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July 14, 2010


Antoine RJ Wright

How would the improved web abilities of the new to come Blackberries, or the improved photo abilities of the current iPhone 4 influence some of the segments that you note here? As you state, some of the model lines which garner headlines might not be the best selling, but it's clear that manufacturers are trying to play to areas which were once weaknesses. Does the baseline you set in this post, since it's not something formerly offered by this channel, show potential room to be readjusted (even before the holiday season sales are assumed into this)?

Morten Saxnæs

Thanks for a great post, with impressive data and user insights.


Have you considered profit margins in the different segments you listed? I guess Blackberries (Enterprise) and iPhones (Web & App) bring in huge amounts of money, rest of the phone makers have to live with much thinner profit margins (if they are making money in the first place!).

Timo Koola

As SamiJ above commented it would be really interesting to hear about profitability and revenue/value share of these segments (and revenues in total smartphone market).

Tomi T Ahonen

Hi Antoine, Morten, SamiJ and Timo

Thanks for the comments.

Antoine - very good point and yes, certainly. As always, segmentation is a dynamic space and individual customers within a segment, as well as often even whole segments, will evolve. And as the mobile industry is seeing dramatic evolution, yes, what is highly desirable one year, can be so commonplace to not matter much a few years later - like say the removable memory card (Micro SD etc). They were very desirable option about 5 years ago but today more than half of all phones, not just smartphones - feature them (Apple the exception, stubbornly still refusing to support removable memory cards haha)

The typical segmentation work process would continue after a model like this is found to be 'sound' and functional with strong internal logic (all customers are included, no customers left out of the model by some accident; and any one customer at any one point in time has to fit one clearly defined segment, ie no customer can potentially belong into two rival segments at any one time - which would invalidate the value of any segmentation model, due to such ambiguity and the model would need to be repaired or a new one built..). So after the model is 'accepted' - you then go map out your competitors and their offering against the model (hoping to find gaps in what the competitor is offering - like obviously here, many are not contesting the biggest passion segment, youth). And then after the competitor analysis (as you have segment sizes) you can start to plan your own product strategy and marketing strategy per segment. That leads to then the pricing, competitiveness, profitability stuff etc.

Just a thorough analysis of a simple model like this could take a professional segment marketing manager team a couple of months of work haha.. And this is remember a 'simplistic' to the point of 'oversimplified' segmentation model. You can bet all the big handset makers and most advanced mobile operators have far more advanced (detailed, more granular) segmentation models, of several dimensions haha..

Morten - Thanks!

SamiJ - yeah, very good point. There certainly is typically considerable variances in the profitability per segment, and a good model will identify such opportunities both from an 'inherent' profitability (understand the customer's price elasticity and desire) and the 'competitive' profitability - how intensely competitive a given segment is - typically all companies seek profitable segments so they tend to be highly competitive. Sometimes a 'modestly' profitable customer type can be very profitable if the rivals are not focusing on it, and you do - if the competition is not strong there, you can command higher prices etc...

But to answer your question, no. This was part of a project you'll see part of a cool new item coming from me later in the year, and this is roughly the extent of how much work I had done to it. I think you can rather easily spot areas which are promising for profitablity - those fashion oriented customers for example, are far more likely to pay premium prices than the disinterested haha.. but then you have to do plenty of 'marketing' on the product and packaging to make sure it is ultracool and truly desirable - that may then in turn dimish your profits - and you may end up with a phone that seemed like a good idea at the time and was expected to take the world by storm - but which ends up a huge flop - like say the Motorola Rokr..

Timo - same answer to you, I'm sorry, no more to give on this model. Feel free to use the facts given here to build your own analysis, the number of segments is quite modest so even one person can do the basic math involved if you have a reasonable understanding of the market ie know the major smartphone makers and roughly who is 'very expensive' and who is 'very cheap' etc... and then make your own assumptions about each of the consumer segments of what their propensity is to spend haha. I can help you that the enterprise segment is viciously profitable - but only for Blackberry - because they have a captive audience who have to replace x millions of phones and Blackberries have to be replaced with Blackberries. The newcomers fighting to gain acceptance - Nokia E-Series are now spending years of marketing and sales efforts to make inroads - RIM did that in 2001 to 2005 haha.. and if Microsoft or Motorola or whoever wants to try to enter this space, it would be prohibitively expensive to gain a couple of percent of market share. But for RIM, they have done their legwork and now can reep the benefits of this segment. The problem for RIM is that this segment is 'done' - it isn't growing fast enough, and if they had only stayed in enterprise, they'd be worth nothing today as they'd be crucified for 'losing to Apple' haha.. They had to go to the consumer segment to keep up with growth..

Thanks for visiting, and please give more of your thoughts.

Tomi Ahonen :-)

Michael Demetriou

Maybe it is just because I am a generation behind, but why do you believe that youth texting is only fulfilled with qwerty phones? I find the standard multitap and T9 keypad easier to blind-type, faster to learn (everybody, even if not texting, stores his contacts on the phone), and most of the texters I know wouldn't change it for anything. E-series phones with T9 and the non-touchscreen N-series that are still on the market have both their followers, and sure they arent those who seek the best web experience (too small screen and awkward site navigation with the D-pad).

Tomi T Ahonen

Hi Michael

Certainly very true and I may have been too hasty to abandon the trusty old T9. I do think the T9 user base is mostly there because of low cost handsets, and would prefer a full QWERTY - but part of that desire is also that all the cool kids have Blackberries now, so its also the 'cool kids' phone form factor. So part may be style in addition to the ability..

But yes, there is a lot of life in T9 still. Thanks for pointing that out. PS I wrote a new blog today about inputs..

Tomi Ahonen :-)

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Is it reasonable, that of this group, about one in 15 will be so fanatical, as to make music the primary decision for their smartphone? I think thats reasonable. I don't see it as one third for example out of this group haha.

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