How can manufacturers counter the increasing smartphone upgrade cycle?
One of the main reasons smartphone sales are declining is that users now tend to hold onto their phones for longer, some estimates show that the average smartphone owner switches devices once every three years.
Naturally, manufacturers would prefer that period to be shorter, ideally one year. Of course, that's an unrealistic goal. Still, three years is a long time and the trend is for the upgrade cycle to extend even further. So, what can companies do to make people buy their phones more often? Here are a few possibilities:
Offer bigger upgrades between generations
This is the most obvious solution, so let's scratch it off the list first. If you're on the fence about buying a new phone and you see that the latest flagship is three times faster than the one you got a couple of years ago while the pictures it takes look better than anything you’ve ever seen, you’ll be more inclined on spending some of your hard-earned cash for it.
However, as I already mentioned in a previous article, incremental upgrades are here to stay, at least until there’s some major breakthrough that completely changes the way smartphones are made.
Of course, upgrades can also mean new features. And while we do see some of those showing up in various devices, most of them are hard to put in the quality-of-life-improvement category. We usually get extras that are nice to have, but you won’t really notice if they’re missing. I’m talking about things like third, fourth or even fifth camera, weird gestures for various commands and even heavily marketed features like reverse wireless charging (Gasp!).
So, with bigger upgrades seemingly out of reach for manufacturers, what else can they do?
Make new models more affordable
Another logical consequence of reduced demand should be a reduction in price. Instead, what we’ve seen in recent years is the opposite: flagship prices have been steadily going up, passing the $1000 mark like it’s no big deal! Phone makers seem to rely on the fact that the monthly payment plans a lot of people are opting for will mask the increased price. After all, what are $10 per month more? That’s like two lattes! Despite that, more and more people are starting to notice the outrageous prices and deciding to keep their device for a bit more, either waiting for a good deal or for the next model (which will likely be even more expensive).
I’m sure lower prices is the option every user will choose, but chances are that’s not going to happen. We might see a stabilization of the prices around where they are now, but once phone makers have reached a price point, they’d do anything to not go below it. We’ve seen that even the so-called “affordable flagships” have used the opportunity to add a couple of hundred bucks to their price tag.
So far, we’re 0 for 2, let’s see what else is there...
Offer a variety of designs
Now, I’m aware that there are only so many variations of “a rectangle with curved corners and a display” you can have, but there are enough parameters to play around with as a manufacturer to make devices feel different.
Take OnePlus, for example. You want a phone with no notch and thin bezels? Get the 5T! You’re okay with a regular notch? The 6 is for you! Maybe you prefer the sleeker teardrop style? The 6T has your back! And in a few months, we’re expecting the company to release a phone with a pop-up camera. Not a fan of that? Well then, wait another 6 months or so and OnePlus will likely release a phone with a different style, maybe a punch-hole display?
My point is that experimenting with different designs is not that risky if you offer them on shorter release cycles as OnePlus does. Sure, not everyone will like the latest design choices, but if fans of the brand know the next model will offer something different, they’re more likely to wait than to go for another brand.
Meanwhile, if you didn’t like the style of the iPhone released in 2017, you’re stuck with your device until late 2019, if not longer!
Luckily, we now see companies experimenting more often with their design. From unusual aspect ratios, like the new Xperia 1, to different ways to make edge-to-edge displays: second displays, sliding mechanisms and so on. Those unusual design decisions also help manufacturers stand out from the competition in a world where one chip determines the internals of most flagships, making it harder to compete with just performance.
Then there’s the completely opposite approach...
Focus on services
In a way, we’re already seeing this from Apple. The company’s services are rapidly increasing in revenue over the last couple of years, accounting for bigger than ever part of the company’s overall profits. We also know Apple is planning to launch brand new services this year, covering an ever wider range of its users’ needs.
With this business model, as the hardware specs of phones become less relevant, the device will turn into a portal to the manufacturer’s ecosystem. So while you're paying money for a new phone less often, as long as you’re part of the ecosystem, you’re compensating the revenue loss through subscriptions, ads, or, worst of all, your personal data. One day you might receive a smartphone for free as long as you subscribe to the manufacturer’s package of services. Sounds familiar, doesn’t it?
This is why we’re seeing not only Apple, but Samsung, Huawei and Xiaomi as well, all creating tech products for every need, from headphones to laptops, and connecting them with their own software solutions. And while we’re already used to Apple’s walled garden, soon walls will start raising around other brands’ gardens as well.
This is not a future that sounds exciting, to be honest, getting engulfed in a single ecosystem limits your consumer choices and more or less leaves you to the mercy of the brand you’ve chosen.
Offer lucrative upgrade incentives
That’s another strategy we’ve seen in play plenty of times, most recently with the release of the Samsung Galaxy S10 phones. Samsung offered discounts up to $550 depending on the device you’re trading in. While that does sound tempting, discounts like that are most useful if you were planning to sell your device anyway and can’t get a higher price for it, so it’s not so much that you’re saving money rather than adding convenience. Of course, for those of you with a green mindset, knowing that the company will make sure the phone will be properly recycled is a reward of itself.
Another way to push people to pull the trigger on a new smartphone is by offering free products as a bonus, again just like Samsung did with the Galaxy Buds it paired with Galaxy S10 preorders. Of course, while they will cost you $130 if bought separately, for Samsung the manufacturing cost is significantly lower, so in a way, it’s a win-win for both parties. It works even better if the freebie is something users don’t have already or something they’d like to have but would otherwise skip because of the cost.
Reduce durability and usability
This is truly the darkest timeline, but it’s one that can’t be ignored. The age-old debate about planned obsolescence has been reemerging regularly. Most of you probably already have an example in mind: Apple slowing down iPhones after their batteries degraded to a certain degree. The practice remained a secret until it was discovered through a third-party investigation and subsequently broadcasted by all possible media outlets until Apple finally admitted it. Was that planned obsolescence? Well, it’s hard to say how much it was “planned” in advance and how much it was just Apple reacting to the issues with the batteries on their phones and not telling anyone about it. Either way, the result was that phones were slower which likely resulted in people upgraded sooner that they would have otherwise. That was recently confirmed by Apple’s executives when the cheaper battery replacement program ended and the company revealed estimates about how much money it lost because people kept their phones longer.
What makes planned obsolescence so hard to prove is pinpointing why a certain component failed. Was it because it was designed to fail, or was it because a cheaper material/design was used to save money? One is illegal (at least in some countries), while the other is perfectly justified financially.
Even if we leave hardware components aside, smartphones rely heavily on software to be functional. And as we saw with the slowed down iPhones, companies can change the behavior of each device at the deepest possible levels, potentially masking any artificial sandbagging in ways that it can never be discovered. While such shady practices are likely rare, what’s more common is phones receiving software (whether that's newer OS or apps) that was designed with more powerful devices in mind, leading to worse performance.
Hopefully, manufacturers will stay away from the consumer-hostile practices and will instead try to win more customers by just offering products people want to buy. What a revelation, right? You’re welcome, smartphone industry!