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Market Research Questions iPhone Adoption

With technology market research firms such as Gartner, 451 Group and Current Analysis already advising their clients against allowing the Apple iPhone into their enterprise network environment, other researchers are eager to issue their own warnings.

The list price of the new device and the cost of switching mobile phone service providers may dampen the demand for Apple's iPhone, according to the analyst interpretation of the results from a new survey conducted by IDC.

The survey of online mobile phone shoppers, conducted by IDC and Market Insight Corp., found that while a majority of the respondents -- nearly 60 percent of a sample of 456 individuals -- were interested in the iPhone, they were unlikely to buy one anytime soon owing to the cost of the device and the potential cost of switching carriers.

"While the allure of owning the next 'cool' device will undoubtedly have early adopters -- and die-hard Apple fans -- queuing up to get the iPhone regardless of the price, the associated costs of ownership will persuade many others into a 'wait and see' position," said Shiv K. Bakhshi, director of mobility research at IDC. "Despite all the hype, there is little clarity on Apple's (and AT&T's) service plans for the device. This lack of clarity could adversely impact consumers' purchase decisions."

The survey, designed to gauge consumer interest in the iPhone, found that only 10 percent of respondents were interested in paying full price and signing a two-year contract with AT&T, the only carrier currently slated to offer the device. AT&T has stated that it will not offer a subsidy for the iPhone, which will retail for $499 and $599, depending whether the subscriber wants 4GB or 8 GB of flash memory.

Nearly 18 percent of the respondents indicated a willingness to buy the iPhone if it were priced under $299. In addition to the cost of the device itself, the survey identified the cost of switching carriers as a deterrent to iPhone adoption.

Given the widespread use of two-year carrier agreements with large penalties for early contract termination, consumers cannot easily change carriers whenever they want -- regardless of wireless number portability. However, about 17 percent of the respondents indicated that they would buy an iPhone if it were offered by their current mobile carrier.

"Beyond these important adoption issues, a number of questions remain about how consumers expect to use the iPhone," said Chris Hazelton, senior analyst, Mobile Device Technology and Trends at IDC. "The capabilities of the device, and its supporting network, present the next set of potential barriers to widespread adoption. These issues may ultimately determine the success, or failure, of the iPhone."

The iPhone, at least in the version being launched, will come with (2.5G) EDGE connectivity. AT&T (formerly Cingular) is yet to have a system-wide 3G network in the United States, although its 3G HSDPA network is available in most metropolitan areas. EDGE is available system-wide.

"Apple loyalists alone can make the initial launch a success. But beyond that, it will be interesting to see the extent to which the iPhone hype, and the curiosity it has generated, translates into actual purchasing intent," noted Bakhshi.

I believe that the market researchers lining up to raise questions about the benefits of the iPhone may be underestimating the value of an enhanced consumer experience, as a clear point of product/service differentiation. Actually, this is a common problem since many consumer electronics (CE) manufacturers also lack an appreciation for superior human factors design.

As an example, we know that Apple launched the iPod into an already mature and crowded digital music player market, and priced their product towards the high-end of that market -- and yet this product line now has over 70 percent of the global market share.

Was Apple wrong to assume that re-imagining the design of a complex smartphone, and delivering a simplified and intuitive user experience, might produce similar results? Only time will tell, so let's just wait and see.

I'm trying to maintain an open mind, but as an advocate of "simplicity, by design" I do admit that part of me hopes that Steve Jobs and his team will always dare to think differently -- regardless of the financial results from the iPhone sales volume. In a desert of banal CE product sameness, Apple has been a welcomed oasis of truly refreshing and imaginative design.

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