CRM: The psychology of SmartPhone Majority Adopters and implications for CRM marketing

Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Smartphone Adoption:
The psychology of Majority Adopters and
implications for CRM marketing
February 2011

Objective
 In 4Q 2010, Verizon exceeded in its goal of 70% smartphone take-rate for activations.
However, we need to continue to drive that goal now that we’re out of the promotional holiday
period.
 This review consolidates several information sources (see Appendix) to address questions
about users who have not yet adopted smartphones:
– What are they thinking?
– What do they need to be confident in their purchase decisions?
 This review also provides implications for how we message in mass media and treat
customers in CRM.
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 2

The Rogers Technology Adoption Curve
Rogers Technology Adoption Curve
3
Source: Everett M. Rogers: Technology Lifecycle Adoption Curve
 A technology diffusion model that Everett Rogers generalized describes how new ideas and
technologies spread in different cultures.
 This model describes the adoption or acceptance of a new product or innovation, according
to the demographic and psychological characteristics of defined adopter groups.
Time

Current U.S. Smartphone Penetration
Industry’s current
estimate is 30% U.S.
smartphone
penetration, 10 pp
behind projection.
 Current industry estimates indicate that the U.S. is at about 30% smartphone penetration rate.
 That is approximately 10pp behind where Nielsen had projected the U.S. to be at this point in
time (40% penetration ).
4

U.S. Smartphone Position on Adoption Curve
Roger’s Technology Adoption Curve
Cumulative 2.5% 16% 50% 84% 100%
With 75%-80% smartphone
take rates, the industry is
suddenly moving up the
curve quickly.
 We have reached Majority adoption, but not as far as you may
think.
 It took 12 years to get to 16% penetration, but only two more
years to almost double to 30% penetration.
1996 2008 2010
12 years
30%
Majority Adopters
are the 2011
target.
5
2 years
Source: 4Q earnings releases
4Q 2010 Smartphone
Take Rate1 Penetration2
VZW 75% 24%
AT&T 80% 44%
Sprint 69% 37%
T-Mobile Not Available 38%
1 Financial earnings releases
2 Nielsen Mobile

U.S. Smartphone Penetration Is Much Greater
in MC than General Market
• Hispanics and Asians have consistently led in smartphone penetration, with anywhere from
6-12% higher penetration than other race/ethnic groups
• In Q410, Hispanic and Asian penetration is also about 50% higher than the general market
Source: Verizon Wireless Performance Update, Nielsen, Oct. 1, 2010-Dec. 31, 2010
Industry’s Q410
current estimate is
30% U.S.
smartphone
penetration
30%

U.S. Operating System (OS) by MC Group
• Hispanics are fairly evenly divided between the three major key players
– iOS, while the most expensive, is the leading system for Hispanics
– Hispanics are value conscious, not just price sensitive – this suggests they see value in iOS that is
worth the added cost
• African Americans use RIM the most, but interestingly, also choose operating systems
outside of the leading three

Where Does Verizon Stand?
New Customers
(First Contract Customers**)
30%
Tenured Customers
(Non First Contract Customers)
27%
VS.
Smartphone Penetration
DirectionallyGood
Directionally good, but
expected a wider gap
Goal
Smartphone Take Rate
70%*
* Note that Value Tracker found that 68% of its shoppers were interested in taking a smartphone, both Advanced to Advanced and Basic to Advanced.
** First Contract Customers (FCCs) are defined as new-to-Verizon customers on their first contract in contract months 0 to 30, meaning they joined any
time from December 2010 back to June 2008. They represent 12% of lines in base (7.9 million). Customer data provided by the CRM team.

Aligning Verizon’s Customer Segments
to the Adoption Curve
Roger’s Technology Adoption Curve
Cumulative 2.5% 16% 50% 84% 100%
 At 26%, Verizon is a little behind the industry in terms of smartphone adoption, but with
smartphone take rates at 75%, Verizon is catching up very quickly (and, iPhone…).
 Verizon’s new segmented customer base communication streams align well with the
technology adoption curve (depicted below).
26%
9
Innovation
(all lines are on smartphones)
Smartphone Propensity
(all lines are likely to take smartphones soon)
Value (80% on basic/feature phones)
Mass (68% on basic/feature phones)
OOC 6+
Verizon’s
smartphone
penetration is
26%

Who Are Majority Adopters?
In comparison to Innovation/Early Adopters, the Majority Adopters:
 Are a little older.
 Are more likely to be in families with children.
 Are more likely to be on a shared plan.
 Are less likely to feel the need to be connected to the Web/Email all of the time.
 Are more likely to feel that data plans are too expensive.
 Are more likely to be motivated to adopt a smartphone if the plan, not the device, was
affordable.
 Are less likely to have an employee discount, thus they are more price sensitive than
Innovators/Early Adopters.
 Show a strong preference for purchasing wireless services or devices in carrier stores vs.
online or at retailers (that carry multiple wireless brands) – they feel the staff in carrier
stores are more knowledgeable.

Majority Adopters: What Are They Thinking?
Early Majority Adopters Late Majority Adoptersvs.
Key Trait Pragmatic
Prefer “tried and true” products
Resistant
Demands are rarely met by new products
CRM Smartphone Propensity
Shopper Marketing
Retail Advertising
Approach Thoughtful and Deliberate
“They like to stay with the herd.”
Conservative and Skeptical
“If it ain’t broke, don’t fix it.”
Influencers New opportunities/
Incremental improvements
Economic benefit/
Ease of use
Drivers Change to build
efficiencies
Change out of
necessity
Technology
POV
Optimistic
Believe technology can make life better
Pessimistic
Believe new products overpromise
11
CRM Value / Mass

How We Can Help Build Confidence to Get a
Smartphone
Nudging, encouraging to follow the herd
Educate how smartphones can help them
do what they do now, easier and more
efficiently
Easy to understand plans and
value-minded pricing for plans & devices
(e.g., family plans and BOGO/BOGA
devices)
Guidance to what’s popular
and proven, to what people like them
choose (e.g., plans, devices, apps,
features)
Guidance to self-directed trial, selection
help, tips for switching, device/account set-
up, device training
Wash away resentment
Educate that while still a great phone, you
can do so much more
Least expensive plans and least expensive
devices
Guidance to proven entry-level experience
(e.g., plans, devices, apps, features)
Guidance to aided trial, selection help, tips
for switching, device/account set-up, device
training
12
Tone
Educate
Bundling
Training
Offerings
Shopper Marketing
Retail Advertising
CRM Value / Mass

Their Adoption Barrier is the Cost-benefit of
Plan Costs vs. Constant Connectivity
A/a = Significantly higher than corresponding column at 95%/90% confidence level
D03B1. Why are you ... to purchase a PDA or Smartphone in the next 3 months?
Why don’t plan to purchase Smartphone in the next three
months? (%)
Total Basic Shoppers
4Q10 4Q10
C J
Base: Don't Plan To Purchase Smartphone Or PDA N3M 1421 418
Don't want/need to be connected to email/web all the time 37 45 F
Data plan is too expensive 35 48 F
Waiting for a specific device to become available 13 8
Don't/didn't understand how to use all the smartphone features 9 13 F
Don't like the choice of devices available 8 8
Other 20 6
4Q 2010 Value Tracker

A Good Plan Deal Bundled with an Inexpensive yet
Proven Device Could Tip the Scales in Verizon’s Favor
What Would Motivate Smartphone Purchase
Today (%)
Total
Basic Shopper
Smartphone
Non-Intenders
Basic Shopper
Smartphone
Intenders
4Q10 4Q10 4Q10
C E G
Base: Total Respondents 1992 418 172
A good deal on the device 42 40 59 E
A good deal on the monthly data plan 40 41 66 E
A good deal on the monthly calling plan 38 41 62 E
A good deal on a family data plan 32 36 40
Free applications 30 29 42 E
Data plans starting at $15 per month/per line 23 22 38 E
Other 3 3 2
None of the above 20 19 G 1
A/a = Significantly higher than corresponding column at 95%/90% confidence level
D03C1. Would any of the following motivate you to upgrade to a smartphone/advanced device today?
4Q 2010 Value Tracker

In Absence of a Compelling Bundle, How We Should Treat
Customers Differently to Encourage Smartphone Adoption
15
Device Offers
 BOGO, BOGA
 $$ off
 Secondary line offers
 Shared upgrade eligibility
 Free phone
 Trade-in
 Online only deals
Plan Offers
 Family friendly data
 Share plans
 One month free
 Share plans
Appropriate Offers/Devices
Device
Selection
 All smartphones
 Most popular and highest rated
 Both smartphones and feature phones
Communication Channels
Channels
 Mail
 Email
 Text
 Mail
 Email
Shopper Marketing
Retail Advertising
CRM Value / Mass

Treat Customers Differently to Encourage
Smartphone Adoption, cont’d
16
Creative
Offer
Prominence
 Equal prominence for device and plan
offers
 Plan offer or description more prominent
than device offer
Device
Positioning
 Most popular
 5-star rated
 Fastest selling
 7 out of 10 Verizon customers choose
smartphones
 Durable and reliable, our customers
keep for an average of XX years
 Best price ever
 Our lowest priced smartphones
 User friendly
Benefits (of
having a
smartphone)
 Everything you love about being online
in your palm
 Owner quotes (e.g., they don’t call it
“crackberry” for nothing)
 Stay more in-touch with friends and
family than you can imagine
 Streamline your life
 Never be at a loss for entertainment/sports
 Convenience of always having access to
important information
 Owner quotes (e.g., they don’t call it
“crackberry” for nothing)
 Replace paper that gets lost (e.g., coupons,
boarding passes, etc.)
Shopper Marketing
Retail Advertising
CRM Value / Mass

Treat Customers Differently to Encourage
Smartphone Adoption, cont’d
17
Education  Data need estimator
 Smartphone selection guidance based
on “what you like to do”
 Smartphone benefits and tutorials
 Most popular apps
 Data need estimator
 Free features (e.g., BBM, Skype, Wi-Fi
etc.)
 Offer to pre-load apps and/or send to
store for help
Call to Action  Outfit your family today  Schedule an appointment today
Creative, continued
Post-purchase
Education/
Cross-sell
 Tutorials and training online, in-store
 Most popular apps for OS
 Encourage to write a review at vzw.com
 Accounts like yours have XYZ account
mix
 Encourage to “refer a friend”
 Tutorials and training online, in-store
 Most popular apps for OS
Post Purchase
Shopper Marketing
Retail Advertising
CRM Value / Mass

Source References
 Experian. 2010 Technology Adoption Consumer Report: Spring 2010.
 High Tech Strategies, Inc. Historical Perspective: The Technology Adoption Lifecycle.
http://www.hightechstrategies.com/profiles.html
 Coatings World. New Technology Adoption, Part IV: May 2008.
http://findarticles.com/p/articles/mi_hb053/is_5_13/ai_n29437896/?tag=rel.res2
 Wivoda Consulting, Inc. Information Technology Adoption: Moving from a cost of doing business to strategic
advantage.
 Forrester. Segmentation Consumers By Technology Preference: April 2009.
 Rogers, Everett M. Diffusions of Innovations: 2003.
http://steveapplegate.com/consultant/adopter/index.htm
 Green Book. Research on Trends: Influentials, Innovators & Early Adopters.
http://www.greenbook.org/marketing-research.cfm/influentials-innovators-early-adopters
 5MetaCom. Understanding the Technology Adoption Life Cycle. 1999.
http://www.5metacom.com/Assets/PDF/TechAdoptionLifeCycle.pdf
 Verizon Wireless Performance Update, Nielsen, Oct. 1, 2010-Dec. 31, 2010.

Who Uses Data?
Looking at gender, age and race/ethnicity and assuming females, those age 35-44 and white as
the base (index of 100):
• Men, youth (ages 18-34), and non-white ethnic groups all over index
– Men = 1.39
– Youth (average) = 1.23
– Non-white Races (average) = 1.32
• Hispanics, in particular, drastically over index at 1.42
Smartphone MB Usage Levels by Demographics

Different Verizon lines of business can use the following insight in different ways:
 Innovators and Early Adopters are always passively shopping, therefore we want to message to those who
are competitive switchers in mass media, in-store, and via customer communications.
 Early Majority adopters are now likely to be in the market for a smartphone, therefore we want to message
to them in mass media, in-store, and via customer communications.
 Late Majority adopters probably are not in the market for a smartphone.
– We need to keep an eye on industry smartphone take rates during 2011 to identify when it will make
sense to message to them in mass and in-store.
– However, we can target Late Majority Adopters via direct customer communications.
Applying Insight by Lower Funnel
Marketing Responsibility
Innovators &
Early Adopters Early Majority Late Majority
Retail
Advertising
Message To
(competitive switchers)
Message To
Do Not Message to in
1H 2011
Shopper
Marketing
Message To
(competitive switchers)
Message To
Do Not Message to in
1H 2011
CRM
Target Innovation 1
Segment
Target Innovation 2
Segment
Target Value/Mass
Plus Segments
21

Majority Adopters Think About Technology Differently
than Early Adopters
Early Latevs.
Majority Adopters
Key Trait Pragmatic
Prefer “tried and true” products
Resistant
Demands are rarely met
by new products
Judicious
Likes to be seen as opinion leader
Approach Thoughtful and Deliberate
“They like to stay with the herd.”
Conservative & Skeptical
“If it ain’t broke, don’t fix it.”
Managed Risk
“Willing to spend money
early in trial.”
Influencers
New opportunities/
Incremental improvements
Economic benefit/
Ease of use
Opportunity to leap frog/
Each Other
Drivers
Change to build
efficiencies
Change out of
necessity
Change to keep
competitive edge
Technology
POV
Optimistic
Believe technology can make
life better
Pessimistic
Believe new products overpromise
Enthusiastic
High utilization of technology
Early Adopters

In Absence of a Truly Compelling Bundle,
Consider Subtle Messaging Changes
Obviously, mass media reaches prospects and customers across the full adoption curve.
Therefore, we need to balance messaging to switching Early Adopters vs. to customer and
switching Majority Adopters.
Early Adopters Early Majority Adoptersvs.
Device
Positioning
 Latest and greatest
 Be the first/only to have
 The next generation of
 Better than ever before
 4 stars from Engadget, BRG
 Most popular
 Most popular among families with kids
 Fastest selling
 Easiest to use
 4 stars from Consumer Reports
Device
Benefits
 Everything you love about being online in your palm
 Owner quotes (e.g., they don’t call it “crackberry” for
nothing)
 Stay more in-touch with friends and family than you can
imagine
 Streamline your life
Device
Offers
 BOGO, BOGA
 $$ off
 Free device set-up and training
 Free switching tips
Plan
Offers
 Data plans starting as low as
 Share plans
 Speeds & Feeds
 More power in your palm
 Power your tablet with this phone’s
hotspot
 Automatic system updates
 $$ off advanced device bundles
 Register now to be the first
 Register now to get one of the limited
 Device trade-in
 XX MB data for only $$ per month
 Data plans starting as low as

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