I asked the Gear Diary team a question last night: if you had an additional $300, how would you spend it? The reason I asked, was that $300 seemed to be the average cost difference between an iPhone/Galaxy phone, and the new Nexus phones (Nexii?) and the Moto X Pure; was it enough to lure switchers?
The question was actually asked in two parts; first I asked about what they would do with $300, and then I explained why. Here’s a sampling of what people would do with extra cash:
- Perry said he’d put money in his daughter’s college fund.
- Judie said she’d use it towards the girl’s weekend she’s planning.
- Joel and Travis both said they’d likely spend it on bills (though Travis did say if it didn’t go to bills it would go to hunting gear!)
- Candice would use it on rent or textbooks.
Once I explained the extra $300 would come from choosing a Nexus 5X/6P or Moto X Pure over an iPhone, though, everyone agreed that spending the extra $300 was worthwhile over the hassle of changing platforms. On the other hand, there was acknowledgement that Android users should never consider buying a Galaxy (or HTC, or high-end LG) over a 5X/6P/Moto X, given the relative parity in terms of performance and the cost savings. If I had to guess, I’d say that the Nexus line (and even the pricing of the Pixel C) are a shot across the bow to HTC and Samsung in particular. Google is basically pointing out that price matters more in the Android world. People will pay a premium for an iPhone, but they balk at paying that same premium for an Android phone. This is going to become a lot more apparent now that the carriers have eliminated subsidies. Whether you’re paying up front or over 24 months, you’re still paying the full cost of the phone, and it’s going to be hard for consumers to swallow spending $700 on an Android phone when they can get a similar phone for $400. Or, worse, they’re going to look at the costs and think “So I can pay [$750 up front/$31 monthly] for this Galaxy phone, or I can pay the same for this new iPhone…why wouldn’t I buy the iPhone?” It’s not good for Android to go head to head on cost with the iPhone, because once you get people to accept they’re paying that much for a phone, they’re going to seek the phone they think is most “worth” that much money.
On the other hand, if you can offer them a phone that gives similar performance, but at a cheaper cost, you’re reminding them of what they could do with that extra $300. Maybe they could buy a tablet as well, or more apps, or accessories. This is the math we’re doing in our house right now, as Sarah’s iPhone 5C is basically running on pure grit, and my HTC One M8 looks like it’s been street fighting when I’m not looking. Sarah is 100% committed to the iPhone, and will likely end up upgrading to an iPhone 6S in the next several months. So we’re looking at $749 for her phone. I will need to replace the One M8 at some point, and I have one foot in Android and one in iOS, since I have an Android phone and an iPad. If I also get an iPhone, our total cost for phones is $1,500. On the other hand, if I get a Nexus 5X or a Moto X Pure, our cost is between $1,100 and $1,200 (depending on capacities, if we can snag a sale, etc). That extra $300 can go towards upgrading my tablet, or our home theater system, or replacing our couch…you get the idea. The point is, when I look at the difference, I don’t see the value in a higher priced phone once I look at what that savings means to us. And that math is going to be particularly dangerous to smartphone makers not named Apple who are still charging iPhone-level prices (cough, HTC and Samsung, cough).
So what does your smartphone math look like? Are you considering a cheaper smartphone now that subsidies are out the window? Let us know your thoughts in the comments!