About one year ago, my cell phone contract expired allowing me to upgrade my phone. At the urging of my totally plugged in teenage son, who threatened incessant ridiculing of me for using ancient technology, I upgraded from an iPhone 5c to an iPhone 6. Sure, I had the option of choosing the current model, the iPhone 7, which offered the latest and greatest tech improvements. But I couldn’t fathom one good reason to do so.
The thing is, the 5c was working just fine. It suited my needs, being fast and smart enough (I mean it’s called a ‘smart’ phone for a reason other than being an in your face, silly little marketing ploy, right?). So, just as I had no reason to exchange a 5c for a 7, nor did I have reason to upgrade to an iPhone 6.
But I did exactly that for one reason: cost (so sorry, Teenage Son, my Dad coat of armor makes me impervious to your ridicule!). Not only was there no cost for the new phone but I was able to change my phone plan resulting in reduced monthly charges.
At the end of the day, I had lowered monthly expenses, added more money to my pocket, and was the proud owner of a shiny new piece of stainless steel, glass, plastic, etc, that Teenage Son grudgingly accepted as an improvement, though certainly not worthy of any sort of excitement.
‘Excitement? You want me to get excited? You bring home the iPhone 8. Now THAT’s a PHONE to get excited about! said Teenage Son.
Bitten To The Core
From 2009 through 2016, new model iPhones rose in sticker price from an average of $629 to $645; a reasonable increase of 2.5%. Then came 2017.
While the retail price of the least expensive iPhone 7 model was $649, Apple tested the waters for big time price jumps by slapping the 7 plus with a $769 tag, an 18.5% jump from the non-plus 7.
And how did consumers respond? They loved it! Expensive or not, beyond their means or not, the 7 was gobbled up faster than a juicy stuffed turkey at Thanksgiving dinner.
And Apple execs loved it, counting profits hand over fist and watching the company’s share price (NYSE:AAPL) soar more than 60% in the past year, from about $100 to more than $160.
So the boardroom thinking went, ‘if the masses are willing to digest an 18% price increase with barely a burp, well, how about we really rock this world by moving the needle to 4 digits for the new iPhone 8, making it the first $1,000 phone?’
Justified? Reasonable? Or Not?
Oh yes. How exciting. To drop a cool grand on a phone. Who wouldn’t buy in? Who in their financially sensible mind would object to paying a whopping 50% more than the iPhone 7 for a new phone which is substantially the same save for a few new optional, admittedly cutting edge, yet entirely unnecessary features?
Because, let’s face it, this isn’t your father’s 1980s rotary phone (you mean all it did was make phone calls? How quaint. How … how did you survive?), it isn’t the laughable flip phone of the early aughts, and it isn’t even the iPhone 7 for that matter.
Dudes! Dudesses! The iPhone 8 is from the greatest of all tech companies, APPLE, and it’s their new flagship out of this universe cool product that offers infrared facial recognition and wireless charging!
Okay, look, sarcasm aside, here’s the deal: Apple’s making a bet that it can move enough consumers into the luxury phone market. (To be fair, Apple isn’t the only one looking to juice gigantic profits; Samsung, is not far behind. Later this week, Samsung will introduce its Galaxy Note 8, priced at $950). You see, companies in the know understand that if you want to plant your flag in the luxury market, no matter how well built or designed your product, involuntary salivation is triggered in a certain kind of human animal only if product price is moved beyond easy reach of the masses.
Luxury buyers WANT a higher price. I mean, how else would people be able to judge and compare themselves against others? How would they set themselves apart from the riff raff? How would they know who has more money except by what kind of phone you flash to strangers and lovingly kiss good night? (Ooops, sarcasm creeping back in).
So what’s going on? Is Apple gouging? Is this pure corporate greed at play? Is it not enough that Apple is the planet’s most valuable company? That they have more than $260 Billion sitting in the bank (you read that right)? Or … is Apple simply satisfying demand, giving a segment of consumers what they want, and in the process being a good corporate citizen?
Apple’s bet is informed by their belief that consumers will cough up a premium price for a cutting edge product. That increasing price will increase sales. And this thinking is informed by knowing that US consumers spend an average of three hours per day (three hours!!!) on a mobile device, that the Apple name commands a premium, and that consumers will pay to associate with the Apple image.
Because only at its margin is the device a phone. Moreso, it serves as a personal computer, video player, camera, gaming player, GPS system, music player, reader, wallet … and status symbol. And in the minds of tens of millions of people, its become vital to their daily existence. Not only vital, but for some “the iPhone is your dream phone,” according to Satish Meena, analyst at Forrester, a research and advisory firm to big tech corporations.
Okay I’m totally out of the loop. Who knew that people have dream phones?! Talk about a marketing home run. Apple, Samsung and their competitors are now burrowed in our subconscious, seemingly as essential to life as oxygen. Or so it seems for some.
And for those folks who gasp for breath when their phone isn’t within reach, the dream is often a financial burden. Because too many folks buy these devices owing to the cool factor generated by tech companies in cahoots with fawning media types.
Sure, for the true techies out there who live for the next digital advance, new model phones may be a must have. But for most of us casual device users, there is no need to buy a new model every year or two or three assuming the current model its functioning well.
But there’s want. And the want is driven by NEW and SHINY and EXCLUSIVE things that inflate our sense of status (well, really, only delusions are inflated, but too many folks derive feelings of being ‘better’ (empty as the feeling is) than others because they own a THING that’s available to relatively few.
Apple knows all about want. Same with Samsung. Any tech corporation worth its motherboard knows that phenomenal sales happen only when there exists emotional attachment. And this kind of attachment is manufactured through savvy marketing.
As corporations go deeper inside consumers heads, vulnerable consumers suffer. Because they convince themselves of the need for an expensive phone that they can’t afford. So credit cards are used for purchases. And when the full balance owing isn’t paid, the consumer incurs interest charges, adding to the total phone cost.
Or wireless carriers offer financing plans, as if this is an excellent solution. I’m here to tell you: NO, IT’S NOT! When purchases are financed, you’re charged interest and interest adds to indebtedness. And as debt grows, savings are depleted or at least not increased, and the consumer’s financial situation only worsens.
So before you chase the dream, do an inventory check of your wants and needs. Measure any desire for a ridiculously expensive electronic device against your inner values. Consider whether you enjoy being played by a giant corporation with an insatiable appetite for more. Ask your self whether you prefer to add to Apple’s monstrous cash pile or whether you prefer to build your own cash pile, through wise spending, saving and investing.