Third party mobile phone pricing

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?

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6 Responses to Third party mobile phone pricing

  1. Bob says:

    One reason to go to Wal-Mart or Costco is convenience. The only time the AT&T store near me is not crowded is on a weeknight less than 1 hour prior to closing. I don’t know about Wal-Mart, but the wait at the booth at Costco is usually 0 minutes and never more than 5.

  2. Jim R says:

    I also don’t think this indicates the Nokia Lumia 900 launch was a failure.

    But the following things sure do make me worry:
    1) The big launch was on Easter Sunday. You know, the day all the local AT&T company stores are closed. Fail.
    2) Hearing about the Nokia rebate in response to the data connection problem was enough to tip the scales to make me want to update my old creaky WM 6.5 phone. So I headed back to the local AT&T store. “Sorry, we don’t have any in stock, we sent them all back because of the firmware bug.” “When will you have more in stock?” “Don’t know”. Double Fail.

    I could go order one online, but frankly I never understand the AT&T online equipment upgrade pricing and the people in my local store are actually quite competent to navigate that and also usually give the new subscriber equipment pricing to people renewing 2 yr contracts, online doesn’t always do that. So, will the store have any in stock before the Nokia rebate expires? Who knows. They don’t.

    Not exactly a stellar start to the great promotion.

    • halberenson says:

      I agree. The Easter launch was wierd to say the least. I know that AT&T does their store switchover on Sunday, and some stores were open, but why not just say the launch was on Monday even though some stores would start selling them on Sunday? Sounds like that would have been more in-line with under-promise over-deliver.

      Nokia/Microsoft/AT&T were looking for an A+ on this launch, so far the best they can hope for is a B+. And they still have the opportunity to drop lower.

  3. Dave says:

    Microsoft seems to market a different phone each week, month or quarter – pick your time delta based on how vociferous someone internally was regarding the need to match Apples single iconic device strategy. Hard to argue Nokia Lumia 900 is ” the one ” when just last week Microsoft was promoting another device (sorry, no idea what it was, they all look alike to me) in their ” smoke windows phone ” events.

    I also find it interesting that apple makes Walmart, target, best buy, carriers, and apple stores hold the same price for iPhone. You buy on convenience and service, not hunting for the lowest price. I would have expected Nokia & Microsoft to have done the same if this was ” the one ” windows phone.

    Nope, unfortunately Nokia Lumia 900 will be followed by other hardware variants from Nokia or others, the Lumia 900 will cease getting software updates, and a long list of windows phone variants will all end up competing on price and discounts from Nokia, Microsoft, the carrier, or the retailer. For example, Microsoft and Nokia rebated the Lumia 900 by $100 to make up for a software bug.

    In a few months we will see focus spin to another windows phone. People will lose all sense of OEM brand and buy phones based on operating system – android or windows phone. Unfortunately in that case, android has the mindshare and loyalty among referrers.

    • halberenson says:

      But of course Microsoft wants it to be “Windows Phone” in the end, and even Nokia wants a range of devices. The only real alternative would be for Microsoft, most likely by acquiring Nokia, to offer a single (or very small range) of devices under a single brand and fully embrace an Apple-like strategy. But we both know that Microsoft isn’t going down that road and is unlikely to do so. From day one it was obvious that while the iPhone was the immediate concern, Android would become the ultimate competitor. And that is still true. Can they succeed at either strategy? That is still a big question mark. You’ve always been skeptical, and certainly Microsoft has shown nothing to prove you wrong.

      BTW, I walked into an electronics store in China and they have some member of the Lumia line displayed at the front of the store. I think it was an 800, with my point being that they are establishing a distinctive brand that you can spot as a Nokia Lumia from a mile away even if there are different models. That will work for them. The question is, will it do for Windows Phone what Droid did for Android?

  4. dave says:

    I bought a Lumia 900 last weekend. The Boston, Boylston steer store bad sold out of cyan units, but had black in stock. The store manager said it was selling well, better than any phone except the iPhone, selling about 50 in four days. Most of the store employees had one, and they seemed excited by particular features. Its been since 2005 and the Audiovox SMT5600 that employees at this store actually all possessed Windows phones.

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