Types of Handset and the Market

Handset Segmentation
Segmentation of mobile handsets is usually based on technology, with a correlation
between technology and price; that is, the more complex or feature-rich the device,
the more expensive it tends to be. However, more recently, and for the foreseeable
future, alternative segmentation strategies have become increasingly important for
both vendors and operators. They both seek to segment handsets and their markets
in a variety of ways to cope with market trends and aid in the differentiation of
their products to attract and retain subscribers:

Technology.

Technology is the traditional handset segment. Handsets are
divided on a technical basis, with a direct correlation to pricing so that a
handset incorporating less of the latest technology is invariably cheaper in
the marketplace than one with greater technical prowess. This can now also
be applied to features on the phone, such as the number of megapixels on a
camera or the amount of storage capacity.


Lifestyle.

This is an increasingly ubiquitous segmentation strategy, reflecting
the growing importance of the end user in the value web. This involves
matching the functionality of a handset with the specific needs of the end–
user (e.g., youth or style).


Price.

This strategy is beginning to be used more, owing to the move into
developing markets where customer income is low. It is primarily based on
the cost to manufacture the handset and the customer market segment at
which it is aimed. It also includes customer purchase profiling.
Application specific. This segments the market by optimizing components of the
handset to focus on a specific application, such as games or music. It is not a
technology-hungry mode, as the handset design is quite flexible and is a comparatively
cheaper process because it eliminates many nonessential components.


Low-end phones.

The term “low-end handset” is used normally to describe those
mobile phones that support only basic voice and data services and perhaps do
not support many features such as color displays or cameras. These phones
are usually targeted at the new user and prepaid user markets. While these
phones are normally at the cheaper end of the market and have traditionally
not supported much in the way of advanced features, the effect of technology
trickle-down is beginning to be felt even in this market sector.

It is not unusual to find color screens, cameras, and even WAP-based Internet
access available on some handsets. Polyphonic ringtones are very popular across all
market sectors and a good revenue generator for the network operators; therefore, it
is in the interest of the operator to enable the downloading and playing of various
types of ringtones, even in the so-called low-end device market.

Also in this segment is the low-cost handset or ultra-low-cost handset. The
GSMA is encouraging handset vendors to address the developing market by producing
handsets at a very low price point, U.S.$40 to U.S.$50, for example. These
devices have very few features in an effort to keep manufacturing costs to the bare
minimum. Often, these devices will support only voice and text messaging and
perhaps a limited selection of preprogrammed, non-changeable ringtones. While
these handsets are designed to address the developing market to make mobile communication
more affordable to those people that have little disposable income, they
may also find a place in the senior (or “gray”) market.

Low-Feature Phones

Low-feature handsets are generally geared toward more mature users and the
replacement market. The main attraction of the mid-range handset is the more
advanced feature set, in comparison to a low-end phone. Designs are more ergonomic,
with shapes and keypads that are easy to hold and handle. Displays are generally bigger than those on low-end phones and are more likely to be color. The
graphics quality and user interface are also expected to be superior, and this segment
is most likely to see the first significant showing of tri-band handsets.


Music and Entertainment

Music entertainment handsets are generally equipped with a mobile music player
for MP3 and AAC files, stereo FM radio, digital recorder, and Flash memory. This
is an extremely popular market segment, largely due to the popularity of standalone
music players such as the Apple iPod. Several handset vendors have launched
mobile phones that address the music market directly. These players are often
shipped to the subscriber with some form of access to a music downloading site,
(e.g., iTunes). One challenge that faces the industry in this market sector is the issue
of copyright and digital rights management (DRM). For the service to be popular,
musical content must be easy to distribute and exchange between authorized music
sites and vendors, as well as between the consumers of the music. This, however,
is at odds with the management of the copyright holder’s rights to the content.
Industry bodies such as the Open Mobile Alliance (OMA) are working on methods
to resolve these issues.


Feature Phones

This segment encompasses devices with high-technology capabilities and a variety of
features but without harboring an advanced OS, which would put them into the smart
phone device category. This segment has many of the attributes assigned to lesser segments
and also incorporates advanced features such as video capture and playback,
music, expandable memory slot, high-resolution screen, and megapixel camera.


Smart Phones

The smart phone is generally defined as a converged device whose primary function
is that of a phone with added advanced computing capabilities or PDA functionality
with an advanced operating system (OS). The category was born out of the
amalgamation of mobile phones that offer PDA functionality with an advanced OS
and a PDA with a WWAN connection. Smart phone devices invariably have a large
color display, are inclined to have a larger form factor, and are feature-packed.
There are two primary types of smart phone. There are those that are mainly
rich media devices with advanced OS and computing functionality that are basically
mobile phones embedding a number of additional features outside the usual
ones found on PDAs, such as MP3, camera, MMS, games, Java, or e-mail. These
devices might be used in the business and corporate markets. At the higher end
of the smart phone market, the devices tend to be PDA computers with phone capabilities,
typically manufactured by handheld device vendors such as HP, PalmOne,
and Toshiba; these devices are aimed at the business professional.