Unlocked phone user base growing but less loyal: NPD

mobile phone
Users of unlocked phones are less loyal to both carriers and manufacturers than other customers, according to NPD.

The U.S. market for unlocked phones has reached 30 million users, according to the NPD Group, accounting for 12.5% of overall phone sales.

But that growing base of wireless customers is less loyal to both carriers and manufacturers than are owners of locked phones.

The market research firm reported this week that 30% of unlocked phone users switched carriers when buying a new device, while only 24% of purchasers of locked phone users switched service providers. The top motivating factor for buying an unlocked phone was freedom to choose a network in the future, NPD said, and users of unlocked phones were significantly more likely to cite “lowering cost” as a reason for moving from one network to another than users of locked phones.

“The market is made up of two distinct consumer bases: price-sensitive consumers looking for low-cost devices that deliver value; and high-end, tech-focused consumers, looking to differentiate from the standard choices,” said Brad Akyuz, an industry analyst for NPD, in a press release. “Now that smartphone subsidies are nonexistent, for the most part, the unlocked market has become a cost-effective option.”

Owners of unlocked phones are also more likely to buy a different brand when upgrading their handsets, NPD reported. Forty-eight percent of unlocked phone users changed brands when moving to a new phone, compared to 37% of locked phone users, and brand loyalty increased with the price paid among unlocked phone users.

“Retailers, both in-store and online, have taken this opportunity to increase their unlocked phone selection, as more consumers are open to purchasing alternative brands for a lower price, or even for the same price if the functionality is appealing,” Akyuz observed. “As the unlocked phone market grows, differentiation will be key for original equipment manufacturers. While price is one competitive component, devices will need compelling features/functionality to appeal to consumers and retailers alike.”