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U.S. wireless carriers push Samsung over Apple

When Apple (AAPL) revealed strong iPhone sales growth for the last quarter, investors weren't overly impressed. They might have been had they realized that at least in the U.S., Apple fights an uphill battle.

Employees at wireless carriers, which are an important source of smartphone sales, recommend Samsung phones twice as often as iPhones, even though the latter is enormously popular among consumers. Although the new study by consumer research firm Kantar Worldpanel doesn't explain the reason for the discrepancy, other reports offer a possible explanation: Samsung spends large sums on payments to stores and salespeople who promote its products over those of competitors.

According to surveys run against panels of consumers for the first quarter of 2014, almost two-thirds of consumers bought their phones in stores, versus just under a quarter who purchase online. Stores are critical to success in U.S. smartphone sales. The tilt toward stores means that salespeople have the opportunity to heavily influence the market.

Their choice for a recommendation is overwhelmingly Samsung. Salespeople recommended the company's products to 63 percent of consumers who bought a phone in the first quarter. Of those, 59 percent bought a Samsung, 35 percent took a different make of Android phone, and only 6 percent chose an iPhone.

Only 30 percent of buyers reported having received a recommendation for an iPhone. Nokia got the nod 7 percent of the time and Blackberry, 3 percent. Suggestions overlapped, so salespeople would recommend other Android phones as well a Samsung.

Samsung phones have become increasingly competitive with iPhones in terms of features and quality. And there is also the argument that the Galaxy line had features that consumers wanted and that Apple has not yet implemented. Internal Apple documents from last year that surfaced in its legal battles with Samsung showed Apple was concerned about less expensive phones with larger screens, saying "consumers want what we don't have."

Salespeople will reflect back what they think consumers want to hear, but they are also open to other influences, like spiffs. In the retail industry, that is a term for a payment made by a vendor to a salesperson at a retail chain or distributor for promoting sales of a specific product. It's literally buying mindshare and is a practice that goes back many years.

In an Apple slide presentation, a bullet point refers to competitors using the practice: "Spending 'obscene' amounts of money on advertising and/or carrier/channel to gain traction." In 2012, analyst Horace Dediu noted that "one of the more remarkable aspects of Samsung's success has been their willingness to increase promotional spending." That year it looked as though Samsung would not only spend more in advertising than Apple, HP, Dell, or Microsoft, but that its ad budget would be higher than Coca-Cola's.

Samsung has been looking for a vice-president of marketing for the Galaxy Tablet. The role's responsibilities include promotional activities. One of the examples is spiffs.

There are other possible factors at work, as well. One is that wireless carriers may have self-interest in mind if they pay higher subsidies for Apple products and want to rein in the power the company has had over the industry. There have been previous reports of carriers allegedly throttling back on selling iPhones.

CBS MoneyWatch has asked both Apple and Samsung for comments. Apple declined to comment and Samsung has not yet responded.

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