iPhone price cut, schmice cut, they getcha with the monthly plan

The safety razor is a classic example of business marketing: Sell people the handle cheap, and they’ll keep coming back for the pricey blades. Thanks to a series of posts over at Apple Insider, we can see that’s exactly what AT&T is doing to the iPhone. Sure, the the hotter-then-hot iPhone price has been dropped to a wallet-pleasing $199. But even as they lowered the price of the handset, they raised the price of calling plans. Now an iPhone calling plan with unlimited data costs $70 a month, and they took away the free 200 text messages (I’m not a text messager, but I’m told that they’re all the rage with the whippersnapper set), which costs an extra 5 bucks.

So that’s $15 a month more per month than it was with the first generation iPhone, plus you have to pay a $36 upgrade fee. Given the mandatory 2-year contract, that means the plan costs $396 more then it used to own an iPhone ($276 if you think text messaging is unhealthy). So the savings from the 8GB iPhone price cut from $399 to $199? Poof, they’re gone.

2 Responses to iPhone price cut, schmice cut, they getcha with the monthly plan

  1. Adamooo says:

    So, I’m a bit peevish with the tone here, although partly as a hangover reaction to all the b*tching about the first big (and more legitimate) price cut. Apple sold simply scads and scads of the first iPhone, at a price that can in no way be confused with dumping them on the market. I’ll betcha that in spite of that achievement they’re going to continue to sell scads of the 3G device now and until any other device maker comes up with something substantially better. Two-year contracts and expensive data plans are absolutely standard in the US mobile phone industry, and it’s not like the terms are substantially unclear at the time of sale.

    So for this round – you’re getting more phone capabilities than you would have last month, for the same price . . . where’s the evil marketing genius?

    (As for the previous round of complaints, when Apple dropped the price of the original device, I have two comments. First, when you shell out $500 for a shiny techy gizmo, DO NOT coming whining to me later when the price goes down. If it wasn’t worth what you paid, you shouldn’t have bought. Second, look at the economics. Apple put a significant multiple of the amount of flash-RAM being produced and sold before and after the iPhone launch, and the price drop was in concert with the introduction of the iPod Touch, which used the same components and thus presumably drove up their discount. Memory chips are already one of the most continually disrupted markets I can think of – it should really be no surprise that they could move the price of the market when they sold a million handsets in a quarter. See also http://tinyurl.com/5v9kjm for more digging on this. Finally, it was not really as big of a cut as it looked like, percentage-wise, considering the full price of the two-year service, as you point out in the current discussion. And finally, again – more phone for the same or less money. Where’s the bad guy?)

  2. Eric Wolff says:

    The evil marketing genius is simply that all the marketing played up the fact that the handset was half price. Much of the emphasis was on how now the iPhone is cheaper. So people like me, who felt that a $500 phone wasn’t affordable, got all excited. Then we find out that in fact, all they’ve done is transfer the expense from Apple to AT&T. The phone is indeed better, but the price is the same, and arguably higher. So if I couldn’t afford an iPhone last month, I still can’t afford one this month. People tend to become peevish when the rug is yanked out from under them. It’s about screwing up the expectations game, rather than strict market valuations.

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