Nailing pricing in the mobile industry is a delicate and necessary balance. We accept $50 tiers separating the highest of high-end premier phones all the way down to the cheapest off contract entry level affair. Where a phone lands on that spectrum can make or break a device. Premier phones typically make sense. You put the most cutting edge gear into a slab and we expect it’ll be around $200 on a two year contract. Ditto the low end, slide in well known low power hardware and a price between $100 and $200 off contract can be compelling. The mid-range is a lot trickier. Which leads me to wonder, do we even need mid-range phones anymore?
It’s around that $100 on contract price point we start really running into issues. Purpose building a phone for that price point is becoming an increasingly dicey proposition. Manufacturers can still make a nice device at that price, usually with very few compromises, but you still need to ask your consumers to accept a “lower end” experience while paying more than the entry level kit. Often those compromises involve less storage, lower resolution screens, and reduced processing power. All those things which make using a phone nicer.
Also there’s a certain cachet to using a premier phone. Geek is chic. It’s fashionable, and we recognize the difference between Galaxies and iPhones like we do the difference Audi and BMW.
Outside those image concerns, we also have a timing problem. Tech devalues fast. If you need to exist at the bleeding edge, you pay a tax not unlike buying a new car. If you can wait a month or three, what was once a premier expensive handset can usually be purchased at a mid-range price. For example, at $100 on a two year contract you can get a perfectly acceptable HTC One Mini. Not a bad buy by any means. I’m really enjoying it. However, for that same $100 on contract you could also get an LG Optimus G Pro phablet. I just sat through a commercial offering a promotional deal for the Galaxy S4 for the same price too. Is the HTC One Mini as “good” as the GS4? Probably not.
We also see around a two year lifespan for phones. Apple popularized this with the iPhone. When a new iPhone is released the current iPhone drops in price. At carriers you can often find phones like the Galaxy S3 still kicking around. The GS3 still gives phones like the HTC One Mini a run for its money in terms of specs and it’ll carry more of that fashion statement. To continue a bad metaphor, people will be more impressed by last year’s Lexus than this year’s Toyota.
Lastly, manufacturers could save a little money by purposely pushing older premier phones into the mid-range. Releasing a phone comes with its own unique design, quality assurance, and support issues. Bug fixes, software updates, warranty issues, a company goes through that once for their top of the line gear, then they could purposely ride that investment for several years after. It would also be a boon to third party accessory manufacturers, knowing that their R&D will have a longer tail to recoup. That can only improve a company’s ecosystem when customers know they can count on accessories, replacement parts, and service for a while after they purchase, even if they purchase late.
I’m usually the first person to celebrate more choices and options, but right now we’re in an era where even successful companies are trying to manage consumer and stock holder expectations against risk. Unless I’m missing something glaring (and please point it out in a comment if I am) releasing a phone into the mid-range seems like the riskiest move a company can make…
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Mark Zuckerberg s heading up Internet.org, a collection of companies looking to reduce costs for implementing data services in developing areas. By reducing hardware costs for mobile phones, expanding wireless networks, and working with software developers, he believes that we can cut the costs of setting up and operating networks by 100X.
