What Happens in the Handset Store? If salesrep recommends one smartphone or another.. what is impact?

We have truly rare data on what happens in the store. So we all know the handset salesdude (or salesdudette) has a remarkable influence on our purchase behavior. But wouldn't it be awesome to know exactly how strong that is? Well, we have what I believe is the first ever such measurement. Kantar released a brief free research paper (pdf) done with ComTech on US smartphone purchase factors last year, that I mentioned in the recent blog about what factors drive our smartphone purchases. And it had a very interesting detail in it. The recommended brands...

So they listed by brand the smartphones that were recommended in US retail stores last year Q1 (Jan-Mar 2014). Based on people who actually bought a smartphone, Samsung was recommended in the store 63% of the time. An Apple iPhone was recommended 39% of the time. HTC 25% and LG 24% of the time etc. Fast minds have already calculated that wait a moment! Thats over 100%. Yes, a salesdude can recommend more than one smartphone brand for a given customer. It looked like the average was 1.86 phone brand recommendations per smartphone actually purchased. That data by itself is fascinating but there is a missing part... What was the resulting sales?

Kantar no doubt collects this type of info and sells both the retail recommendation data and the resulting data, but we can't figure that out from Kantar public domain info because Kantar sales market share data is reported by OS platforms, not by handset brands. Samsung, HTC and LG are all on Android (actually Sammy and HTC also sold a miniscule slice also on Windows Phone in the US market back in Q1 of 2014). So the 'juicy bit' part is missing.

But no fear, the T-Dawg is here! We can get a reasonably good measure of the US domestic market smartphone quarterly sales performance from the ComScore data. It takes some calculation and isn't perfect - because ComScore reports installed base of smartphones, not new sales, so we have to take the period after Q1 and see how much the market changed from the period at the start of Q1. And then use the right multiplier to calculate what was the 'missing piece' number, to produce that change from Q1 to Q2. But yes, ComScore gives us a close approximation of the missing piece.

Now it gets VERY interesting (and incredibly rare). For US smartphone retail sales in Q1 of 2014 ie one year ago, what kind of sales results were produced by the recommendations in the retail stores? We can expect that some brands have a strong correlation with sales recommendation and resulting sales, and other brands have a poor correlation. But because we know the installed base of a Q1, we know what is the existing customer base!!! So we can ALSO see how well US retail sales pushes brands that are popular and owned by the consumers and how does that correlate. So lets do a table

US RETAIL . SMARTPHONE RECOMMENDATIONS AND RESULTING SALES Q1 2014
BRAND . . . . SHARE JAN 2014 . . . RECOMMENDATIONS . . . SALES Q1 2014 . . . SALES RESULT
Apple . . . . . . 42% . . . . . . . . . . . . . . 39% . . . . . . . . . . . . . . . . . . 40% . . . . . . . . . . . . . 103%
Samsung . . . 27% . . . . . . . . . . . . . . 63% . . . . . . . . . . . . . . . . . . 35% . . . . . . . . . . . . . . 55%
LG . . . . . . . . . 7% . . . . . . . . . . . . . . 24% . . . . . . . . . . . . . . . . . . . 4% . . . . . . . . . . . . . . 15%
Motorola . . . . 6% . . . . . . . . . . . . . . 15% . . . . . . . . . . . . . . . . . . .  6% . . . . . . . . . . . . . . 37%
HTC . . . . . . . 5% . . . . . . . . . . . . . . . 25% . . . . . . . . . . . . . . . . . . . 5% . . . . . . . . . . . . . . 18%
Blackberry . . .3% . . . . . . . . . . . . . . . . 3% . . . . . . . . . . . . . . . . . . . 3% . . . . . . . . . . . . . 100%
Others . . . . . 10% . . . . . . . . . . . . . . . 17% . . . . . . . . . . . . . . .  . ..  8% . . . . . . . . . . . . . . 48%
Source: TomiAhonen Consulting March 12, 2015 from Kantar ComTech and ComScore data for Q1 2014
The above table may be freely shared

Fascinating findings! So Apple? A recommendation in the store results in 100% sales (actually 103%). But then look at how frequently Apple is recommended compared to installed base? Only at just about the same level as iPhone ownership. If a customer walks into a store asking for an iPhone, the store staff will recommend another iPhone but essentially never for other buyers. (the only other major brand that is not 'pushed' at all is Blackberry - which also gets 100% conversion when it is recommended). Because these Apple sales are clearly easy and result in satisfied customers, if sales reps were behaving on purely 'easiest sale/most satisfied customer' basis, they'd be pushing iPhones all the time. Especially when you see that all Android major brands are so bad you have to try many times to make a sale. Why isn't Apple getting more than this level of support? Must be sales support and incentives. Apple is doing too well, they don't need to provide any incentives and because salesdudes and dudettes are driven by their commissions, they push the phones with the best commission deals... Ain't Apple.

So look at Sammy. Samsung was owned by just over one in four Americans but the stores were pushing a Galaxy to two thirds of customers walking into the stores. Just over half of those recommendations resulted in a purchase (55% by this math, and incidentially, Kantar's paper says it was 59% in reality, so that also is a nice validation of the reasonably-close numbers level of this analysis). So as the salesreps were pushing Galaxy in Q1 of 2014 and the customers liked the phones in the stores, Samsung's share went up handsomely in Q1 to 35%. Nice. Now what about the other Android rivals then?

LG was the second most owned Android device at the time in pockets of 7% of Americans. In the US retail stores, 24% of the time they received a recommendation to pick an LG brand smartphone. How many then bought an LG? 5 out of 6 who considered an LG in the store said no and LG sales in Q1 fell to 4%. This was not that the sales channel wasn't pushing LG. Only 7% owned an LG but 24% were shown an LG, yet only 4% bought an LG. I think it says very clearly that the LG offering in Q1 of 2014 was not competitive.

Lets take Motorola next. Moto had 6% of the installed base of smartphones. 15% of retail recommendations were a Motorola device and one third of those who got that recommendation liked the phone and bought a Motorola. Motorola's market share stayed stable at 6%.

Then what about poor HTC then? HTC was owned by 5% of Americans ie 1 in 20. But the stores were so eager to push the Taiwanese brand, that 1 in 4 customers, 25% were offered an HTC. How many took that device? More than 4 in 5 said no thanks, and even with a big retail push, HTC couldn't grow share and stayed at 5%.

Now, note, that this is VERY imprecise, as only two thirds of all US smartphone purchase of this time one year ago were made in the retail stores (most of the rest were bought online and the share of online purchases are obviously growing rapidly). But this is VERY interesting. Retail was clearly not at all motivated to push Apple or Blackberry at all. Both of those seem to have BIG upscale potential IF they invested in sales retail support and provided better sales incentives. That is expensive however. So Apple is doing incredibly well without having to resort to bribing the salesdudes and dudettes. All goes back to the incredibly strong loyalty and customer satisfaction of the iPhone (plus strong word-of-mouth). 

Then the table shows a heavy battle for the soul of the salesrep by the Android brands. If you can't (or won't) differentiate, then you have to pay more. All of these brands were regularly complaining about how their marketing costs were high and how competitive the market was. This is perfect evidence of that. Compared to the existing ownership, LG was pushing sales to nearly 3 times larger potential customer base and HTC pushing to 5 times more potential buyers than existing owners of the brand. Motorola at 2.5 times its ownership and Samsung over 2 times more.

But the retail push is not enough, then we see the four Android brands and their performance. If offered, a Samsung results in 55% sales conversion. Motorola does far worse at 37%. And HTC and LG, gosh 18% and 15% sales conversion, why are the salesreps even bothering. And how bad WERE those phones if customers so strongly refused to accept that smartphone haha...

Now we can't really take anything out of this analysis of year-old and only US market focused data, but it is a VERY rare glimpse into the actual metrics of what happens in stores. All phones are not created equal. The retail (in Q1 of 2014) didn't love Apple or gosh, Blackberry. They were pushing various Android devices at a ratio of 3.5 to 1 over iPhones when Android-iOS market share at the time was close to even.

And all phones are not created equal. An iPhone owner knows what they want, they walk into the store, ask for an iPhone and they walk out with that device (satisfied). It really doesn't take any pushing by the sales to achieve gosh, 4 out of 10 smartphones sold in America to just 'natural' sales that Apple now owns, without any significant sales effort. Imagine how much bigger Apple could be if they really tried to win in this game (and how badly the competition would be crushed). Apple really isn't trying.

And Blackberry (clueless as they are) also isn't trying but for the opposite reason. They still don't know what business they are in and how loyal their last customers are and what magic they could do if they only bothered to grow up and take this industry seriously.

Now I'm not in the business of selling industry reports by various analyst houses, but that Kantar ComTech data that they showed some highlights in 2014? If I was a handset maker, that is the most valuable data I could imagine and most handset makers should already be customers of that. My analysis is rough using the ComScore data to measure the effect. Imagine having Kantar's actual sales data for that period and across all brands (and other countries too....)

So I thought I'd share this analysis with you readers. Isn't this interesting? Yes the sales channel can make DRAMATIC decisions of what to push and what not - and its NOT related to who is biggest or smallest. And their recommendations can help boost a phone brand - if that phone ITSELF is also competitive. Else its money wasted down the drain like with LG and HTC one year ago in America. Or yield a very costly result to hold steady as with Motorola..

Comments

[RottenApple]

Hm...

I don't believe that Apple could win more by pushing sales recommendations.

By now the market is pretty much divided and most customers enter the store with their mind being made up which operating system they want.

So obviously Apple and Blackberry get nearly 1:1 ratio but an Android customer has actual choice so it's not really surprising that here a sale for a specific brand needs more recommendations.

[abdul muis]

@Rotten

I agree 100% with you. I think the customer already made up their mind for the OS before they entering the store. The one that they don't made up for Android/Windows is which phone.

For android vs. iOS vs. BB, I believe web reviewer and friend and family took a larger part rather than some store salesman.

[Maggan]

@Tomi

"Why isn't Apple getting more than this level of support? Must be sales support and incentives. Apple is doing too well, they don't need to provide any incentives and because salesdudes and dudettes are driven by their commissions, they push the phones with the best commission deals... Ain't Apple."

I believe that this is the key to Samsung's success, more than anything else. A lot of the money that was marked as advertising includes (or at least included) sales incentives. So Samsung had to pay extra for each customer, which in turn resulted in big market share.

Their problem seems to be that they have to keep paying those incentives to stay competetive, and maybe they have cut down on that which would explain at least parts of the S5 fiasco.

/M

/M

[Tomi T Ahonen]

Rotten and abdul

I hear you but have you WORKED in sales? I worked years in sales and then years more in sales management, and I wrote THE book about sales in the mobile telecoms industry (3G Marketing) the bestselling telecoms book of all time said the biggest publisher of engineering and telecoms books, John Wiley its publisher. I hope you can accept from me both professionally having been a 'salesman of the year' of my employer and then years in sales management and support, that YES you can influence sales at the retail level and IF you get 100% conversion - that means you didn't try hard enough. There is good profitable business left on the table. Apple's conversion should be no better than 80% and more like 60% for them to reach all prospects and the full sales potential. Achieving 100% conversion means they left easy sales on the table. Apple could do at least one tenth or one fifth more business than it currently has (had in Q1 of 2014) in the USA. ABSOLUTELY there is more that they could land, profitable satisfied customers that could be converted NOW to the iReligion, without thinking about cheaper iPhone Nano models or new areas like iCamera or somehow by now the accessory side through Apple Watch.

That the don't push Apple more, makes sense from the sales reps as clearly it must be that Apple (and Blackberry) are not offering good enough sales incentives and bonuses. Thats a fair strategic choice they have made (Apple and BB) and are making. But MY point that the math is CLEAR, that there is still SIGNIFICANT potential for Apple - that should be alarming... Why is Apple NOT pursuing these customers NOW when they still can, before the competition has caught fully up in the way as Windows PCs essentially caught fully up to the Macintosh PCs.

Comes back to my thesis that Apple is focusing on short-termism, short term profits at the expense of long term sustainable business. That will come to bite them in the ass some day. Not this year, but some day. This is not the way to run a 'company of the century' and it means a crash is looming somewhere near the horizon.

Tomi Ahonen :-)

[Catriona]

It isn't that Apple isn't trying. Apple wants you to buy phones through their own sales channels (retail stores and online), so they don't offer much in the way of incentives to the carriers. At iPhone launches, the carrier stores get a handful of iPhones while the Apple stores are replenished daily or even more often. That's partly what did in RadioShack. They became heavily dependent on cell phone sales, and when Apple essentially cut them off, they lost a huge business.

It doesn't surprise me that Samsung got lots of recommendations. They offer lots of incentives, since they sell mostly through carrier stores. Last year they must really have been pushing incentives since the phones weren't moving. If the Galaxy S6 is a smash hit (and early signs are encouraging), we might actually see fewer incentives and a decline in recommendation rates but a higher sale-through rate.

[Catriona]

@Tomi, I see no signs of short-termism at Apple at all. If all they were concerned about were short term profits, they'd have released the Apple Watch last October along with the iPhone and cashed in on holiday sales, or perhaps even in late January to try to capture Chinese New Year and Valentine's day. Instead, they pushed it back and back and are releasing it in April. I think Apple knows what market share it can realistically get in a mature market like the U.S. and is focusing its efforts elsewhere.

From all their moves, it should be pretty obvious that Apple essentially wants to cut the carrier out of the equation to the extent possible. There is a rumor that Apple will include the Apple SIM in next year's iPhone. So far Verizon has resisted on the iPad, but they managed to get AT&T signed on (sort of), and Sprint and T-Mobile will likely sign whatever Apple puts in front of them since they need all the help they can get. The more that Apple can get people to buy products from their own stores, the better it is for them. They've been heading to this point ever since they built the first store, and have nurtured the cellular industry for years to get to the position they are in now. That's anything but short-termism.

[Tomi T Ahonen]

Maggan

True and we heard Samsung complain about their bloated marketing budgets last year and reorganizing and pruning. That is EXACTLY what is happening now. And if they cut their marketing budgets - while competitors in Android do not - then it means YES that less will go to sales incentives in retail as well as less in TV advertising, etc. If you are biggest, your advertising budget HAS to be biggest. Look at Coca Cola. Simple. We see clearly from the above that essentally any customer who didn't walk in committed to an iPhone, was pushed a Samsung in America a year ago, and that helped them pick up 8 points in market share. That is 'being aggressive' in sales and marketing - but also means they had a competitive product portfolio. Remember this is essentially still the end period of Galaxy S4, then came the disappointing S5 and during 2014 Sammy was cutting its product portfolio and cutting its marketing. And a downward spiral that started as a trickle turns into a flood. That is how an accountant reacts to a marketing problem. They cut the budget. It always damages sales and profits. We've seen this film a million times from Siemens to Palm to Motorola to LG to Nokia to Blackberry to Sony. These are not marketing people in charge, they are either engineers or accountants, and their remedy makes the situation worse.

But the handset industry is not mature enough yet to be run by proper business people with strong marketing skills (apart from Apple) which is why such elementary marketing mistakes are made consistently in this industry. A car maker or cola maker or shoe brand would not make these elementary mistakes...

Now if you are strongly pushing your brand through marketing, it means that there is a natural level of where your market share is, and you achieve more than that (at a cost, through heavy marketing). If you then cut the marketing, you will instantly fall to approximately where you 'should have been'. But that fall is so rapid in this industry with the fastest product cycles of any industry, it results in huge volatility. When it goes your way (Motorola Razr, iPhone, Samsung Galaxy) then you think you are marketing geniuses and think the growth will go on forever. But if the opposite happens and you have the short-term fall (Motorola, Nokia, Blackberry, Samsung) then panic strikes and management reacts by the worst thing you can do to your sales - by slashing sales and marketing budgets (and often also, even worse - slashing product portfolios). Then the small fall becomes a 'collapse'.

This Samsung Galaxy S6 'solution' is a perfect example, a decision not made by a marketing professional but made by an accountant and obviously a designer who obsessed about the iPhone. Now rather than regaining Galaxy market share, there are LOYAL customers who will be pissed off, IN THE STORE when they see the phone being offered... (or worse, at home when they try loading the files from the microSD slot or to take the Galaxy to the shower..)

Now, the REALLY interesting part would be to see how this data evolves over time. What is the current sales push focus for Samsung or iPhone in the USA. How would that market compare to say India or China. What is the conversion rate now for LG or HTC etc.

Tomi Ahonen :-)

[Wayne Borean]

The biggest takeaway from this is, it doesn't matter how much you push a product, if the product doesn't have what the consumer wants. Which makes you wonder why so many companies just don't get it. It isn't as if there haven't been enough examples.

take for example the tale of Windows Phone in Canada. There used to be huge numbers of Windows Phone ads on Canadian TV and radio. There were also in store recommendations. But the phones didn't sell. Compared to an iPhone, Windows Phones just didn't offer what the customer wanted, and didn't sell. After a while sales people stopped recommending Windows Phone. A sales rep on commission has only so much time to work a customer. If a product is hard to move, it isn't worth their time, brand specific bonuses or not.

As to who is cutting marketing bucks, my guess would be accountants rather than engineers. I worked at several firms where accountants were given the CEO slot, and it was always a disaster. Always. Which isn't to say that engineers didn't make mistakes, but that they didn't make the same type of mistakes. Cutting marketing spending is very much an accountant style of mistake.

[Lullz]

@Tomi

"Why is Apple NOT pursuing these customers NOW when they still can, before the competition has caught fully up in the way as Windows PCs essentially caught fully up to the Macintosh PCs."

People quite often say how Apple will be caught up soon or how they were already caught up. When the iPhone 6 was released people were saying how Apple allowed them to be caught up. Now the same people are saying how they will be caught up soon. Maybe they were or maybe they were not. Very hard to say since some sources say how Apple lost market share and some say they didn't. In any case the change was so small that it's really hard to say if they were losing or winning for the competition.

We will have to wait for the first calendar quarter results before we can really say if Apple was caught up or if they were not. If Apple lost market share in the last 12 months then they were possibly caught up. If they gain on market share, then Apple was probably not caught up. We should know that by late April when we can once again compare the latest 12 months.

[charly]

@Baron95

"remember that all Apple customers have credit cards and are high income"

I think income is something relative so not more than 20% of people can have an high income. Apple has a much higher score than that regionally.

Apple has no near competitors which is not true for windows on PC or Android of phone so brand stores work for Apple because they have a monopoly on IOS and OSX but they don't work for Android phone makers because they don't a monopoly on Android. Apple brand stores are in fact very unique in that they aren't in clusters of stores which sell the same product which points to Apple being an unnatural monopoly and should be forced to be broken up in a software and hardware companies.

[Henrik N]

My observations here in Sweden at Telia, MediaMarkt, Elgiganten etc..
The salespeople push Samsung, iPhones and mostly Sony.
I guess Sony got a bigger marketshare here than other countries depend of historical reason and the connection to the Swedish brand Ericsson.
(not a lot of htc anymore like some years ago)

Younger people often go after the Android devices. Older couples that only had a dumphone before often are showed iPhones by the sales representants. iPhone are often the device companys give to employes. If that was not the case I am sure the marketshare would be smaller for Apple.

And Windows Phone/Lumia? Only one place got a lot of them, that place is Elgiganten. I suppose they have some kind of a deal with Microsoft.
Sales people not push them, but I think they sell some of those online or if a customer already have decided for one by themselves.

Some small observations from the real life.

[charly]

Apple has an extremely peaky volume of sales during the year so claims that they sell all they make are not really relevant as it is obvious due to making supply match demand and not the other way round.

You want to sell more than the CONTRACT besides the obvious point that under normal circumstances that they are the most profitable ones is because it makes your re-sellers happy and it allows you to better control your distribution channel.

[Spawn]

> Blackberry (clueless as they are) also isn't trying

They are trying hard to not sell. On-contract is difficult, off-contract very difficult.

http://crackberry.com/blackberry-classic-launched-singapore
http://forums.crackberry.com/asia-pacific-f317/indonesias-indosat-now-offers-smart-phones-contract-including-z3-945415/

> They still don't know what business they are in

Exactly. Its not consumers it seems and so they got no or very less consumers. Surprise!

[charly]

Every Greek is in the top 20% of world-wide income distribution, so what.

Porsche dealerships are mostly next to other car dealerships unlike Apple. Asus PC ASP is so much lower than Apple that i expect that service isn't as good.

[Spawn]

@Charly

> Every Greek is in the top 20% of world-wide income distribution, so what.

Bulls eye, nailed and depunkt'd :-)

Fact remains that the huge majority of the 20% leading world-wide income countries does NOT pick an Apple but an Android.

Even in USA the situation is different then Amateuer-writers with agenda like Sam Biddle wanna make you believe.

http://forums.appleinsider.com/t/158143/twitter-heat-map-shows-iphone-use-by-the-affluent-android-by-the-poor/30#post_2349718
http://cartonerd.blogspot.com/2013/06/3-billion-tweets-on-map.html

"If you own an phone you are rich" is a pure marketing gag long proven wrong. Everybody knows that low-income ppl in the US own iphones too and US has lots of them hence more iphone users - lol.

[Apple is secure]

@Tomi

I wonder if you have watch the Gladiator...

PROXIMO: Then listen to me. Learn from me. I wasn't the best because I killed quickly. I was the best because the crowd loved me. Win the crowd, win your freedom.

MAXIMUS: I will win the crowd. I will give them something they have never seen before.

....

Apple wasn't the best because it has kitchen sink. It was the best because the journalist love it. And what Samsung did with S6 is the same as what Apple did with iphone. It wasn't aiming to have the kitchen sink, but it was aiming for journalist to love them....

[sve]

Awhile ago there was discussion on the importance of physical keyboards. I wonder today if physical keyboards or voice recognition is the more important feature. I suspect voice is. And it ups the technology ante to all smartphone players.

[abdul muis]

@sve

100 million+ bb owner & I don't know what is the number from nokia E series user + other brand.... mostly move on to touch screen. A couple years from now, we all will laugh at the idea of removable battery on the high-end device.

[charly]

How many people use voice? People actively detest it even when it works. Especially because it kills privacy

[Crun Kykd]

@charly How many people use voice? Everyone I know doing SMS on the move. For new ff's like iWatch - voice is only option. For google search requests when mobile, voice is also easier.