Filed under: Analysis / Opinion, Deals, iPhone
Does a $99 iPhone break the psychological barrier to buying?
Sure, the reduced price on the iPhone 3G 8GB model is swell, but is there something magical about 99 dollars? The AP story on yesterday's product announcements gets a quote from analyst Michael Gartenberg where he seems to think there may be some retail psychology at work:In my experience, a $99US item is right at the point where I can at least consider buying it on impulse without consulting my spouse; this was the case with Palm's Zire handheld when it debuted, and it includes the iPod shuffle now. Anything that could be a 'checkout line' purchase should hit at that price point or below, so it's all well and good to include the 8GB 3G in the mix for new or over-contract purchasers... but knowing that the real cost of the phone is in the two years of voice and data, will consumers bite in large numbers? The Wall Street Journal cites Sanford Bernstein analyst Toni Sacconaghi's guess that the price cut could increase iPhone demand as much as 50%, even with the presence of the 3G S at the top of the food chain."Every $100 you move down in consumer electronics brings in a lot more customers," [Gartenberg] said. "Ninety-nine dollars is a psychological price point, so that's a real barrier to move through. It becomes something people can afford - it becomes an affordable luxury.
Is iPhone demand that price-elastic? I have my doubts... but it's worth noting that the numbers from the first quarter, where RIM had to give away a free Curve with every purchase to catch up with Apple in handset sales, indicate that the smartphone market can definitely get a big boost from price cuts.
[via MacDailyNews]
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Reader Comments (Page 1 of 3)
Sonic said 2:42PM on 6-09-2009
The problem IMO was never the price of the phone itself, its the prices of the plans that ATT forces on us.
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ianlive said 2:57PM on 6-09-2009
Agreed! Same with Rogers here in Canada where we still don't have unlimited data.
I would pay $300-$500 for the iPhone if it would mean lower monthly rates. Charging customers by month has got to be the smartest/most devilish pricing strategy as it adds up so quickly and people are often none the wiser.
Would you pay $1200 for an iPhone? No, well many user likely are after building in the monthly costs. And that's just for one year.
ron said 3:19PM on 6-09-2009
totally agree. AT&T is the biggest barrier for me and always will be.
codeman38 said 3:22PM on 6-09-2009
Yep. Same here.
Incidentally, I probably dislike the plans for the opposite reason that most people do: I don't mind the cost of the data; it's the 450 minutes of talk time, which is around 400 more than I tend to use in a month, coupled with the fact that SMS isn't even included in the package except as an extra.
Surely I'm not the only one who texts far more than talking...
Ryan Trevisol said 3:25PM on 6-09-2009
Agreed. My mom is toying with an iPhone and this would be perfect for her, but it's the monthly costs that she's balking.
Aaron said 3:53PM on 6-09-2009
Exactly. With myself at least, the sticking point is the monthly fees. I am simply unwilling to pay at least $70 a month for an iphone (and that's cutting my current unlimited text messages and a cut in minutes - for what I am getting right now for under $20 a month I would be paying well over $100 for an iphone).
The price for the phone itself doesn't even factor into the equation, for me.
Zach said 5:56PM on 6-09-2009
QFT I never really had a problem with iPhone's price it was the $80+ monthly fee which is ridiculous especially on one the worse cell phone networks.
Level 5 said 12:43PM on 6-10-2009
Same here. I deal with Sprint because it is DIRT cheap. Unlimited data, SMS and 900 minutes is about $60 a month. Furthermore, I have a Touch Pro that's able to fly under the radar with tethering as well; which Sprint never seems to care about anyway, regardless of device. Sprint customer service blows, but I never have service issues, my phone works everywhere, data is blazing fast, and they're easy to manipulate into giving me a new phone whenever mine bites the dust.
I've though long and hard about an iPhone, but doubling my monthly bill just isn't going to happen, regardless of what devices we're talking about.
It's pretty sad when Sprint has better service than AT&T.
Simon Arch said 2:45PM on 6-09-2009
It won't for me because I know the thing will still cost me at least $70 a month for one line. That's what we're paying a month for two lines with our old RAZRs. Unless I can add a second (non-iPhone) line for a minimal amount (say, $10/mo) then I've got to pass.
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superjeff said 4:36PM on 6-09-2009
You can do exactly that. I have an iPhone and my wife has some piece of junk... don't even know the brand. I pay my iPhone price + $10 for my wife's phone
oliver hart said 2:49PM on 6-09-2009
the $99 dollar price point will open the door for people wanting to get in on the iPhone, but not many. $199 to $99 may make it seem affordable, but you have to take the monthly prices into consideration. most of the people i know say they would get an iPhone, if only it wasnt $100+ a month to have. i understand it may be +/- with the monthly fees but still, compared to what an average person pays a month, that's a lot. are they going to charge extra for mms too? and if you want legit tethering? after you have a decent voice plan, add the cheapest mandatory data plan, and sms, it's hefty. and i think that is the biggest issue people have with switching to the iPhone.
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Eric said 3:01PM on 6-09-2009
Exactly echoing all the above. Its not the price of the phone, but the monthly price you have to pay AT&T. Second, its on AT&T which has been shown to have questionable service and treats iPhone owners horribly. It will be a no brainer that the day Apple announces new partnerships with other telcos that a mass exodus from AT&T will occur.
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Joanna D said 3:12PM on 6-09-2009
No idea why ANYONE quotes the $99 price - there are better phones available for FREE which cost less per month.
The only figure that matters is the total cost of ownership. With iPhone it's higher than just about all of the competition.
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Andrew B. said 9:15PM on 6-09-2009
Not that the iPhone is the perfect device but what phone is cheaper up front and better? Blackberries (except when they give them away for free), Nokias, Palm Pre, and Samsungs are all 99$ and up. I have Verizion and the reason I did not get a free Blackberry is it increases your bill each month 30$.
SteveM said 9:57AM on 6-10-2009
I do agree that the price of the phone really isn't the important thing to look at. Total cost of ownership is matters, but if one's going to compare TCO, one also needs to look at what capability is provided by that cost.
The iPhone is the first phone I owned that had a web browser where I didn't think to myself 'hmm, do I really need this information?' before going through the tedium of looking it up. It's the first phone I owned that provided an audio player that was worth using and allowed me to easily buy music directly from the phone. It's the first phone I've owned that had a map application that was good enough to allow me to stop printing Mapquest directions from my computer before leaving the house. I could go on - but the point is this: I get more from my iPhone than I used to from any of the smartphones I've owned previously. Considering the value I get from it on a daily basis, I don't mind the monthly fee in the least. I'm paying less than $3/day for a handheld computer of incredible connectivity and capability.
Joanna D said 6:50AM on 6-10-2009
Go and speak to Vodafone, Orange or Telstra - they'll give you a free phone. Looks like you're speaking to the wrong carriers.
ProfessorDex said 10:10AM on 6-10-2009
After using many "free" phones from the various Canadian carriers over the years, it's painfully evident that you get what you pay for.
Although most of the free phones can do just about everything, it's the higher end phones which do those things more eloquently, and that's what I personally want in a cell phone.
Chris Y said 3:13PM on 6-09-2009
While $99 is a big drop from $199 (50% drop), if you calculate the difference in 2 year cost (at $70/month), the cost drops to $1779 from $1879 (not including taxes), so it's really only a 5% drop in costs over 2 years. However, that said, people aren't rational and as most studies show, all people consider up front costs much more than recurring costs. I'm sure most people would take a $100 drop in first cost than take a $8 drop in monthly bill even though the latter would save much more money over 2 years ($100 vs $192).
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ack154 said 3:28PM on 6-09-2009
I think part of that is most people will accept that they will have a regular cell phone bill... which may or may not already include data. I pay $75/mo after taxes for my Helio, which is 450 min and unlimited everything else. I will also accept that I will end up paying a similar monthly fee with the iPhone. It is nearly a given if you're in some sort of smartphone market.
The barrier for some people then, becomes the initial price point.
brian said 4:37PM on 6-09-2009
Agree 100%. However, the question posed is "does a $99 iPhone break the psychological barrier to buying" and the answer to that is YES. People aren't always rational and a low introductory price is ALWAYS a plus. Hell, look at how well Apple has done with the iPhone 3G already--"Twice the speed, half the price (but now $10 more/month, so really $40 MORE at the end of 2 years.)"
Plus, remember that everyone--you, me, Apple, the carriers--has a different angle. AT&T makes their money on subscribers, Apple makes their money from selling handsets AND from selling apps to iPhone owners, so anything that puts more iPhones out there is a good thing for them. Apple will do very well with the $99 3G, and not just from hardware sales.