BlackBerry Consumer Preferences and Segmentation

Reclaiming the Smart Phone Market M. Brent Eason Ben Furr Carrie Martinelli Adam Scott

BUSINESS INFORMATION ▪ Founded in 1984 ▪ First BlackBerry launched in 1999 ▪ 2009 Revenue: $11.1 billion ▪ 2009 Net Income: $1.89 billion ▪ Employees: 12,000 RIM Confidential

TARGET MARKET PROSUMERS ▪ Non-business user ▪ RIM BIS Application – Customers are given access to an email account comparable in speed/features as BES is for enterprise users ▪ Feature based segment – fast email, text, MMS, web browsing and BB exclusive PIN to PIN messaging (very fast and secure) ▪ BlackBerry has 20% of the current smartphone market share and losing ground in this customer segment RIM Confidential

KEY COMPETITORS ▪ Strong competitor in the prosumer ▪ Low cost OS with open development customer segment – 15% of current ▪ Advantages: Scalable and flexible – smartphone market share functions on a variety of smartphones ▪ Advantages: Brand awareness ▪ Disadvantages: Low adoption and low and variety of application downloads number of available apps (both are ▪ Disadvantages: Price point and rapidly increasing) limited to AT&T GSM network ▪ Overall, serious threat to both the iPhone and BlackBerry in the next 12-16 Months RIM Confidential

MARKETING PROBLEMS LAGGING MARKET KNOWLEDGE ▪ Evolution of smartphone customer segmentation (i.e. business users » personal users) LAGGING R&D EFFORTS ▪ Rapidly shifting consumer preferences and higher expectations (i.e. mass customization) require greater feature offerings and speed to market BUSINESS IMPLICATIONS ▪ Targeting and Positioning, Product Development, Pricing & Promotion ▪ Bottom Line: Sales, Profit, and Market Share RIM Confidential

RESEARCH STRATEGY OBJECTIVE Carefully analyze customer preferences and characteristics in order to better define customer segments, determine which customers to focus marketing efforts on, and what features are most important to those customers. PRIMARY DATA ▪ Exploratory Survey: “How Smart is Your Phone?” ▪ Follow-up Survey RIM Confidential

RESEARCH STRATEGY ADVERTISE! RIM Confidential

RESEARCH METHOD COLLECTED SURVEY DATA www.surveymonkey.com ▪ 346 of 421 Respondents completed survey end to end ▪ 73 Respondents excluded – did not pass eligibility check, therefore not in the Prosumer market ▪ 2 Respondents did not finish the rest of the survey and were excluded SURVEY LIMITATIONS ▪ Time Constraint - Sampling was not a perfect representation, could have been larger ▪ Survey Length - 24 questions, would’ve liked more to capture more critical data but there were concerns about the impact on participation RIM Confidential

DATA COLLECTED SURVEY STRUCTURE Eligibility Check General Phone Preferences Information About Existing Phone Demographic Information DEPENDENT VARIABLE ▪ How likely are you to make your next phone a BlackBerry? INDEPENDENT VARIABLES ▪ Usage Information ▪ Demographics ▪ Feature Preferences ▪ Psychographics RIM Confidential

SAMPLE DEMOGRAPHIC PROFILE GENDER CHILDREN EDUCATION OCCUPATION Female 46.2% 160 Yes 48.6% 168 Did not graduate high school 0.0% 0 Full-time student 3.2% 11 Male 53.8% 186 No 51.4% 178 High School Diploma 0.3% 1 Engineering 6.9% 24 Technical school or some college 2.9% 10 Construction/Physical labor 1.4% 5 AGE # HH MEMBERS 2-year college degree 2.6% 9 Information Technology 16.2% 56 18-24 3.2% 11 1 15.0% 52 4-year college degree 47.1% 163 Medical/Health Services 4.3% 15 25-29 23.1% 80 2 43.1% 149 Masters 42.5% 147 Sales/Marketing 12.1% 42 30-34 27.5% 95 3 18.8% 65 PhD 4.6% 16 Financial Services 11.8% 41 35-39 14.2% 49 4 19.7% 68 Education 6.6% 23 40-44 10.1% 35 5 2.9% 10 HH INCOME Retail/Hospitality 2.0% 7 45-49 3.8% 13 More than 5 0.6% 2 less than $50,000 10.1% 35 Public/Emergency Services 0.0% 0 50-54 8.1% 28 $50,000 - <$75,000 16.5% 57 Artist/Musician/Designer 0.6% 2 55+ 10.1% 35 RESIDENTIAL TYPE $75,000 - <$100,000 15.9% 55 Science/Biotechnology 7.5% 26 Urban 25.1% 87 $100,000 - <$125,000 14.7% 51 Government/Legal 5.8% 20 MARITAL STATUS Suburban 64.7% 224 $125,000 - <$150,000 9.8% 34 Self-Employed/Consultant 4.3% 15 Yes 70.2% 243 Rural 10.1% 35 $150,000 - $200,000 13.9% 48 Media/Journalism 0.3% 1 No 29.8% 103 More than $200,000 6.4% 22 Non-Profit/Social Services 2.0% 7 Prefer not to say 12.7% 44 Homemaker 2.6% 9 Retired 0.9% 3 Unemployed 1.4% 5 ▪ All 346 Respondents Other 9.8% 34 ▪ Satisfactory Spread, Very close to Prosumer profile RIM Confidential

ANALYSIS METHODS REGRESSION ANALYSIS ▪ Identify significant factors affecting smart phone choice CLUSTER ANALYSIS ▪ Identify meaningful customer segments DISCRIMINANT ANALYSIS ▪ Profile each segment demographically RIM Confidential

STEPWISE REGRESSION Q3 - Q#3 Please rate the order of Q8 Q#8 - On a scale of 1-7, please indicate how importance of the following in your Parameter frequently you intend to use the following P-Value Tolerance Parameter choice of WIRELESS CARRIER, Estimate features on your NEXT CELL PHONE. These P-Value Tolerance Estimate on a scale of 1-7: features may or may not be available on your current phone. Brand Availabilty -0.14299 0.0003 0.76136 Frequency of use of Calendar/Reminders 0.109 0.0041 0.60378 Data Availabillity 0.20886 <.0001 0.76505 Frequency of use of Purchased ($$) Add-on -0.1323 0.0024 0.6863 Phone Pricing 0.07273 0.0849 0.99019 Games or Apps Frequency of use of Music Playback -0.1534 <.0001 0.66558 Q5 - Q#5 Please rate the order of Q10 importance of the following in your Parameter Q#10 Generally, where do you look for P-Value Tolerance information when purchasing technology initial choice of PERSONAL CELL Estimate Parameter products? (You may choose more than one P-Value Tolerance PHONE, on a scale of 1-7 Estimate answer but must choose at least one.) Price/Promotional discount 0.09651 0.0185 0.91478 Internet – Retailer website (Binary Variable ) 0.24198 0.0838 0.98292 Ability to Play Music -0.11165 0.0052 0.67424 Magazines – Hi-Tech (Binary Variable) -0.65675 0.0116 0.98897 Importance of Touch Screen -0.22011 <.0001 0.60131 Q19 Parameter Q#19 How would you best characterize the Q7 - Q#7 Please choose how often area in which you live? Estimate P-Value Tolerance you currently use the following Parameter P-Value Tolerance features of your CURRENT CELL Estimate Suburban Area ( Binary Dummy Variable ) -0.2624 0.0851 0.99849 PHONE on a scale of 1-7: Frequency of use of Calendar/Reminders 0.10564 0.0032 0.60985 Q20 Q#20 Which kind of computer do you use Parameter P-Value Tolerance Frequency of use of Free Add-on most frequently? Estimate -0.09581 0.02 0.53927 Games or Apps Other PC - Windows or Linux (Binary Dummy Frequency of use of Music 0.58534 0.0039 0.99849 -0.21721 <.0001 0.6389 Variable) Playback RIM Confidential

CLUSTER ANALYSIS Cluster Sum m ary Standard Deviation Maxim um Distance (How close people are Distance from Nearest Betw een Cluster Frequency related to each other Seed to Cluster Cluster inside cluster) Observation Centroids 1 49 1.3338 14.8592 3 7.1202 2 69 1.2066 14.1314 6 7.4241 3 42 1.188 14.7218 1 7.1202 4 62 1.2817 12.8745 1 7.5641 5 61 1.3117 14.6057 2 8.5896 6 29 1.3239 15.3594 2 7.4241 7 34 1.2864 13.6458 3 7.4825 RIM Confidential

CLUSTER ANALYSIS: NARROWING FOCUS CLUSTER MEAN #Q11. How likely are you to choose a "smart" 1 4.84 4 4.89 phone the next time you buy a personal cell 5 4.03 phone? (Continuous Scale 1-5) Average of the 3.72 Others CLUSTER MEAN #Q12. How likely are you to make your 1 2.84 4 3.18 next phone a BlackBerry, specifically? 5 2.49 (Continuous Scale 1-5) Average of the 1.79 Others RIM Confidential

CLUSTER MEANS: PREFERENCES Please rate the order of importance of the following in your choice of WIRELESS #Q3. CARRIER? (Continuous Scale 1-7) Cluster Preference 1 4 5 Brand Availability* H M M Voice Quality H H H Voice Availability H H H Data Speed H H M Data Availability* H H M Service Plan Price H H H Phone Price* H M H (1-3=Low, 3-5=Mod, 5-7=High, * Correlation w/ Linear Regression) RIM Confidential

CLUSTER MEANS: PREFERENCES Please rate the order of importance #Q5. of the following in your initial choice Preference 1 Cluster 4 5 Brand Reputation H M M of PERSONAL CELL PHONE? Voice Clarity H H H (Continuous Scale 1-7) Email* H H M Style/attractiveness H M M Price/Promotion* H M H Tech. Integration H M M Ease of use H H H Phone Size H M H Battery Life H M H Internet H H M Music* M L L Video M L L Pictures H M M GPS M M M 1-3=Low, 3-5=Mod, 5-7=High QWERTY keyboard H H M * Correlation w/ Linear Regression Touch Screen* M M M RIM Confidential

CLUSTER MEANS: PREFERENCES Please choose how often you currently use the following features of your CURRENT #Q7. CELL PHONE? (Continuous Scale 1-7) Cluster Preference 1 4 5 Call M H H Text H H H Email* H H L Calendar* H M L Web Brow sing H H L Social Netw orking M M L Purchased Apps L L L Free Apps* M L L Camera H M M Video L L L Music* L L L (1-3=Low, 3-5=Mod, 5-7=High * Correlation w/ Linear Regression) RIM Confidential

CLUSTER MEANS: PREFERENCES How frequently you intend to use the following features on your NEXT CELL #Q8. PHONE? (Continuous Scale 1-7) Cluster Preference 1 4 5 Call H H H Text H H H Email* H H H Calendar* H H M Web Brow sing H H M Social Netw orking H M M Purchased Apps* L L L Free Apps H L M Camera H M M Video M L L Music* M L L (1-3=Low, 3-5=Mod, 5-7=High * Correlation w/ Linear Regression) RIM Confidential

CLUSTER MEANS: PREFERENCES Generally, where do you look for information when purchasing technology #Q10. products? (Binary Variable) Cluster Preference 1 4 5 In-Store Promo Displays M L M In-Store Sales Rep M M M Internet-manufacturer's w ebsite M M M Internet-retailer's w ebsite* M M M Internet-review w ebsites* H H H Internet-social m edia w ebsites L L L Internet-technology w ebsites M M M Magazines-High Tech* L L L Magazines-Lifestyle L L L New spapers L L L Television L L L Word of Mouth H H H (1-3=Low, 3-5=Mod, 5-7=High * Correlation w/ Linear Regression) RIM Confidential

DISCRIMINANT ANALYSIS CLUSTER #1 Demo/Psychographics Cluster 1 4 5 ▪ More likely younger Male? 0.45 0.67 0.45 ▪ Less likely married, children, Age: 1(18) - 8(55+) 3.2 4.2 3.9 suburban Education: 1(HS) - 6(PhD) 4.4 4.4 4.4 ▪ More likely a PC owner Married? 0.55 0.75 0.78 Children? 0.25 0.51 0.55 CLUSTER #4 # HH Members 2 3 3 ▪ More likely male Surburban? 0.57 0.67 0.69 ▪ Higher income Urban? 0.27 0.24 0.22 Mac? 0.05 0.07 0.05 CLUSTER #5 PC? 0.93 0.84 0.84 Emotional Spender? (1-7) 4.0 3.6 3.8 ▪ Very similar to Cluster #4 HH Income: 1(<$50K) - 7(>$200K) 3.1 4.5 3.5 except balanced sex and lower Mostly Spend? (0-7) 3.8 3.8 4.0 income level RIM Confidential

DISCRIMINANT ANALYSIS Occupation: 0(N) - 1(Y) Cluster CLUSTER #1 1 4 5 ▪ Mostly IT Professionals Artist/Musician/Designer 0.02 0.00 0.02 Science/Biotechnology 0.07 0.04 0.13 ▪ Somewhat Financial and Education Government/Legal 0.09 0.05 0.04 Self-Employed/Consultant 0.00 0.05 0.02 CLUSTER #4 Media/Journalism 0.02 0.00 0.00 ▪ Mostly Sales/Marketing and Non-Profit/Social Services 0.00 0.00 0.07 Homemaker 0.00 0.00 0.05 Financial Professionals Retired 0.00 0.00 0.02 ▪ Somewhat IT Unemployed 0.00 0.00 0.04 Full-time student? 0.07 0.02 0.02 CLUSTER #5 Engineering 0.05 0.07 0.05 Construction/Physical labor 0.00 0.04 0.00 ▪ Most Diverse Information Technology 0.23 0.15 0.09 ▪ Somewhat Science/Biotech and Medical/Health Services 0.07 0.04 0.05 Sales/Marketing Sales/Marketing 0.09 0.20 0.16 Financial Services 0.11 0.22 0.05 Education 0.11 0.05 0.04 Retail/Hospitality 0.00 0.02 0.04 RIM Confidential

CLUSTER LABELING Cluster #1: “Hi-Tech Prosumer” ▪ High value on most phone and network features ▪ High current and expected use of most phone features ▪ Unwilling to pay a high price to get features ▪ Lowest income level ▪ Youngest Cluster #4: “Typical BlackBerry Prosumer” ▪ High preference for most network features ▪ Moderate preference for most features (voice clarity, email, ease of use, battery life, QWERTY) ▪ High use of call, text, email, and web browsing ▪ Doesn’t use or plan to use apps, music, or video Cluster #5: “Basic Prosumer” ▪ High value on voice quality/availability, price, ease of use, phone size, and battery life ▪ High use of call and text ▪ Low use of all other features ▪ Plan to increase use of email, calendar, web browsing, apps, and camera with next phone ▪ Cluster likely to converge with cluster #4 over time RIM Confidential

TARGET MARKET SELECTION KEY DEMOGRAPHICS Age 30's Sex 50/50, M/F Income 75K - 125K Education Bachelor's or Master's Degree Job IT, Sales, Finance Married Yes Household 2 to 3 people Residence Suburbs Computer PC Current Phone BB or non-smartphone Current Provider Verizon Type of Shopper Balances wants and needs, moderate spender RIM Confidential

TARGET MARKET SELECTION KEY PREFERENCES KEY PREFERENCES IMPORTANCE or IMPORTANCE or PREFERENCE or USAGE PREFERENCE or USAGE INTENTION INTENTION Wireless Carrier - Voice Quality HIGH Current Cell Phone Use - Purchased Apps LOW Wireless Carrier - Voice Availability HIGH Current Cell Phone Use - Video Playback LOW Wireless Carrier - Service Plan Price HIGH Current Cell Phone Use - Music Playback LOW Personal Cell Phone Preferences - Voice Clarity HIGH Intend to Use - Purchased Apps LOW Personal Cell Phone Preferences - Ease of Use HIGH Marketing Channel - Social Media Sites LOW Intend to Use - Voice Calling HIGH Marketing Channel - High-Tech Magazines LOW Intend to Use - Text Messaging HIGH Marketing Channel - Lifestyle Magazines LOW Intend to Use - Email HIGH Marketing Channel - Newspapers LOW Marketing Channel - Web Review Sites HIGH Marketing Channel - Television LOW Marketing Channel - Word of Mouth HIGH OTHER FINDINGS Somewhat Important: In-Store Sales Rep, Manufacturer's website, Retailer's website, IT websites RIM Confidential

PROBLEM: MARKETING KNOWLEDGE PROMOTION ▪ Overwhelming majority use Review Websites which is shown to have a significant negative effect in our linear regression analysis. We need to find a way to improve BB image on review websites. ▪ Word of Mouth also very significant with target market. ▪ Ineffective: Paper advertising (i.e. newspapers or magazines), social media, website advertising, and TV ads PLACEMENT ▪ User Distribution = AT&T 34%, Verizon 49% ▪ BB in 550 Wireless Carriers worldwide and 175 Countries, AT&T 34%, Verizon 49% PRICE ▪ Logical, moderate spender - Value Pricing Model ▪ Must lower price to stay competitive: iPhone is $199 for 16GB, Storm2 is $199GB for 8GB ▪ Service Plan Pricing is also critical to target. Must work with wireless providers to offer various competitive packages RIM Confidential

PROBLEM: R&D EFFORTS PRODUCT Primary Intended Usage: Call, Text, Email, Web (Basic Stuff!) R&D Focus ▪ Improve OS (i.e. ease of use and speed) ▪ Improve Email Features ▪ Improve Voice Clarity ▪ Extending battery life ▪ Development of FREE apps ▪ Minor Focus: GPS, Touch Screen Not Important ▪ Development of Purchased apps ▪ Music Playback ▪ Video Playback RIM Confidential

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BlackBerry Consumer Preferences and Segmentation

by Carrie Martinelli on May 11, 2010

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