Skip to main content



Competing brand loyalty in mobile devices

http://appleinsider.com/articles/15/11/19/of-101m-iphones-now-in-us-installed-base-62-are-iphone-6-models-with-apple-pay-support

A large market where we can consider the effects of networks is technology. Particularly, brand loyalty towards cell phones and operating systems is interesting. If we consider the two main competitors in the field, most would respond that the majority of consumers align with either Apple’s iOS platform or Google’s Android platform.

We see a good amount of brand loyalty between the two platforms aligns around 80 percent annually. Among the two platforms, near the release of a new device (like an Apple keynote indicating the release of a new iPhone), the loyalty rate wavers a bit (Android rates dropped from 82 percent to 76 percent). Both platforms are challenged with the issue of attracting competing users to their side of the field, and many of these switches can be described with network effects.

One of these network effects can be explained with software versioning. Apple’s platform is the king of adoption rates and the latest version (iOS9) has been upgraded to by 67% of iPhone users. Comparatively, only 0.3% of Android users are running the latest version of the OS, Android 6.0. This is a network effect resulting from two factors.

Manufacturers of Android phones feel less obligated to update their software as a result of negative “direct-benefit” network effects. Updating their software does not make an extensive contribution to the percentage of Android users who have adopted the latests operating system, since there are so many other manufacturers that are unlikely to update their software quickly as well. Therefore, each manufacturer does not believe that pushing updates to consumers will result in a competitive advantage, and thus Android sees less of an adoption rate for upgrades.

Apple, on the other hand, produces both the software and the hardware for their products and directly controls how soon software updates become available for each of their devices. If consumers see that others are updating to the latest software, they incur an “information effect” and also feel inclined to update their phones as a result of information cascades. Apple, in turn incurs a “direct benefit” network effect to upgrade their software on the basis of pleasing their consumers who expect more rapid update schedules.

Comments

Leave a Reply

Blogging Calendar

November 2015
M T W T F S S
« Oct   Dec »
 1
2345678
9101112131415
16171819202122
23242526272829
30  

Archives