Sprint is trying to woo in new customers with a free year of unlimited service for bring-your-own-device subscribers at rival carriers. But could the fact that these customers come with unlocked devices hurt the carrier down the line?
A new report from NPD Group indicates unlocked phone users are more likely to switch both carriers and device brands than their locked device counterparts. According to NPD, 30 percent of unlocked phone users switched carriers when buying a new device, compared to just 24 percent of locked phones users. Unlocked users expressly cited the freedom to choose a future network as their number one motivation for purchasing an unlocked device. Around 45 percent of unlocked users said “lowering cost” was their reason for switching carriers, compared to 34 percent of locked device users.
“The market is made up of two distinct consumer bases: price sensitive consumers looking for low-cost devices that deliver value; and high-end, tech-focused consumers, looking to differentiate from the standard choices,” Brad Akyuz, director and industry analyst for NPD’s Connected Intelligence, commented. “Now that smartphone subsidies are nonexistent, for the most part, the unlocked market has become a cost effective option.”
This group of free floaters now accounts for 12.5 percent of the U.S. market, or about 30 million users, and is only expected to continue to grow, NPD said.
But this presents a new problem not only for carriers, but also for device manufacturers. The latter have increasingly added unlocked options to their lineups, but NPD found unlocked users were also more likely to switch brands. The firm said 48 percent of unlocked phone users switched brands when upgrading devices, compared to 37 percent of locked phone users. The mitigating factor appeared to be price paid for a device, which prompted more loyalty among unlocked users, the firm said.
“As the unlocked phone market grows, differentiation will be key for original equipment manufacturers,” Akyuz added. “While price is one competitive component, devices will need compelling features/functionality to appeal to consumers and retailers alike.”