Apple's iPhone Builds Huge Lead in Customer Satisfaction

| About: Apple Inc. (AAPL)
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“As a general rule, people disappoint you as you know them.”
– Astronomer Maria Mitchell, 1858

This 19th century astronomer’s rather cynical viewpoint may hold true in relationships between human beings, but to date there are no signs of disappointment between consumers and their iPhones.

According to ChangeWave’s latest consumer cell phone survey, completed Oct. 2, 2007, the Apple (NASDAQ:AAPL) iPhone has continued to enjoy solid growth while racing to a huge lead in terms of customer satisfaction.

The survey of 3,654 Alliance consumers looked at key market share changes among the major cell phone manufacturers and service providers – and found that while the iPhone’s been on the shelf just three months its impact is already being felt industry-wide.

iPhone Ups its Share

Apple’s current cell phone market share among respondents rose to 2% in this survey, double our last cell phone survey in July – solid growth that’s in line with previous expectations.

The top cell phone manufacturer, Motorola (MOT), still maintains its number one spot in terms of current market share with 30%; however, that figure has fallen 1-percentage point since our July survey to its lowest level in more than a year.

But the most striking finding of the survey is the iPhone’s outstanding customer satisfaction rating. An unprecedented 82% of iPhone owners report being Very Satisfied with their purchase, up 5-points since our previous survey in July and by far the highest rating of any cellular manufacturer.

The only other company with a satisfaction rating above 50% is Research-in-Motion (RIMM; 51%).

At the other end of the spectrum, Motorola (33%) was next to last among cellular manufacturers in customer satisfaction, with Sony/Ericsson (31%) at rock bottom.

But it’s when we asked respondents about their planned future cell phone purchases that the iPhone marketplace transformation becomes fully apparent.

Going forward, we find an astonishing 16% of respondents who plan to purchase a cell phone in the next six months saying they’ll buy an iPhone – placing Apple up at the top among all manufacturers.

Importantly, while the number of European and Canadian respondents in this survey wasn’t large enough to draw final conclusions, the iPhone also appears set for a stellar debut when it launches in the coming months in Europe and Canada.

“There’s no longer any doubt about the staying power of the iPhone,” says Tobin Smith, founder of ChangeWave Research and editor of ChangeWave Investing, who adds, “The continuing embrace of the iPhone by the public is a stellar example of how a new product can forever alter its own playing field.”

Motorola’s Downward Slide

In other findings, after a long and horrendous slide, Motorola’s future planned purchases (15%; up 1-pt), appear to be bottoming for the first time in a year. Note, however, that ChangeWave surveys throughout 2007 have shown Motorola to be the manufacturer hurt most by the iPhone, and the current survey results continue to support that finding.

The above chart illustrates Motorola’s dramatic rise and fall in terms of planned purchases over the last two-plus years. Notably, the decline first started showing up in our January 2007 survey, conducted immediately after Steve Jobs’ original iPhone announcement.

On a more upbeat note, Nokia (NYSE:NOK) planned purchases have jumped 3-points since our July survey to 13%. Conversely, LG (4%) and Palm (PALM), 2%, have each fallen 2-pts.

Service Provider Wars

Within the cellular service providers market, the tug-of-war between Verizon (NYSE:VZ) and AT&T (NYSE:T) rages on.

In terms of current market share, both Verizon (30%) and AT&T (29%) have each gained 1-point since the previous survey in July. For AT&T – the iPhone’s exclusive service provider in the U.S. – this is the third survey in a row that they’ve racked up a 1-pt gain.

Mired far behind in third place is Sprint Nextel (NYSE:S) with 12%. The company still shows no signs of a turnaround from its downward spiral.

Looking ahead, after the initial wave of excitement for the iPhone, planned future demand for AT&T – while still historically high – is returning to more normal levels. Among respondents who plan to switch carriers over the next six months, a total of 23% say they’ll go with AT&T – a full 7-points lower than our July survey.

Verizon, on the other hand, has halted its downward slide in planned purchases that began immediately after the Steve Jobs iPhone announcement back in January. All told, the company has increased its share of planned purchases 2-points to 21% – significantly narrowing the gap with chief competitor AT&T.

Here’s another look at the roller-coaster slugfest in planned purchases between Verizon and AT&T over the last two-plus years:

Importantly, Verizon customers continue to give their company the highest satisfaction rankings in the industry, even as lower satisfaction ratings continue to plague AT&T. We note that previous surveys have identified the speed of the AT&T network as the top complaint among iPhone users.

Going forward, Sprint barely registers in planned purchases, garnering a minuscule 3%.

In sum, as the survey shows, the Apple iPhone is far from a disappointment to date. Unless you’re one of Apple’s chief cellular competitors, in which case you may well be feeling a sense of disappointment – in your own cellular products.

Paul Carton co-wrote this article.

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This article summarizes the results of a recent ChangeWave Alliance survey. The Alliance is a research network of 11,000 business, technology and medical professionals who spend their everyday lives working on the front line of technological change. For more info on the ChangeWave Alliance, or if you are interested in joining, please click here.