          Have zero understanding of the technological marvel that is a BMW, but they fully understand its affects on impressing the neighbors. I know plenty of people who spend every dime that touches their hand on trying to improve their appearance of "status." For these people, "status" purchases are the reason why credit cards exists.
          T1Oracle
          • I know nothing of the technological marvel..

            that is the BMW, but I know that I rented a 3 series in Italy
            two weeks ago, and I'd buy one without hesitation. It was
            well built, peppy (it was a diesel, too!), handled the mountain
            roads beautifully, and was fairly good on gas mileage.

            Maybe people buy these things just because they're good.
            msalzberg
        • re: Are you both serious?

          call me when it can do the basics like "cut and paste" natively. its still only half way between a basic phone and a smart phone.

          "it is a no brainer" a good description for the purchaser and you can also call them fashion victims.
          deaf_e_kate
  • I was going to wait

    Figured next year there will be an iSight
    camera built in as well as iChat. That and
    more memory for the same price led to a
    decision to wait.

    Then my mobile bit the dust. I was
    already with ATT as they have worked well
    for me in my area.

    After spending some time deciding I went
    with an iPhone. I could care less about
    fashion or status (I drive a 15 year old
    Madza MX-3), but liked the idea of apps
    from the app store.

    I use it as a phone more than anything, as
    a "it's with me" camera, and various Mac
    stuff like the calender and address book.

    I also have a small database app that
    downloads csv files and displays them. I
    used Maps when on a sudden trip to
    Houston, Pocketpedias before buying
    books, etc.

    My grandkids, however, prefer the free
    games I downloaded for them.

    Basically it's a phone and junior computer
    in my pocket. Not flashy, not a status
    symbol.
    Ken_z
    • Yup

      Agreed. The impressiveness of the device has little to do that it is an Apple product per se; people are used to seeing iPhones now (the price drop removed a lot of the "status symbol"), and many just don't care.

      What makes the iPhone an impressive device is the device itself...all the things that Ken_z has mentioned above, plus some. Showing people what the device can do and how it interacts is more influential than the fact that it is an Apple product.
      steeldestroyer
    • Re:I was going to wait

      Many smartphone current and past can do what you mentioned. Nevertheless, you took the iphone. Perhaps it because you thought it was nicer compared to the others?
      Jandler
      • UI baby......

        It does not matter what a device can do if it's harder to do it
        on one than the other the one gets my and many others
        business. EASE OF USE matters. Many a feature of an overly
        complicated device goes unused and unloved. It's like the
        features version of the Island of Misfit toys or should I say
        Misplaced features.

        Pagan jim
        James Quinn
  • Convergence my butt !

    Apple has brilliantly managed to market so-so products that are overpriced, flashy and proprietary so they become somewhat of a status symbol to own. Sort of like owning a Coach bag or a BMW automobile. That is the allure. Pay too much for an Apple whatever, and you become one with all the other sheep who are compelled to keep up with Joneses, whether they can afford it or not.
    jpr75_z
  • Asthetics sells, because we're vain.

    I'm a Windows Mobile user, and I prefer Windows to OSX - for obvious reasons, but the iPhone is beautiful. Even though I have no need for it as my Windows Mobile phone can do even more than the iPhone can, I am very tempted.

    If Microsoft were to develop an elegant device with an attractive interface, then they would enjoy the same sort of publicity. Let's just hope that Windows Mobile 7 comes on Microsoft hardware.
    General C#
  • Perhaps because it functions the way they want

    and it does what they want, need and ask such a device to
    do?

    Pagan jim
    James Quinn