Canadian households currently have close to four active PCs in their homes and I suspect there are very few households who own the same brand of PC across each of these devices. Over the years I have been asked many times the best approach to increase loyalty in the PC market, but the challenge has always been when dealing with a commodity type product, which unfortunately is what has happened to the PC market, how do you differentiate your product or services to warrant a customer returning to purchase your brand again.

Despite this continuous challenge we are starting to see a change moving into 2012. Based on the 2012 Understanding the Canadian PC and Tablet Buyer Study loyalty across PC brands has increased each year since 2009. Are we at the same level of loyalty that certain Consumer Packaged Goods products enjoy, absolutely not, but to see a consistent rise over the past three years is encouraging. In 2012 there are two brands in particular whose loyalty level is closing in on 50 percent. We are accustomed to hearing how loyal Apple owners are to that particular brand, which has contributed to the rise of Apple across many different categories, however, it may come as a surprise that of all the major PC brands Apple does not lead the market in loyalty among Canadian buyers. The honor of having the most loyal PC customers goes to Dell.

Will the PC industry ever achieve the type of loyalty that is enjoyed by the many coffee outlets, cereal makers, or cola companies, probably not, but we will look upon this trend as a move in the right direction. Let’s hope that this movement can continue and PC vendors can work to better understand what can drive increased loyalty to help ensure long term viability in a very competitive market.

But beyond the generic Market Place apps, Nokia is also developing exclusive applications with major brands (including PGA Tour, ESPN, Groupon, and AOL) in various consumer verticals. These are designed to drive consumers interested in Windows Phone to a Lumia decision point and – hopefully – making the decision more about content than about simply the device price point. Importantly, these new applications are being built with a Live Tiles focus, and thus are an improved experience over variants based on other OS platforms.

The trick for Nokia will be how to market the exclusive nature of these applications, rather than simply creating strong marketing for Windows Phone overall – an approach that will benefit competitors such as Samsung just as well as Nokia. Indeed, one day prior to Nokia’s announcement of the new apps, AT&T announced the upcoming availability of the LTE-powered Samsung Focus 2 Windows Phone, which will carry a $49.99 price tag. If consumers do not understand that the apps are exclusive the purchase decision will remain one of device price and functionality, and all the efforts on development initiatives will have been for naught. Compounding the issue is the fact that a key target for Nokia is first-time smartphone buyers, who are far more price sensitive. Unless the value of exclusive apps is truly highlighted at retail, these target customers will still migrate to other OEMs.

While there is no question that Nokia should continue to heavily cooperate with Microsoft to expand the Windows Phone ecosystem, more emphasis must be placed on marketing the exclusive apps in TV advertising and in the retail point of purchase.

The announcement, made just before day 1 at CTIA 2012 in New Orleans, is really no big surprise. MasterCard, like other major payment networks, including Visa, is vying to maintain strong positioning in the growing and increasingly contested mobile payment and wallet space. MasterCard’s PayPass Wallet services announcement is a multi-pronged approach, and centers on three elements:

1) PayPass Acceptance Network, including PayPass Online and PayPass Contactless, which looks to help merchants drive a consistent payments experience in mobile (NFC) and online and across devices (computer, tablet and smartphone).

2) PayPass Wallet, a white label digital wallet capability targeted at banks, merchants, and other partners, and is open to other payment methods (beyond MasterCard).

3) PayPass API, which allows partners to connect their own digital wallets into the PayPass Acceptance Network.

While it’s still early, as most consumers do not yet understand the benefits of NFC-based payments, an increasing proportion of smartphone users are engaged in using their smartphones to move money, buy products and services on their phone, comparison shop, redeem coupons, and start to pay for things – mostly micro-transactions or payments, such as a cup of coffee (think Starbucks app) to movie tickets – using the phone itself. In fact, SmartMeter data from NPD’s Connected Intelligence shows Android smartphone users engaged in mobile payment applications are on the rise, growing 8 percent since August and topping one-third of users by March.

With all that seemingly untapped demand, the challenges for MasterCard and others focused on NFC-based mobile payment and wallet plays are still the same – extending service capabilities more ubiquitously, including more wireless carriers, more NFC-equipped Android smartphones, more merchants accepting mobile payment and digital wallet solutions, and more payment methods (with associated hardware/infrastructure at point of sale).

In the meantime, other non-NFC-based solutions, such as PayPal, may have some running room, but still face some of the same issues to achieving a measure of success – including smart services integration, as well as scaling its solution with large, nationwide merchants, as well as consumer acceptance.

While it still remains to be seen how many of these mobile wallet solutions will make the cut and survive, the market needs to focus on regular, mass market consumer use cases – including lower-value (micro-) payments, such as mobile ticketing (where speed in the payment process delivers real consumer value), and from there moving up to higher-value transactions. Ultimately, the success of mobile payment and wallet initiatives rests on changing entrenched consumer behaviors, and shifting the reliance on, and use of, physical wallets and all of its contents to a mobile/digital version. In order to do this, and facilitate on-the-go consumer transactions and commerce, the ecosystem needs to make sure the process is convenient, simple, and secure for consumers.

The security companies also have a Trojan horse of sorts in the wall panel that has traditionally been used to activate the alarms. These contain the cellular gateways that are the basis for many remote automation tasks. Increasingly, though, the growing penetration of smartphones and tablets are providing alternative activation points. One way for carriers to fight the security company advantage is to shift the center of home automation and security from a fixed location in the home to the smartphone. The user interface that AT&T previewed at CTIA looks like a good step toward an engaging tablet user interface to help consumers make the most of an installation.

This current firestorm around the Kindle Fire numbers is a perfect example of how mistaking shipments for sales leads the market to incorrect and faulty conclusions about trends and opportunities.  In this case my friends at IDC reported that the Fire shipped 750k units in Q1 2012 following the introduction of the Fire in Q4 2011 when 4.8 million units shipped. (NPD DisplaySearch reported 5 million shipped in Q4.)  That’s a total of 5.5 million shipments over the first two quarters of its product life (please remember that number).   While it may appear that sales for the Fire fell off a cliff in Q1 that would only be the case if shipments actually equaled sales.  And since they don’t, any analysis that might indicate the Fire is losing ground is fundamentally flawed, especially since the Fire is only through two quarters of its life. 

In the Kindle Fire’s first quarter of availability IDC’s reported shipments of 4.8m most certainly included the normal inventory build-up a new item requires.  The Fire was distributed in something around 10 thousand stores in the U.S. at launch and certainly Amazon’s warehouses needed some inventory too.  Let’s not forget it was the fourth quarter when sales tend to rise dramatically.  So Amazon, rightly, built a lot of Kindle Fires and shipped them out to its warehouses and its retail partners to take advantage of fourth quarter volume.  Logically there will be inventory remaining and shipment volumes will decline in the following quarter as the inventory to support Q1 sales is partially satisfied by the remaining inventory from Q4.  And of course that is exactly what IDC’s numbers show; a seasonal change in volume and a sell-down of inventory accumulated in the fourth quarter. These numbers don’t measure sales volume of the Kindle Fire in the first quarter, rather they measure the small amount of inventory buildup Amazon needed to do in Q1 to replenish inventories.

So how did the Kindle Fire do in the first quarter of 2012, pretty darn well thank you very much.  According to NPD’s Consumer Tracking Service the Kindle actually sold (there is that word again, this time properly used) 1.8m units in the first quarter.  That is an actual consumer bought it and took it home (or had it delivered) and paid their own real money.  It was not a sale from Amazon to a retailer for their inventory to support sales, nor was it Amazon replenishing the warehouse stock it controls for its own sales; it was a consumer spending their money to acquire the product.  Looking back in Q4 2011 NPD’s Consumer Tracking Service counted 3.8m Kindles sold during the holiday period.  And if you add up those two sales figures you get a number almost exactly the same as IDC’s shipment number that we referenced earlier.  And looking at the numbers from that actual sales perspective the concept that Kindle Fire sales collapsed in Q1 becomes absurd.

No matter how we frame it, or how others may spin it, the Kindle Fire had a pretty good second quarter of sales results.  And as important as shipment tracking is, it is an incomplete number without the power of actual sales behind it.  And of course we at NPD know something about that. 

While there are certainly parallels with Palm, though, there are also commonalities with another company that lost its way and mounted the most incredible comeback in technology history. Like Apple at the release of the iMac, the first major product released after Steve Jobs’ return, RIM is simplifying its product line and focusing on its core audience. It is also working on building a platform designed not to get it through the next product, but the next generation of products. By characterizing “Blackberry People,” RIM is also playing on a tactic by another company in the PC space – Lenovo – which has seen its fortunes rise since the launch of its “For those who do” campaign.

Also, like Apple, RIM is looking beyond its traditional core strengths. Its acquisition of QNX provided an entry into the world of automotive systems. The company showed off a Porsche decked out with multiple displays at BlackBerry World, all of which were powered by a single installation of QNX. Just as Apple saw the future as being far beyond the PC, RIM sees it as being far beyond the smartphone to multiple digital touchpoints.

None of this is to say that RIM is necessarily poised to be the next Apple. But the company is in far better shape financially than Apple was in 1997, its forthcoming operating system is not just different but appears thoughtfully designed for tasks at hand, and the company now has a number of avenues to help return to sustained profitable growth.

As purchase factors, interoperability and brand exclusivity loom large for Apple owners. Two-in-three (65 percent) say compatibility with devices they already own is an important purchase factor when shopping for electronics and, as one might expect, brand homogeneity is key as well. Nearly half (45 percent) of Apple owners say buying technology brands they already own is important when considering a purchase compared to just 36 percent of non-Apple households who say buying a brand they already own at home is important. Owners of specific Apple product categories exhibit an even greater disparity with non-owners. iPad owners tend to own more Apple devices (3.7) than average and place more importance on brand exclusiveness as a purchase factor than non-Apple tablet owners (44 percent compared to 20 percent).
As Apple sells more devices into the homes of existing owners and into new ones, I expect this notion of brand allegiance to strengthen. By all accounts, the owners of Macs and assorted i-Devices are accumulating a staggering amount of content within Apple’s platforms (it was reported during the earnings call that iTunes sales grew 35 percent year over year). As these consumers consider additional electronics purchases, seamless access to the content they already own is likely to factor in to the hardware purchase decision more heavily. Apple’s hardware is what garners all the attention but it is their brand equity and platform strength that create a built-in competitive advantage over other hardware manufacturers.

While much later than Apple and Google to support in-app billing capabilities, Amazon is certainly in a better position now than it was six months ago to further developer monetization, particularly as Android smartphone users increasingly rely on Amazon’s storefront as a source for app content despite the differential in the sheer number of apps available – tens of thousands for Amazon compared to 400K+ for Google Play.

According to NPD’s Connected Intelligence SmartMeter nearly one-third of Android users accessed the Amazon Appstore from their smartphones in March, up from just 18 percent in August 2011. This in concert with the success of the Kindle Fire, as well as the company’s superior merchandising capabilities and user experience focus (i.e., one-click payments), makes it appealing monetization platform for app developers and publishers.

The real question in in-app purchases lies in the underlying business model, and whether or not they are flexible enough to support media companies’ monetization, particularly in subscriptions. As it stands now, Amazon Appstore follows the standard 70-30 business model for in-app purchases as it does with paid apps, but there does appear to be some level of flexibility baked into the in-app model as the developers’ guarantee of its 70 percent is based on the list price and not the Amazon retail price point charged to consumers.

Today’s problems in consumer technology are structural, they hit all retailers, all suppliers, and all brands equally. The change in product demand, and the shift in the customers’ view of the value and the necessity of their devices have caused a sea change in the market. Retailers, as the ones most connected to the consumer, feel these changes first - and when you are the biggest and the most successful retailer you feel the change ahead of the other retailers. There is no doubt that Best Buy is in that position. Their challenges today are not because they haven’t seen the change coming, or because they haven’t been preparing for it but instead because of how dramatically and swiftly the changes happened over the past year. Again make no mistake, every company in the technology space is dealing with these changes. Every retailer both online or brick and mortar, every brand, and every inch of the supply chain is looking for ways to move their business towards where product demand appears to be headed, and to date very few have found the right formula to make that happen.

So let’s look at the facts. Despite the massive upheaval in the technology business Best Buy has actually done pretty well in coping with, and managing, the changes to its business, preserving its legacy strengths while moving as rapidly as possible towards a future of which no one has an exceptionally clear vision. In 2011, Best Buy’s share of consumer technology revenue stood at 19 percent of hardware sales, according to NPD’s Consumer Tracking Service, exactly what it was in 2010 and what made it the leader in sales by a substantial margin. Best Buy also was the number one brick-and-mortar retailer online and gained almost one point in revenue share, now 22.4 percent, among retailers on the Web.

Best Buy also remains the dominant U.S. retailer for the key product categories. In computers Best Buy’s market share is 10 points higher than any other outlet that sells Windows notebooks and generates 2X more revenue from those sales than any other retailer. Best Buy is the number one non-manufacturer seller of Windows notebooks on the Web and gained almost 2 points in market share in 2011. Best Buy is the largest retailer of Apple notebooks, selling one in every four notebooks in the U.S., a number that is 6x larger than any other Apple reseller.

Despite an overall decline in the TV market Best Buy’s brick-and-mortar stores gained one point in market share in 2011. Best Buy grew revenue share as well and accounted for nearly one-in-three dollars spent on flat-panel TVs. In the fast-growing TV segment of 50” and above, Best Buy’s market share was 31 percent and more than 3x higher than any other retailer. On the Web Best Buy gained 1.5 points of market share in TV sales in 2011.

Best Buy sold more tablets than any other retail store or Web site in 2011. Best Buy saw its unit share of the cell phone sales grow by 25 percent in 2011 and its share of smartphone sales increase by 50 percent. Best Buy sold one-in-four smartphones sold through multi-carrier, multi-brand stores in 2011, an increase of 50 percent. In addition, they were the single largest non-carrier outlet for smartphone sales.

Even in declining categories Best Buy is gaining share. The retail stores gained market share in both point-and-shoot (up almost one point) and the fast-growing DSLR camera segment up more than a quarter of a point) and they were the largest seller of DSLRs in the U.S. with twice the market share of their nearest competitor. In MP3 players Best Buy gained 2 points of unit share, and in headphones, another fast-growing emerging category, Best Buy’s revenue share increased by more than one-third of a point.

In all of the most important product categories, ones which represent more than 50 percent of U.S. consumer technology revenue, Best Buy by any objective measure is either gaining share rapidly or maintaining its industry leading position. While there are challenges ahead, Best Buy remains the dominant retailer and in the best position to succeed in the coming years.

“Freemium” is a combination of two words: “free” and “premium”. As defined in the report, freemium games are digital games that are free of charge to play (“free”), but also offer ways in which the player can pay to enhance their gaming experience (“premium”). There is surely an inherent appeal to being able to play a game for free of charge, 85 percent of those aware of freemium games have engaged in trial. That’s an impressive statistic, but it begs a lot of questions: Is this an enduring form of acquiring games? What compels gamers to actually pay for something they could otherwise access for free? Can these games make any money? What does all this mean for the video games industry as a whole?

Whether an individual freemium game makes money or not is a combination of factors, of course, including the cost to develop and market a game and the revenues it might generate from either consumer spend or ad revenues. NPD’s Games Market Dynamics: U.S. incorporates the consumer spend on freemium games in three separate areas of monetization: Digital (full game and add-on content across PC, console, and portable platforms), Mobile Games, and Social Network Gaming. In 2011, we found that the consumer spend in these three areas combined increased by 27 percent over 2010. While the increase in those three areas of content spend isn’t driven solely by an increase on freemium game spending, it is one indication of the growth in non-traditional gaming.

One very interesting finding from NPD’s freemium report is that the majority of players that choose to pay to upgrade their experience do so within the first month of beginning to play the game, so an implication of that is the importance of building game features or attributes that would encourage a quick conversion to pay.

Inevitably, the games industry will continue to change and new types of content, and methods for acquiring that content, will continue to emerge. For now, freemium is an area the industry is placing a lot of focus.