Customer Loyalty May Be Giving Apple an Edge Over Android

Warning: anything written in this post could change tomorrow. Or this afternoon. Or in seven minutes.

Watching the competition between Apple and Android is like watching a marathon. It's going to take a really long time and the lead is going to change. A lot.

That said, recent data suggest that Apple may have an advantage that Android can not yet claim: customer loyalty.

Any manager will tell you that customer loyalty is one of the most prized strategic assets a business can possess. It reduces costs, improves margins, diminishes uncertainty and enhances prospects for future growth. It is inextricably intertwined with quality, reputation, performance and value.

In the battle over preeminence in  the mobile phone market, Android has been thought to possess the advantage of late due to pricing, availability and the savvy backing of its primary supporters, Google and Samsung. But it turns out that Android customers may be less devoted to that product than are Apple's faithful to the iPhone. This is hardly a surprise. Apple is not just a product or even a brand, it is a cult. Customers see it as a positive association which defines their world view and even their self-image. For that, they are willing to pay well over market, given the power and functionality available at a lower cost from other, comparable models. They will also reflexively buy newer versions from Apple without even considering alternatives. Android customers, by comparison, are open to exploring what else may be available whenever they are ready to purchase a replacement.

It may well be that Apple's cost disadvantage will ultimately take it down or that an as-yet-unknown competitor will leapfrog it with an amazing disruptive innovation. But for the time being, the loyalty factor promises to keep Apple well-positioned. JL

John Paczkowski reports in All Things D:

So, Android’s seemingly inexorable ascension over the iPhone? Not quite so inexorable anymore.
Apple’s smartphone continues to gain share over devices running Google’s mobile OS in the U.S.; so much so that, according to the Yankee Group, iPhone ownership in the U.S. will exceed Android ownership by 2015. The reason: Platform loyalty.
Yankee Group surveyed 16,000 consumers over the past 12 months regarding which smartphones they own and which they intend to buy within the next six months. And, broadly, it found what you’d expect. About half of smartphone owners use an Android handset, while 30 percent use an iPhone. Of respondents who intend to buy a new smartphone within the next six months, 42 percent said they plan to buy an Android phone. Another 42 percent plan to purchase an iPhone. Again, about what you’d expect from the Google-Apple smartphone duopoly, with one exception: Buying intention versus ownership is higher for iPhone than Android.
Now, here’s another.
Of those surveyed, 91 percent of iPhone owners intend to buy another iPhone, while 6 percent plan to switch to an Android device with their next purchase. In other words, more than nine out of 10 iPhone owners are loyal to the platform. Once you buy an iPhone, chances are high you’re going to buy another.
That’s not quite as true for Android. Yankee found that 76 percent of Android owners intend to buy another Android phone. A big number, sure. But it means that 24 percent of Android phone users plan to switch to another platform. Guess where the majority of those professed switchers are going — 18 percent to iPhones.
Flip side: Just 6 percent of iPhone owners said they plan to switch to Android.
That’s a pretty significant asymmetry. And when you apply it to first-time smartphone buyers, two-thirds of whom plan to buy either an iPhone or an Android phone, it’s not hard to see iPhone ownership surpassing Android ownership in the U.S. in the next few years — by 2015. Yankee Group VP Carl Howe, who figures that Android has already peaked, has a great analogy for how this trend will play out:

“Think of the Apple and Android ecosystems as two buckets of water. New smartphone buyers — mostly upgrading feature phone owners — fall like rain into the two big buckets about equally, with a smaller number falling into Windows Phone and BlackBerry buckets. However, the Android bucket leaks badly, losing about one in five of all the owners put into it. The Apple bucket leaks only about 7 percent of its contents, so it retains more of the customers that fall into it. The Apple bucket will fill up faster and higher than the Android one, regardless of the fact that the Apple bucket may have had fewer owners in it to begin with.”

Lesson: Massive market share surges are great, but platform loyalty is powerful, powerful magic.