iPhone, Verizon Lead in Smartphone Satisfaction

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Includes: AAPL, BB, GOOG, PALM, T, VZ
by: Marketing Charts

Despite the traditionally high Blackberry penetration among business users, smartphones with more consumer-oriented functionality - such as the iPhone (NASDAQ:AAPL), Google’s (NASDAQ:GOOG) Android and Palm (PALM) Pre - score the highest in a customer satisfaction study (pdf) from CFI Group.

The CFI Group Smartphone Satisfaction Study, based on surveys of more than 1,000 US smartphone users, also found little relationship between smartphone satisfaction and consumer satisfaction with network provider. Verizon (NYSE:VZ) and T-Mobile get top scores for satisfaction in this category, despite the fact that the iPhone is exclusive to AT&T (NYSE:T).

iPhone Undisputed Leader in Satisfaction, Loyalty

The study used the same methodology as the American Customer Satisfaction Index to compare smartphone platforms, and found that Apple’s iPhone is the undisputed leader in customer satisfaction, scoring 83 on a 100-point scale, 8% higher than its nearest competitors, Android and the Pre (77).

Smartphones popular among business users, such as Research In Motion’s (RIMM) BlackBerry (73) and Palm’s Treo (70), trail significantly in customer satisfaction, while the “others” category - including Symbian and Windows Mobile - had a score of 66.

The study found that the majority of new smartphone owners are using them for mostly personal use, a departure from the early adopters who originally used smartphones primarily for business. This new customer audience has much higher expectations of the smartphone, and the platforms that satisfy these needs rate the highest, CFI group said.

“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,” said Doug Helmreich, program director with CFI Group. “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.”

In addition to being the best in satisfaction, the iPhone has the most loyalty and word-of-mouth recommendations. More than nine in 10 (92%) of current iPhone users say they have their ideal phone, 90% have recommended the phone, and 35% say they purchased their phone because of a recommendation. The iPhone also is the most popular alternative to any other smartphone.

Competitions Nips at iPhone’s Heels

Despite iPhone’s lead, the study also revealed that competition is heating up, with Android and Pre the biggest threats to iPhone. This is because all of these models, CFI Group said, have the ability to deliver consumer-oriented activities, like apps, an easy web-browsing experience, and multi-media playback.

On the other hand, business-oriented smartphones, such as Palm’s Treo and early generation BlackBerrys, are falling behind, and “generic” smartphones that run Symbian and Windows Mobile are “not even on the radar,” CFI said.

AT&T Lags in Network Satisfaction

Despite iPhone’s dominance in satisfaction and loyalty, the study’s analysis of the relationship between device satisfaction and carrier satisfaction found that the iPhone has done little to help AT&T’s customer satisfaction among smartphone owners.

Among smartphone providers, Verizon Wireless and T-Mobile tie in overall provider satisfaction, scoring 79. Sprint scores 74. AT&T’s non-iPhone smartphone customers score 73, while its iPhone users rate AT&T 69.

Verizon is the ideal provider for 86% of smartphone users surveyed, yet only 38% of Verizon smartphone customers say their current phone is their ideal smartphone, the lowest percentage of any provider.

Interestingly, Verizon has none of the most satisfying smartphones but still maintains a leadership position in satisfaction on the perceived strength of its network, CFI Group said.

For AT&T, the opposite is true. It has the most satisfying smartphone but lags in provider satisfaction, in part because of its network problems associated with its iPhone customers’ overwhelming data use.

Exclusive Arrangements Double-Edged

AT&T’s exclusive iPhone arrangement with Apple has been a double-edged sword, the study found. While the carrier acquired millions of new customers who purchased iPhones, half of iPhone respondents said they would like to defect to another provider.

CFI found that four in 10 (40%) iPhone users switched providers to get the phone, and these customers may be dragging down AT&T’s satisfaction score. Study results show that iPhone customers that switched providers to get the device rated AT&T 64,while iPhone users who did not switch rated AT&T at 72.

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

Other recent research studies also shed some light on the iPhone’s prominent position in the smartphone market. In a list of the top social brands of 2008 compiled by social media marketer Vitrue, the iPhone ranked as the #1 most social brand, while a study by ChangeWave Research found that smartphone ownership this year has risen to 37% in the US, driven by demand for the iPhone, among others.

Consumers also continue to monitor ad campaigns and promotions for new smartphone devices. Research by comScore, Inc. found that digital ad campaigns this summer for both the Palm Pre and Apple’s new 3G iPhone garnerned significant online attention.

About the survey methodology: The American Customer Satisfaction Index (ACSI) is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the US. It is updated each quarter with new measures for different sectors of the economy replacing data from the prior year. The overall ACSI score for a given quarter factors in scores from more than 200 companies in 44 industries and from government agencies over the previous four quarters. The Index was founded at the University of Michigan’s Ross School of Business and is produced by ACSI, LLC.