Report: Pre, Android Closing iPhone Gap

Hear that iPhone? The Palm Pre and Android-powered handsets narrowly beat out the BlackBerry in customer satisfaction, according to a report issued today.

Apple’s (NASDAQ: AAPL) iPhone is still the one to beat, earning first place in customer satisfaction with an 83 on a 100-point scale. Palm’s (NASDAQ: PALM) Pre and the Android category each checked in at 77, beating out Research In Motion’s (NASDAQ: RIMM) BlackBerry at 73, according to the CFI Group’s “Smartphone Satisfaction Study 2009.”

Under the metrics of the study, a score above 80 is considered stellar while one below 70 is cause for concern. The study did not break out specific BlackBerry, Symbian or Windows Mobile models and defined the Android category as users who were “mostly using an HTC phone.”

The Palm Treo scored a 70, more than handsets running Microsoft (NASDAQ: MSFT) Windows Mobile and Nokia’s (NYSE: NOK) Symbian, which had an overall grade of 66.

In terms of accolades, the iPhone, which is credited for triggering a surge in popularity of smartphones with mainstream buyers, still reins supreme — 92 percent of iPhone owners said they have the “ideal phone.” Around 90 percent have recommended the device, while 35 percent said they bought the iPhone based on word-of-mouth advice.

The tip of a data-incentive iceberg

“The iPhone is the best thing to happen to the smartphone industry because it captured the imagination of a whole new set of consumers that might not have made the smartphone jump,” Doug Helmreich, program director with CFI Group, said in a statement. “The iPhone raised the bar not only for other smartphones, but for the networks as well. The new breed of smartphone consumers expect more from their phones, and the iPhone may represent only the tip of a data-intensive iceberg.”

High customer satisfaction scores among iPhone owners, however, did not carry over to AT&T, the exclusive carrier for the device, according to the survey, which polled about 1,000 smartphone users during a 7-day period in August. AT&T has struggled to meet the demands of iPhone owners since the launch of the iPhone 3GS in June as the network strains under heavy data use.

Half of all iPhone owners surveyed said they would switch to another provider, but 75 percent of non-iPhone users said they would stick with AT&T. For customer satisfaction, AT&T scored 69 out of 100 among iPhone users, and 73 among non-iPhone owners.

Verizon Wireless also shows a discrepancy in terms of what its customers think of network performance and how they feel about devices running on that network.

Smartphone satisfaction accounts for only about 15 percent of a person’s likelihood to recommend the network, the study says.

Verizon is considered the ideal carrier among 86 percent of users questioned, and it scored 79 out of 100 for customer satisfaction. Still, just 38 percent of Verizon subscribers said their phone is the ideal smartphone, the lowest among all carriers.

Page 2: Cash cows and satisfaction saboteurs

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“The iPhone has been a cash cow for AT&T, but that cash comes at a cost in terms of overall satisfaction. In effect, switchers can be satisfaction saboteurs if they were not already inclined to choose AT&T,” said Helmreich.

“As for Verizon, the scales may tip if customers continue to demand smartphones that the company fails to supply. Then again, will its network hold up if it adds network-heavy smartphones? For now, its an apples to oranges comparison.”

The nation’s No. 4 carrier, T-Mobile, scored well across the board on the following five criteria, while AT&T did not: ability to connect from any location; ability to maintain connections; competitiveness of prices; variety of pricing plans; and quality of customer service.

In terms of the general profile of most new smartphone users, most are the average Joe type of consumer, not the Type-A corporate worker who embodied the demographic just a few years ago, according to the study.

A more competitive smartphone industry

The study suggests that despite some companies scoring better than others, essentially, all the handset makers in the mobile market are winners.

“The iPhone has clearly raised the bar, but given the performance of the initial versions of the Pre and Android, the gap is narrowing. It’s clear from our data that the Android and Pre are worthy competitors to the iPhone, and more recent versions of the BlackBerry pose a bigger threat,” the report states.

“As more applications are developed for the Pre and Android (and BlackBerry), and as hardware grows more competitive with the iPhone, customers will likely look to other criteria for choosing their phone — including evaluations of the provider.”

For wireless networks, the future, may be a bit more complicated.

“We will, in short, return to the earlier days of mobile phones, when coverage and price and plans mattered much more than the technology of the phone. Our data also indicates all new smartphones, not just the iPhone, encourage a large amount of
network usage. Business users and early adopters are less likely to burden the network as much as personal users and late adopters,” says the report.

“As smartphone growth increases, all networks (not just AT&T’s) may be strained, leading to lower customer satisfaction across all providers. The carrier with the technological advantage will be best positioned to handle the smartphone explosion.”

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