A post about the price of the HTC Titan II price being dropped drove me to this little piece. The price has NOT been dropped, Wal-Mart is simply offering the Titan II for $50 less than the official AT&T pricing. So what? Indeed Wal-Mart and Amazon, amongst others, frequently offer phones for less than their pricing from the carrier stores.
When I was pricing out a Nokia Lumia 900 at the Amazon Wireless site I came across a line item for (something like) “Reseller discount applied”. There was no explanation, but there was a link, and when I clicked on the link it explained that Amazon was giving you an extra discount and that if you cancelled your contract in under 6 months you’d owe Amazon $250. Ok, we can now reverse engineer the carrier/reseller discount. The carrier (in this case AT&T) pays the reseller (in this case Amazon) $250 to bring them a customer signing a new two-year contract. If the customer leaves the carrier in less than 6 months than the reseller has to pay this finder’s fee back to the carrier.
Discount retailers such as Wal-Mart or Amazon are happy to live on less of the Finder’s Fee than dedicated brick and mortar mobile phone resellers, because of course they have lower costs. And so both are happy to live on a $200 commission for selling you the Nokia Lumia 900 or HTC Titan II rather than keep the entire $250. Without this discount why would you buy your phone from Wal-Mart or Amazon rather than directly from AT&T?
That the Nokia Lumia 900 has received all the love in this week’s dual launch should not be a surprise. Nokia obviously wanted to devote a lot of resources because, along with T-Mobile’s launch of the Lumia 710 a few months ago, this is their return to the U.S. market. That Microsoft and AT&T wanted to join them to make the launch huge is also not a surprise. Microsoft because it needs an iconic device to power Windows Phone forward, AT&T because it needs a new differentiator from main competitor Verizon Wireless.
So why no love for the HTC Titan II? Well I think three things. First, the HTC device is aimed at more of a niche and thus a poor candidate to be the Windows Phone standard-bearer. Second, HTC itself was likely unwilling to put a large amount of resources into its launch. Their big marketing spend this quarter is on the HTC One line of Android phones. Third, and most importantly, I don’t think Microsoft and AT&T wanted to dilute their messaging. Focusing on a single iconic device has worked for Apple (iPhone) and Android (Verizon’s original Droid campaign). The next broad multi-device Windows Phone campaign will come with the launch of Windows Phone 8 sometime this fall.
With that as context we can revisit the pricing of the HTC Titan II. A few bloggers out there are already jumping on the Wal-Mart pricing as a sign that this weeks’ Lumia 900/Titan II launch is a failure. I don’t think it says that at all. If Wal-Mart even listed the Titan II at full price I thinkthatwas a mistake, and the $50 discount is the norm for them. But I still would expect to see the Titan II price dropping fairly quickly, including at AT&T, because I just don’t see how it is going to sell at $199. With almost no promotion, little differentiation, and a complete overshadowing by the Lumia 900, who is going to buy it? Honestly you’d have to be a HTC fan, and probably one looking to upgrade their HD7 to a device featuring a front-facing camera, to get excited by the Titan II. And there just aren’t enough of those, particularly enough coming off contract, to make the Titan II a success.
The bottom line here is that resellers have (at least) $250 to work with when deciding how to price mobile phones. And while their pricing may give clues about how successful a particular device is, it is mostly a clue about how successful the device is for them and within the context of their own strategy. Wal-Mart is known for “Always low prices”, and Amazon is the place you go to save money after browsing at a brick and mortar store. So if they don’t discount from the price you can get at the carrier, why shop there?