CRM: The psychology of SmartPhone Majority Adopters and implications for CRM marketing

Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.

Smartphone Adoption:The psychology of Majority Adopters and implications for CRM marketing

February 2011

Objective

In 4Q 2010, Verizon exceeded in its goal of 70% smartphone take-rate for activations. However, we need to continue to drive that goal now that we’re out of the promotional holiday period.

This review consolidates several information sources (see Appendix) to address questions about users who have not yet adopted smartphones:

– What are they thinking?

– What do they need to be confident in their purchase decisions?

This review also provides implications for how we message in mass media and treat customers in CRM.

Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 2

The Rogers Technology Adoption Curve


Rogers Technology Adoption Curve

3

Source: Everett M. Rogers: Technology Lifecycle Adoption Curve

A technology diffusion model that Everett Rogers generalized describes how new ideas and technologies spread in different cultures.

This model describes the adoption or acceptance of a new product or innovation, according to the demographic and psychological characteristics of defined adopter groups.

Time

http://upload.wikimedia.org/wikipedia/en/4/45/DiffusionOfInnovation.png

Current U.S. Smartphone Penetration


Industry’s current estimate is 30% U.S.

smartphone penetration, 10 pp behind projection.

Current industry estimates indicate that the U.S. is at about 30% smartphone penetration rate.

That is approximately 10pp behind where Nielsen had projected the U.S. to be at this point in time (40% penetration ).

4

http://gigaom.com/2010/03/26/1-in-2-americans-will-have-a-smartphone-by-christmas-2011/

U.S. Smartphone Position on Adoption Curve


Roger’s Technology Adoption Curve

Cumulative 2.5% 16% 50% 84% 100%

With 75%-80% smartphone take rates, the industry is suddenly moving up the

curve quickly.

We have reached Majority adoption, but not as far as you may think.

It took 12 years to get to 16% penetration, but only two more years to almost double to 30% penetration.

1996 2008 2010

12 years

30%

Majority Adopters are the 2011

target.5

2 years

Source: 4Q earnings releases

4Q 2010 Smartphone Take Rate1 Penetration2

VZW 75% 24%

AT&T 80% 44%

Sprint 69% 37%

T-Mobile Not Available 38%

1 Financial earnings releases2 Nielsen Mobile


U.S. Smartphone Penetration Is Much Greaterin MC than General Market

• Hispanics and Asians have consistently led in smartphone penetration, with anywhere from 6-12% higher penetration than other race/ethnic groups

• In Q410, Hispanic and Asian penetration is also about 50% higher than the general market


Source: Verizon Wireless Performance Update, Nielsen, Oct. 1, 2010-Dec. 31, 2010

Industry’s Q410 current estimate is

30% U.S. smartphone penetration

30%


U.S. Operating System (OS) by MC Group

• Hispanics are fairly evenly divided between the three major key players

– iOS, while the most expensive, is the leading system for Hispanics

– Hispanics are value conscious, not just price sensitive – this suggests they see value in iOS that is worth the added cost

• African Americans use RIM the most, but interestingly, also choose operating systems outside of the leading three




Where Does Verizon Stand?


New Customers(First Contract Customers**)

30%

Tenured Customers(Non First Contract Customers)

27%

VS.

Smartphone Penetration

Dire

ctio

nally

G

ood

Directionally good, but expected a wider gap

Goal

Smartphone Take Rate

70%*

* Note that Value Tracker found that 68% of its shoppers were interested in taking a smartphone, both Advanced to Advanced and Basic to Advanced.

** First Contract Customers (FCCs) are defined as new-to-Verizon customers on their first contract in contract months 0 to 30, meaning they joined any time from December 2010 back to June 2008. They represent 12% of lines in base (7.9 million). Customer data provided by the CRM team.

Aligning Verizon’s Customer Segmentsto the Adoption Curve


Roger’s Technology Adoption Curve

Cumulative 2.5% 16% 50% 84% 100%

At 26%, Verizon is a little behind the industry in terms of smartphone adoption, but with smartphone take rates at 75%, Verizon is catching up very quickly (and, iPhone…).

Verizon’s new segmented customer base communication streams align well with the technology adoption curve (depicted below).

26%

9

Innovation(all lines are on smartphones)

Smartphone Propensity(all lines are likely to take smartphones soon)

Value (80% on basic/feature phones)Mass (68% on basic/feature phones)

OOC 6+

Verizon’s smartphone

penetration is 26%


Who Are Majority Adopters?

In comparison to Innovation/Early Adopters, the Majority Adopters: Are a little older.

Are more likely to be in families with children.

Are more likely to be on a shared plan.

Are less likely to feel the need to be connected to the Web/Email all of the time.

Are more likely to feel that data plans are too expensive.

Are more likely to be motivated to adopt a smartphone if the plan, not the device, was affordable.

Are less likely to have an employee discount, thus they are more price sensitive than Innovators/Early Adopters.

Show a strong preference for purchasing wireless services or devices in carrier stores vs. online or at retailers (that carry multiple wireless brands) – they feel the staff in carrier stores are more knowledgeable.



Majority Adopters: What Are They Thinking?


Early Majority Adopters Late Majority Adoptersvs.

Key Trait PragmaticPrefer “tried and true” products

ResistantDemands are rarely met by new products

CRM Smartphone PropensityShopper MarketingRetail Advertising

Approach Thoughtful and Deliberate“They like to stay with the herd.”

Conservative and Skeptical“If it ain’t broke, don’t fix it.”

Influencers New opportunities/Incremental improvements

Economic benefit/Ease of use

Drivers Change to build efficiencies

Change out of necessity

Technology POV

OptimisticBelieve technology can make life better

PessimisticBelieve new products overpromise

11

CRM Value / Mass

How We Can Help Build Confidence to Get a Smartphone



Nudging, encouraging to follow the herd

Educate how smartphones can help them do what they do now, easier and more efficiently

Easy to understand plans and value-minded pricing for plans & devices (e.g., family plans and BOGO/BOGA devices)

Guidance to what’s popularand proven, to what people like them choose (e.g., plans, devices, apps, features)

Guidance to self-directed trial, selection help, tips for switching, device/account set-up, device training

Wash away resentment

Educate that while still a great phone, you can do so much more

Least expensive plans and least expensive devices

Guidance to proven entry-level experience (e.g., plans, devices, apps, features)

Guidance to aided trial, selection help, tips for switching, device/account set-up, device training

12

Tone

Educate

Bundling

Training

Offerings


CRM Value / Mass

Their Adoption Barrier is the Cost-benefit ofPlan Costs vs. Constant Connectivity

A/a = Significantly higher than corresponding column at 95%/90% confidence level

D03B1. Why are you ... to purchase a PDA or Smartphone in the next 3 months?

Why don’t plan to purchase Smartphone in the next three months? (%)

Total Basic Shoppers

4Q10 4Q10

C J

Base: Don't Plan To Purchase Smartphone Or PDA N3M 1421 418

Don't want/need to be connected to email/web all the time 37 45 F

Data plan is too expensive 35 48 F

Waiting for a specific device to become available 13 8

Don't/didn't understand how to use all the smartphone features 9 13 F

Don't like the choice of devices available 8 8

Other 20 6

4Q 2010 Value Tracker

A Good Plan Deal Bundled with an Inexpensive yet Proven Device Could Tip the Scales in Verizon’s Favor

What Would Motivate Smartphone Purchase Today (%)

TotalBasic Shopper Smartphone

Non-Intenders

Basic Shopper Smartphone

Intenders

4Q10 4Q10 4Q10

C E G

Base: Total Respondents 1992 418 172

A good deal on the device 42 40 59 E

A good deal on the monthly data plan 40 41 66 E

A good deal on the monthly calling plan 38 41 62 E

A good deal on a family data plan 32 36 40

Free applications 30 29 42 E

Data plans starting at $15 per month/per line 23 22 38 E

Other 3 3 2

None of the above 20 19 G 1

A/a = Significantly higher than corresponding column at 95%/90% confidence level

D03C1. Would any of the following motivate you to upgrade to a smartphone/advanced device today?

4Q 2010 Value Tracker

In Absence of a Compelling Bundle, How We Should Treat Customers Differently to Encourage Smartphone Adoption



15

Device Offers BOGO, BOGA $$ off Secondary line offers Shared upgrade eligibility

Free phone Trade-in Online only deals

Plan Offers Family friendly data Share plans

One month free Share plans

Appropriate Offers/Devices

Device Selection

All smartphones Most popular and highest rated

Both smartphones and feature phones

Communication Channels

Channels Mail Email Text

Mail Email


CRM Value / Mass

Treat Customers Differently to Encourage Smartphone Adoption, cont’d



16

Creative

Offer Prominence

Equal prominence for device and plan offers

Plan offer or description more prominent than device offer

DevicePositioning

Most popular 5-star rated Fastest selling 7 out of 10 Verizon customers choose

smartphones Durable and reliable, our customers

keep for an average of XX years

Best price ever Our lowest priced smartphones User friendly

Benefits (of having a smartphone)

Everything you love about being online in your palm

Owner quotes (e.g., they don’t call it “crackberry” for nothing)

Stay more in-touch with friends and family than you can imagine

Streamline your life

Never be at a loss for entertainment/sports Convenience of always having access to

important information Owner quotes (e.g., they don’t call it

“crackberry” for nothing) Replace paper that gets lost (e.g., coupons,

boarding passes, etc.)


CRM Value / Mass

Treat Customers Differently to Encourage Smartphone Adoption, cont’d



17

Education Data need estimator Smartphone selection guidance based

on “what you like to do” Smartphone benefits and tutorials Most popular apps

Data need estimator Free features (e.g., BBM, Skype, Wi-Fi

etc.) Offer to pre-load apps and/or send to

store for help

Call to Action Outfit your family today Schedule an appointment today

Creative, continued

Post-purchaseEducation/Cross-sell

Tutorials and training online, in-store Most popular apps for OS Encourage to write a review at vzw.com Accounts like yours have XYZ account

mix Encourage to “refer a friend”

Tutorials and training online, in-store Most popular apps for OS

Post Purchase


CRM Value / Mass

APPENDIX

Source References

Experian. 2010 Technology Adoption Consumer Report: Spring 2010.

High Tech Strategies, Inc. Historical Perspective: The Technology Adoption Lifecycle.http://www.hightechstrategies.com/profiles.html

Coatings World. New Technology Adoption, Part IV: May 2008.http://findarticles.com/p/articles/mi_hb053/is_5_13/ai_n29437896/?tag=rel.res2

Wivoda Consulting, Inc. Information Technology Adoption: Moving from a cost of doing business to strategic advantage.

Forrester. Segmentation Consumers By Technology Preference: April 2009.

Rogers, Everett M. Diffusions of Innovations: 2003.http://steveapplegate.com/consultant/adopter/index.htm

Green Book. Research on Trends: Influentials, Innovators & Early Adopters.http://www.greenbook.org/marketing-research.cfm/influentials-innovators-early-adopters

5MetaCom. Understanding the Technology Adoption Life Cycle. 1999.http://www.5metacom.com/Assets/PDF/TechAdoptionLifeCycle.pdf

Verizon Wireless Performance Update, Nielsen, Oct. 1, 2010-Dec. 31, 2010.

http://www.hightechstrategies.com/profiles.html

http://findarticles.com/p/articles/mi_hb053/is_5_13/ai_n29437896/?tag=rel.res2

http://steveapplegate.com/consultant/adopter/index.htm

http://www.greenbook.org/marketing-research.cfm/influentials-innovators-early-adopters

http://www.5metacom.com/Assets/PDF/TechAdoptionLifeCycle.pdf

Who Uses Data?

Looking at gender, age and race/ethnicity and assuming females, those age 35-44 and white as the base (index of 100):

• Men, youth (ages 18-34), and non-white ethnic groups all over index

– Men = 1.39

– Youth (average) = 1.23

– Non-white Races (average) = 1.32

• Hispanics, in particular, drastically over index at 1.42


Smartphone MB Usage Levels by Demographics



Different Verizon lines of business can use the following insight in different ways: Innovators and Early Adopters are always passively shopping, therefore we want to message to those who

are competitive switchers in mass media, in-store, and via customer communications.

Early Majority adopters are now likely to be in the market for a smartphone, therefore we want to message to them in mass media, in-store, and via customer communications.

Late Majority adopters probably are not in the market for a smartphone.

– We need to keep an eye on industry smartphone take rates during 2011 to identify when it will make sense to message to them in mass and in-store.

– However, we can target Late Majority Adopters via direct customer communications.

Applying Insight by Lower Funnel Marketing Responsibility


Innovators & Early Adopters Early Majority Late Majority

Retail Advertising

Message To(competitive switchers)

Message ToDo Not Message to in

1H 2011

Shopper Marketing

Message To(competitive switchers)

Message ToDo Not Message to in

1H 2011

CRMTarget Innovation 1

SegmentTarget Innovation 2

SegmentTarget Value/Mass

Plus Segments

21


Majority Adopters Think About Technology Differently than Early Adopters

Early Latevs.

Majority Adopters

Key Trait PragmaticPrefer “tried and true” products

ResistantDemands are rarely metby new products

JudiciousLikes to be seen as opinion leader

Approach Thoughtful and Deliberate“They like to stay with the herd.”

Conservative & Skeptical“If it ain’t broke, don’t fix it.”

Managed Risk“Willing to spend money early in trial.”

InfluencersNew opportunities/Incremental improvements

Economic benefit/Ease of use

Opportunity to leap frog/Each Other

DriversChange to build efficiencies

Change out of necessity

Change to keepcompetitive edge

Technology POV

OptimisticBelieve technology can makelife better

PessimisticBelieve new products overpromise

EnthusiasticHigh utilization of technology

Early Adopters

In Absence of a Truly Compelling Bundle,Consider Subtle Messaging Changes

Obviously, mass media reaches prospects and customers across the full adoption curve. Therefore, we need to balance messaging to switching Early Adopters vs. to customer and switching Majority Adopters.

Early Adopters Early Majority Adoptersvs.

DevicePositioning

Latest and greatest Be the first/only to have The next generation of Better than ever before 4 stars from Engadget, BRG

Most popular Most popular among families with kids Fastest selling Easiest to use 4 stars from Consumer Reports

DeviceBenefits

Everything you love about being online in your palm Owner quotes (e.g., they don’t call it “crackberry” for

nothing) Stay more in-touch with friends and family than you can

imagine Streamline your life

DeviceOffers

BOGO, BOGA $$ off Free device set-up and training Free switching tips

PlanOffers

Family friendly data Data plans starting as low as Share plans

Speeds & Feeds More power in your palm Power your tablet with this phone’s

hotspot Automatic system updates

$$ off advanced device bundles Register now to be the first Register now to get one of the limited Device trade-in

XX MB data for only $$ per month Data plans starting as low as Family friendly data


Business

CRM: The psychology of SmartPhone Majority Adopters and implications for CRM marketing