When I don't get what I want, I tantrum by blogging

I want a new phone. I want it I want it I want it I want it I want it I want it I want it I want it. I want it NOW.

Having done my homework, I know exactly which phone I want, and I went to the Verizon store to buy it. I was ready to pay, cash monies.

Apparently, the deal that had been offered online is only available to new customers, or to current customers who've earned an upgrade.

I'll fit into the latter category - that is, I will be eligible for an upgrade - in late April. Until then, the purchase of the phone will be FOUR TIMES as expensive. April 21st: $400. April 22nd: $100.

Now, I didn't go to business school. Remember that microeconomics-tutorial Apple game, Lemonade Stand? Perhaps you remember its darker TI-83 cousin, Drug Wars? Well I couldn't stand them. Still, naive to economics though I might be, I'm pretty sure that this arrangement is stupid.

Let's examine why, using a series of case studies...

Case #1 - New customer
Wants: A phone and a plan.
Moneymakers as they stand: The plan (or, to some degree, the new phone).
Potential to make more: Convince the customer to get a better plan (or a more expensive phone).
Summary: There is no effect from the Current Upgrade Policy on the new customer. He is not upgrading, because he is a new customer.

Case #2 - Joe Schmoe
Wants: A new phone every so often
Moneymakers: The plan.
Potential: Maybe the customer will NEED a new phone before two years are up, and will be forced to pay full price. Or maybe he'll pay more for service, just to speed up the upgrade delay.
Summary: A new phone every two years and the slim possibility of a pricier plan.

Case #3 - Fashionista
Wants: The newest phone
Moneymakers: The new phones that he buys at full price because OMG BLACKBERRY STORM!
Potential: Charge him even more for the phones, because he can't say no.
Summary: Phones are like crack to this customer. Have your way with him.

Case #4 - Penny Pincher
Wants: A new phone for free.
Moneymakers: The plan.
Potential: The customer is in it for the upgrades. Only wants the cheapest phone. Will always wait for his free upgrade, even if the old phone is held together with twine and chewing gum.
Summary: There is no money to be made here.



This system works well enough, I'm sure. Why else would the phone companies keep using it? The Fashionistas' paychecks burn holes in their pockets every time they see an iPhone, and even the Joe Schmoes occasionally break or lose a phone.

Assuming (and this is a big assumption) there is money to be made off of phones, here's an alternate proposal: Instead of a quantum leap from full-price to heavily-discounted upgrade price, why not set up a gradient, such that the longer you wait, the greater the discount.

Setting a limit would keep the price from dropping too low, and it would probably even encourage people to buy phones earlier. People like me. I hope you didn't need my money, Verizon, 'cause you're not getting it until April.

There are downsides to my proposal. Fashionistas would still buy frequently, but each purchase would be discounted. Joes with broken phones would also be spending less, even though the company had them over a barrel already.

If companies are selling phones at a loss, then this plan may break down. The increased frequency of purchases would be costly. People may be drawn to companies that offer better discounts, but on the other hand, how many consumers think "I may want a new phone in 18 months, but I'll have to wait a further 6 months"? Tell me, MBAs-to-be, does business school teach you to rely on consumers' ability to delay gratification?

I contend that my plan would, at worst, yield no change in profit. At best, it would boost the number of sales, have minimal effect on each phone's profit margin, promote pricier plans (to match the phones' bells and whistles), and increase customer satisfaction.

Somebody please tell me why I have to wait until April?



Sent from my computer, because I don't have a Blackberry or Palm or anything cool.