Several studies have recently reported that US iPhone owners are more loyal than owners of Android-based smart phones.  These have been widely reported in the press.  The coverage on blogs and in the press is of patchy quality, with no reference to known patterns of loyalty.

So I thought I had better take a look.

I found this study (reported here) based on 2-purchase (switching) data, and this one based on purely intentions.  It’s slightly concerning that neither of the market research firms involved are well known.  But it is heartening that different methods are saying the same thing.

The general gist of the news coverage is “research shows….Apple wins more of its sales from Android than Android wins from Apple”.  And this set off alarm bells for me, because it’s a common mistake to see asymmetric switching and assume that one brand has less loyalty.

If you don’t know about the Duplication of Purchase law then it is very easy to make this mistake. That is, to see that Brand A shares a greater percentage of its customers with Brand B, than B does with it, and to conclude that A must be declining, has a weakness, and so on – when the real story is simply that B has much larger share than A.  For much more on this see chapter 6 “Who Do You Really Compete With”.  Otherwise explain quickly now.

Imagine if Android had 90% share and iPhone 10% in a total market of 100 customers.  And that this market was perfectly stable, neither brand moving in share.  Say each period they each lost 2 customers to each other, leaving them both with the same share (lose 2, win 2).  For iPhone this would mean they lose and win 20% of their customers from Android.  For Android it would mean only 2% lost/won.  So we could write a story that said “iPhone wins 20% of its customers from Android, while Android wins only one tenth of that much from iPhone”.  Which is exactly the sort of story that was run (e.g. Forbes).  We could also write a story that said “iPhone loses 20% of its customers to Android, whereas it loses only 2% of its customers to iPhone”.

To try to understand the potentially confusing percentages that the studies report I looked up the market shares of iPhone and Android.  There are two sorts of share commonly reported, and often mixed up.  There is the share of the installed base (i.e. users of each) and then there are share of recent sales (i.e. in the last month or year).  Fortunately for us currently these two sorts of market share are fairly similar in the US – iPhone has about 40% share and Android 50%, with the rest going to Blackberry and Windows.

So Android is 20% (10 percentage points) larger than IPhone.  That means that Apple should get a greater percentage of its sales from Android, than Android does from Apple.

And that’s what happens, 20% of iPhone’s new customers came from Android, whereas only 7% of Android’s new customers came from iPhone.  This was reported as a huge win for Apple.  Also look at the chart, Android wins much more of its new sales (which are slightly bigger than Apple’s remember) from people buying their first smartphone.  Now percentages add up to 100, so if it has a greater % coming from “basic” and “first” then all its other percentages are likely to be lower.  Put simply this data doesn’t tell us if Apple has greater loyalty, or if people tend to upgrade from Android to iPhone.

iOS wins more of its sales from Android, but that’s because Android is bigger and it wins more of customers buying their 1st smartphone

We have to look at different data.  Fortunately I found this table on a website reporting on the same study.  This gives retention data.

iPhone (iOS) retained 78% of its customers when they bought a new phone, while Android only retained 67%.  Interestingly this behaviour isn’t far off what other people report they intend to do on their next purchase.  Now this is very significant because of the Double Jeopardy law we’d expect Android to be the loyalty leader not iPhone, simply because it has larger share.  So something is interesting about Apple, let’s examine further…

Both brands are winning customers who upgrade from basic mobile phones to smartphones roughly in line with their respective shares – and this is where most new customers come from.  Apple is doing a much better job at winning Blackberry users when they switch – in fact both Android and Apple are doing better at winning Blackberry customers than Blackberry is.

iPhone retained 78% of its customers, Android 67%

Now when we see deviations from laws like Double Jeopardy the causes are usually structural factors in the market place, and that’s the explanation here too.  iPhones compete at the top end of the smartphone market, they are on average smarter (and more expensive) smart phones.  I don’t want to get into a debate about the merits of particular models, all I’m pointing out is that Apple has yet to release a cheaper, low-end model.  Whereas there are plenty of low end Android models and they are clearly successful, particularly in giving Android that  large advantage in winning people who are upgrading from a basic phone (50% cf 39%) – if you can get a new smartphone for the same price or cheaper as your old basic phone, that’s an attractive upgrade.

When a smartphone buyer buys a new phone they practically never go back to a basic phone.  Mostly they stay with the operating system they currently have, but not all: 27% of Android owners moved to iPhone, whereas only 14% of iPhone users moved to Android.  That makes sense if we consider that many switches are driven by a desire to upgrade to better features and iPhone has a larger share than Android at the top end of the market.

So are iPhone customers much more loyal, or is this really a function that iPhone has larger share at the top end of the market?  To tell we’d really have to compare the switching between the iPhone and Android models like Samsung’s Galaxy S4 or HTC One.  I expect the figures would align much more closely with the Duplication of Purchase law, yes iPhone would look strongest but that’s because it has the higher market share.

In summary, it looks to me that Apple is doing extremely well at winning market share, it’s not “buying” false smartphone share selling cheap phones to people not seeking smartphone features (apps and internet).  When people do want these features it’s a much bigger brand than overall “smartphone market share” figures suggest – and that’s what drives these loyalty figures.  This is supported by internet browsing figures that show iOS with a substantially higher share of web traffic than Android.

Likewise, Samsung is doing very well too as the standout Android brand.  Everyone else is struggling for share but then this is a very large and growing market, even small brands (which will have lower loyalty) may still be able to prosper.  But Android needs to not only sell smartphones but also get people to use them as smartphones – and/or to win greater share amongst people who really do use their smartphone.

Should Android marketers worry about Apple launching a low(er)-cost iPhone?  Absolutely.

Should Apple worry that Android is recruiting more of the new consumers entering the category, who will largely then stick with Android?  Absolutely.