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Popularity of smartphones pushes average purchase price

The growing popularity of smartphones packing all sorts of bells and whistles has jacked up the average price for mobile phones.

A study from J. D. Power and Associates shows that the average reported purchase price for mobile phones is $9 higher this year versus what was reported last year. This is the first major increase reported in two years.

"Clearly there's a need there for the Swiss Army knife approach where users want all the services at their fingertips," said Kirk Parsons, Norwalk, CT-based senior director of wireless devices at J. D. Power.

The average price for a mobile handset as reported by consumers is $101, up from $92 in 2007. This is the highest average price paid for a wireless device since J. D. Power began its U.S. Wireless Mobile Phone Evaluation Study in 2003.

Several reasons contribute to this increase in the average price.

One of them is the rising popularity of smartphones such as Research In Motion's BlackBerry, the Palm Treo and the Apple iPhone, along with music-enabled handsets.

Such phones not only offer voice and text but also Internet access, email, downloading capability, navigation, television and enterprise-friendly functions.

The current average reported purchase price for smartphone devices is $208.

By contrast, the average reported purchase price for mobile phones with fewer features is $58.

J. D. Power found that sales of smartphone devices have grown to 6.3 percent this year, a huge increase from 1.7 percent at the start of 2007.

"What we're finding is that smartphone-type devices, from a usability standpoint, are much easier to get information on and to get these types of services from these types of devices -- bigger screens, most of them have QWERTY keyboards, which is better than hitting the key four times," Mr. Parsons said.

Another major influence on the increase average purchase price for mobile phones is the sudden drop in the number of mobile customers who said they got their current phone for free.

So, the percentage of customers who said they got a free mobile phone has decreased from 36 percent to 33 percent in the past six months.

This marks the first time since J. D. Power study's introduction for customers to report a decline in the acceptance of free mobile phones. It makes sense, given the popularity of smartphones which are more expensive and less discounted by wireless carriers.

If there is a fly in the ointment, it's the idea of overpromising.

"You see ads on the wireless carrier-side, all the things you can do on the phone," Mr. Parsons said. "It's frustrating, because you have things you can't do.

"It's the one thing that the industry needs to do is reeducating or doing a better job of educating on how to get the most out of their phone," he said.

The J. D. Power study also measured customer satisfaction with mobile handsets.

In order of importance, 24 percent of the responding consumers cited physical design, 22 percent operation, 20 percent features, 19 percent handset durability and 15 percent battery design.

Sony Ericsson won the highest marks in overall wireless customer satisfaction for the second year in a row, scoring 740 points on a 1,000-point scale. LG was next, with 721 points and higher than the industry average of 710.

Samsung came in at third place with a 706 score, followed by Sanyo and Motorola's 705, Kyocera's 701 and Nokia's 699.

In other pieces of research related to handset usage patterns, J. D. Power found that 74 percent of all mobile phones have a clamshell design, an increase of 24 percent from 2006. Twenty-one percent of all mobile phones have a candy-bar style design and 5 percent a slide-cover.

The average reported length of mobile phone ownership is 17.7 months, above from 16.6 months in 2006.

Among the most frequently reported reasons for customers to select their current mobile phone, pleasing design style got a 41 percent rating, received for free 25 percent, easy to use 23 percent, discounted/reduced price 21 percent, digital cameras 18 percent and multiple features and small size 17 percent.

Based on J. D. Power's findings, it's clear that the increased usage of smartphones will affect marketers in their dealings with consumers.

"It'll have a big impact because you'll see an increased upswing in content because it'll make it a lot easier to download content," Mr. Parsons said.

"The carriers who still have these walled gardens will be encouraged to add these services on the phone," he said.