Smartphone market expands as prices fall

November 15, 2011

Smartphone market expands as prices fallOnly last week we wrote about the potential saturation of the smartphone market for high-end handsets. New figures suggest the next step in market development is well underway with new buyers drawn in by cheaper handsets,

According to NPD Group, 59 percent of all mobile phones sold during the third quarter of 2011 were smartphones, up from 46 percent in the same period last year. That continued growth comes at the same time prices continue to fall: the average price has dropped for four straight quarters and is now $135.

Just having a raw number doesn’t tell us much about the distribution of prices however. Generally people tend not to spend much more than $200 for a top-end phone bought with a network subsidy, so it appears the market is still dominated by those handsets rather than the cheaper ones that are more like $99 or even free on contract (which are often one or two generations old handsets.)

It does appear price is becoming a significant factor, perhaps because of the economic problems in the US. NPD notes that among Americans who had specifically considered paying more than $200 for a phone, 64 percent wound up paying less than that. Unfortunately with $199 a common price, that stat doesn’t really tell us how many people actively rejected the latest models for the sake of saving cash.

Another intriguing note from the NPD research was that on average people continued to buy the same amount of accessories for smartphones despite the price drop. That may suggest people are still willing to splash out on phones, though on the other hand people aren’t spending the extra money they’ve saved through lower prices.

Wired notes a couple of potential factors behind the spending patterns. One is that networks are tending to offer better deals, whether that be price cuts or more generous packages. Another is that consumers as a whole are simply skipping the entire category of “mid-range feature phones” and moving from a bare-bones handset to at least an entry level smartphone.

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