The Smartphone Slow Down (And What It Means for Acquisition Costs)

By: Kahuna | May 2, 2016 | Trends in Mobile, Uncategorized
Growth-Slow

Markets rarely grow exponentially forever, though we often act like they will. This is especially true for smartphone proliferation, which many assume will continue its hockey-stick growth in perpetuity.

But we’ve reached the point where a majority of US adults own smartphones. Reduced availability of feature phones on the market (non-smartphones) and lower average cost of smartphones available in recent years (average of $349 in 2011 down to $276 in 2015) drove massive adoption. In the US smartphone penetration rates were approaching 75% at the beginning of 2015. The number of new smartphone adopters has already peaked and is poised to slow down tremendously.

Smartphone-Users-Growth

This downward trend sets off a substantial shift in the mobile marketing landscape. Classic supply and demand. As the rate of new smartphone adopters slows, the costs to acquire new app users rises. This is already born out by previous data. In 2012, 24 million new smartphone adopters were added in the US, and the cost per loyal app user was $1.75, according to Fiksu, a mobile advertising company. Flash forward to 2015, there are 8 million fewer new smartphone adopters in the pool and, as expected, Fiksu recorded a record high acquisition cost per loyal customer at $4.23 per user. As the “supply” dwindles, acquisition costs are increasing in lockstep.

mobile acquisition cost

This inverse relationship should force marketers to rethink their priorities, specifically how much allocation of time, resources and execution of strategy should be dedicated to engagement and not just acquisition. An important distinction is that we’re not talking about a diminishing number of smartphone users, but rather a drop in new smartphone adoption growth. In that paradigm, capturing continual value from your user base is as important, if not more important, as acquiring new customers. And more cost effective.

Let’s take a look at a correlating data point. The amount of mobile data consumed is growing at a rate new smartphone adoption once experienced, with Cisco showing an increase of 6X over the next four years.  This puts the impetus on marketing to employ messaging that drives greater in-app consumption, repeat purchasing, advocacy, and other deeper signals of true user engagement. That can’t be accomplished if marketers primary goal is attracting new users versus optimizing for the experience of their current users.

Source: GSMA, Global Mobile Economy Report, 2015

Source: GSMA, Global Mobile Economy Report, 2015

This is why in their Mobile Marketing TechRadar report, Forrester declared the Mobile Engagement Automation industry the fastest growing mobile marketing and commerce technology poised for significant success 2016. (You can get a free copy of the report here.) Within the report, engagement is poised for greater success than even mobile ad platforms, as relentless acquisition efforts become prohibitively expensive.

All of these trend lines are converging towards a major mind-shift for marketers: prioritizing the value exchange between the brand and the consumer. This requires getting serious about engagement, and what engagement means in regards to delivering higher value to the consumer and, in turn, capturing more business value from the customer. The current customer base represents the biggest opportunity for engagement. Marketers can provide more value by providing personalized content and offers based on not only interests and preferences, but also on the individual moment in which to deliver that customer’s likelihood to act.

The initial growth of the smartphone market, and it’s current slowdown, is indicative that engaging the mobile customer is no longer a speciality within marketing. It’s a new imperative.

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