Getting the Price Right – Navigating the Mobile
Phone Price Ceiling
Elaine B. Coleman, Ph.D.
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Published July 2009. © 2009 Interpret, LLC
Getting the Price Right – Navigating the Mobile Phone Price Ceiling
Catalyst: With the increase in features and capabilities available with today’s smartphones, consumers
have approached the sales process with conflicting views on the right price point. While the current
economic environment is influencing their budgets, consumers are revealing that the most prized
smartphones on the market can be deserving of a higher price tier.
1) What is the gap between what consumers expect to pay versus what they think a smartphone
2) How can vendors ensure that key smartphones are given the pricing leverage they need to sell
in the marketplace?
3) Is there a price ceiling in the mobile phone space and does it have implications on the subsidy
Interpret Insight: Even though consumers anticipate spending only an average of $111 for their next
smartphone, they identified $171 as the most appropriate price point for their future smartphone. The
$60 difference in cost is a key point for maneuvering on the part of both vendors and carriers. By
positioning their smartphone within that range, both groups can maintain or even propel future handset
US consumers implicitly understand that smartphones deserve much higher price points.
US consumers are accustomed to lower price points and heavy subsidies while considering and
purchasing cell phones. However, smartphones have upended cost expectations and consumers are
more emotionally driven by the idea of owning a fully capable phone. Advancements with connectivity,
speed and multi-functionality have driven consumers’ embrace and vendors’ expansion of smartphone
offerings, but it has been the price point that has laid the foundation for any continued success. The
rapid evolution from basic phones has left its mark on price expectations—consumers expect to pay
$111 on average for the next signature smartphone.
Even though they chose the low $100 range as their expected purchase cost, smartphone intenders later
cited the same price range as below the appropriate price for a device with that level of capability and
style. The advantage here for vendors and carriers is that consumers are showing a clear willingness to
ignore their preferred level of expenditure in favor of rewarding superior design and functionality. The
two most publicized phones this summer (Sprint’s Palm Pre and Apple’s iPhone 3GS) exceeded the $171
mark. The exclusivity and the novelty surrounding a new smartphone’s release seemingly contributed to
it being valued higher than other handsets on the market.
Avoid overlap between the feature phones and the smartphones.