For the first time since the Apple iPhone was released in 2007, the number of iPhone owners who say they definitely will or probably will purchase their next phone from the same brand has declined in both the US and Western Europe (see iPhone Owner Loyalty Declines: Is Apple Losing its Innovation Edge?)

In 2012 only 75% of iPhone owners in Western Europe say they are likely to buy their next phone from Apple, down from 88% in 2011. Despite this decline, Apple retains a higher repeat purchase intention level than any other major phone manufacturer surveyed by Strategy Analytics. Respondents who say they probably or definitely will not buy their next phone from Apple is low.

It is respondents in Western Europe and the US who are unsure whether they will remain with the same brand or not for their next phone that Apple should be concerned about. Having launched the game-changing original iPhone in 2007, Apple is no longer the innovator it once was. At the launch of the Apple iPhone 5, one of the biggest changes compared to previous iPhones was an increase in display size from 3.5" to 4.0". However, previous Strategy Analytics research suggest that existing smartphone owners want something even bigger, with 4.3" the most preferred size in our 2011 size preference research (Smartphone Owners Want Thin Devices with Larger Displays), while early provisional results from an update to this research suggest that 4.5? may be the most preferred size for respondents surveyed from June-December 2012. It should also be noted that most of Apple's leading competitor's flagship devices have a considerably larger screen - the Samsung Galaxy SIII at 4.8", the HTC One X and Motorola RAZR HD at 4.7" and the Nokia Lumia 920 at 4.5".

There is no doubt that Apple is continuing its success (figures released by Apple show that the over five million iPhone 5's were sold in the first three days alone). However, on the back of a lack of recent innovation from Apple we are starting see growth in the number of previously highly loyal consumers who are considering whether or not they will purchase a new iPhone for their next device.

- Paul Brown

Nokia launched their new Windows Phone 8 devices today - the Lumia 920 and Lumia 820. During the event, Nokia and Windows Phone fans took to social media, encouraging consumers to embrace the new experiences delivered by these offerings by tweeting the hashtag #switchtolumia

The devices, which feature a number of incremental enhancements from previous models, have raised the bar in the extremely competitive smartphone market. Nokia has successfully differentiated with its hardware. The design of the previous Lumia models has received a lot of praise, and a range of colors will certainly help Nokia stand out from the crowd. Wireless charging will help to differentiate Nokia devices (for the time being), and it has made great advancements with its imaging technology and software - object remover and Cinemegraph in particular are cool. Location services also featured prominently, with the augmented reality of Nokia City Lens another great feature.

Nokia Lumia 920 (Source: press.nokia.com)

However, are these hardware and software features compelling enough to convince consumers to switch operating systems or are Nokia left to fight with Apple and Android for new smartphone buyers? Previous Strategy Analytics research has found that most consumers are hesitant to switch OS due to:

• Concerns about having to learn a new, unfamiliar OS;
• Potential to lose data or content currently saved or downloaded to their device, and importantly;
• Lack of availability of the long tail of apps that individual consumers are particularly attached to.

With new announcements to come from Apple and Motorola/Google this month, do these new offerings from Nokia and Microsoft offer sufficiently compelling innovations to convince consumers to switch to a new operating system? While some of the enhancements -especially wireless charging - are currently not supported by competing platforms, we are unconvinced that incremental innovations, such as the ability to use the touchscreen while wearing gloves, are sufficient to provide those consumers who purchase high-end devices (who tend to be the most platform-loyal) with a compelling reason to switch.

See the first impressions of the Nokia Lumia 920 from my Wireless Smartphone Strategies colleagues here - Nokia Microsoft Lumia 920 WP8 Smartphone: Our First Impressions

- Paul Brown

Nokia has announced the first CDMA Windows Phone designed specifically for the Chinese market, the Nokia Lumia 800c. Our Wireless Smartphone Strategies colleagues believe that it remains to be seen how the device will help Nokia regain the ground it is losing in the Chinese smartphone market.

However, having recently included the Lumia 800 in a user experience benchmark with Chinese smartphone buyers, we observe that Nokia has unveiled a product that is well placed to meet the needs of the target audience in this market.

In our research, the Lumia 800 received positive feedback for its high-end industrial design and the uniqueness of the Windows Phone interface.  At the same time, we identified a number of areas where all of the major smartphone platforms – including Windows Phone – failed to meet the specific needs of Chinese consumers. These include:

• Lack of integration of Chinese internet services.  In our research, Chinese users were clear that deep integration of Facebook, Twitter etc. was of little relevance to them. They wanted the same level of integration of Chinese internet services from RenRen, Sina Weibo, QQ and Baidu. 
• Some China-specific use cases not supported.  Our research identified opportunities for apps that meet the specific needs and behaviors of Chinese consumers (such like group messaging, data management, phone number location, etc.) which are not currently supported by default by the main smartphone platforms.
• Insufficient offline implementations of experiences.  Chinese users prioritize applications and features that work entirely in offline mode.  Functions such as maps that can only operate in connected mode are likely to be considered as too costly.  In our latest research, Chinese smartphone owners reported that only 29% of music listened to on their device was streamed, compared to 42% of US smartphone owners. 

Based on the available information, the Lumia 800c appears to address these challenges, to at least some extent:

• The device will be optimized for local internet brands.  Nokia has announced that the Chinese version of the Lumia 800 will support all of the major Chinese internet services.  Of course, 'support' does not necessarily imply deep integration throughout the OS (as desired by our research participants), but the launch announcement touts a "compelling, locally relevant experience ... especially tailored for people in China".
• Bundling free music, games and Nokia Maps will be appealing to price sensitive Chinese consumers.  However, the extent to which services will be able to be used entirely offline (to avoid expensive data charges) will be critical to adoption.
• The launch of “BeTop”, an incentive program to encourage local developers to produce apps for the platform is a smart move.  To maximize the value of this investment, we believe that Nokia should prioritize the creation of apps that meet the specific needs and behaviors of Chinese consumers that we identified, and promote the best apps that plug these gaps to the user base.

We also note that, as a brand, Nokia remains stronger in China than in most regions.  Our latest brand loyalty research found that 66% of Chinese Nokia owners plan to remain loyal to the brand when they purchase their next device, compared to 50% of UK Nokia owners. 

As identified by our colleagues, price will be a key factor in determining the success of the Lumia 800c - especially as the product will be targeted towards younger Chinese users, who are particularly price sensitive.  However, if Nokia and China Telecom can offer a very competitive subsidized price, as the vendor achieved with the launch of its Lumia 900 device in the US earlier this week, this will make the product a very appealing offering.

Strategy Analytics’ user research in China is available to Wireless Device Lab clients or for purchase here. Strategy Analytics’ China Handset Market Share report for Wireless Smartphone Strategies clients can be found here.