As smartphone ownership edges ever closer to global saturation, it prompts many questions around what the future of smartphones will look like and what future consumers, particularly younger generations are looking for. Coronavirus will undoubtedly have an impact on consumer decisions, which we are currently tracking and should understand better in the coming weeks.
Gen Z (born 1997-2012) have grown up in a fully immersed digital world. Their first phone experience is more likely to be smartphone and subsequent purchases will come from the position of an experienced smartphone user. Therefore, the influences and decisions throughout their purchase journey look quite different than that of Gen X and earlier generations. In the US today, 95% of mobile phones owned by Gen Z and Gen Y (born 1981-1996) are smartphones, this is even higher in EU5 and urban China, each at approximately 97%.
Compared to three years ago, there has been a rise in Gen Z smartphone owners making handset purchases themselves, increasing their control over purchasing decisions. In 2019, 68% of smartphones owned in EU5 (UK, France, Germany, Spain and Italy) were self-purchased compared to 62% in 2017. Self-purchase has also increased among Gen Y.
So, whether a first-time or replacement purchase, what are self-purchasing Gen Z and Gen Y smartphone buyers looking for?
- More than other generations, the main criteria Gen Z and Gen Y have for choosing a smartphone are design/color and multimedia capabilities such as internet browsing, music, video, etc. Let’s not forget, these generations are those who maximise the average number of activities performed on their smartphone. It is their preferred device for most activities over tablet, laptop or a desktop.
- When it comes to handset, Gen Z on average have more reasons for purchasing.
- In the EU5 for Gen Z the camera is especially important, with three out of five smartphone owners buying for this reason, specifically for the quality of the rear camera and app features. Just over 50% of Gen Y purchase their device for the camera and are more likely to look for dual lens and quality of photos in low light.
- In the EU5 Gen Z are also more likely to be choosing their device for the new technologies i.e. face recognition and 5G capability, whereas Gen Y are choosing for quality of the hardware i.e. material and speed of processor.
- While desirability is still true in the US and Australia, early upgrade options also trigger purchasing. The global prevalence in trade-in schemes has increasingly influenced Gen Z and Y’s purchase. This enables consumers to access the latest devices and manage their budget. Should this behaviour be carried forward into future purchasing we can expect to see replacement cycles shorten.
- In urban China, compared to earlier generations, Gen Z and Gen Y are more likely to be driven by a desire for the latest model or a newer device rather than a need to change i.e. experiencing functional issues with their device, like slowing down.
What about brand preference amongst Gen Z and Gen Y?
- In many markets; such as the US, urban China, Great Britain, France, Germany and Australia, iPhone has traditionally appealed above most brands.
- However, in the last five years among Gen Y iPhone share has decreased in favour of Android brands (US, urban China and France), while in others it has increased (Great Britain, Germany and Australia).
- In the EU5 overall Gen Y are more likely to be Android owners and this cohort are disproportionately more loyal to Android than iPhone than Gen Z (Gen Y Android to iPhone loyalty ratio 117 vs. Gen Z 105).
- Despite the squeeze from Huawei, iPhone managed to achieve higher levels of loyalty among both cohorts than the year before. Retaining customers is particularly important for iPhone in Europe as loyalty to Android is high, regardless of cohort. In the event of declining loyalty, winning lost customers back to iPhone would be more challenging, particularly among Gen Y where loyalty is as high as 95%.
- In EU5 Gen Z share is more concentrated among the top three brands (iPhone, Samsung and Huawei) 77% vs. Gen Y at 74% and in the last three years this trend has increased across all generations. While over a third of this share continued to be iPhone, 3 percentage points were lost and Huawei was the only main brand to gain share.
So how should a brand go about engaging and communicating with these different generations?
- Gen Z need a visual engagement – they get their information through watching influencers, video reviews, product launch events and social media
- Gen Y are more likely to lean on network providers by visiting a network website
As innovation becomes less of a differentiator, brand cache becomes of paramount importance and understanding which messaging and positioning will appeal to which segment, whether for customer acquisition or customer retention, is vital. The challenge manufacturers face now and in the future with Gen Z and Gen Y will be in leading with true innovation that drives desire to match the expectations of experienced smartphone users, all the while making such devices accessible.
In unprecedented times such as the ones we are living through, consumer decisions and brand perception can significantly change. Kantar’s continuous tracking metric allows us to measure and explain what is happening in the smartphone market and why and we will be monitoring this for all segments.