Low-Priced Android Tablets Abound, iPhone Loyalty Exceeds

Tablets are at the top of many holiday wishlists and smartphones aren't very far behind. Both are being aggressively promoted online and in stores this weekend in the US. Heavy price discounting should move a lot of Android tablets (and handsets). Laptop and PC sales generally may suffer as a result.

Below, for example, US wireless carrier Verizon is selling the Motorola Xoom 10" and Samsung 7" tablets for $199 and $149 respectively. Both require commitment to a two-year contract, something most US consumers have thus far shunned.

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Online retail giant Amazon is featuring a broad range of discounted tablets, beyond its own Kindle line, with many under $300 and some falling under $100. So while the iPad has the overwhelming share of tablet-based traffic today it's almost certain that will be diminished after the holidays.

Aggressive price discounting has emerged as the key to driving non-iPad tablet sales (first the HP TouchPad and then Kindle Fire). But this is a very dubious blessing for Android tablet OEMs, who may find their margins on tablets reduced to almost nothing. Apple by contrast has not had to lower prices to get attention or maintain share. We'll see what happens after the holidays. 

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What we're seeing now is the bi-bifurcation of the tablet market. There's a higher-end segment ($500 and above) dominated by the iPad, with almost no competition, and a lower-end segment ($250 and below) dominated by Amazon's Kindle line and Nook. Other OEMs are getting squeezed in the middle, unable to compete on quality at the high end or price at the low end for the most part. There are some "no-name" tablets priced lower than Kindle. 

This looks like the smartphone market, with inexpensive Android models driving rapid penetration across carriers and the iPhone appealing to higher-end consumers. There are obviously exceptions and some of the "flagship" Android devices have done well. Yet Android has not yet been able to establish the kind of brand identity and loyalty that the iPhone has enjoyed. 

A recent survey by GFK found that:

  • 84% of iPhone owners would remain with Apple next time
  • 60% of Android owners said they would stay with Android
  • 48% said they would remain with RIM

GFK also found that content and apps were keys to device/operating system loyalty:

As consumers build digital ecosystems and their own world of content on handsets, the study shows that their loyalty to their smartphone brand increases with the number of apps and services they use. The research reveals that the tipping point for loyalty is when a consumer uses seven or more services on their device.

Consumers in the US are the most likely to use seven or more services (61%), followed closely by China (56%) and Brazil (53%). In comparison to this, European countries use fewer services on their smartphone; France and Italy (46%), Germany (45%), Spain (43%) and the UK (42%)

This survey also reveals the uphill battle that Windows Phones now face as they try to "break in," although more than 50% of the market still don't have smartphones -- which remains a substantial opportunity.