When mobile phones first became popular in the US, many people took the free phone offered with their plan, and liked it. In the beginning, simply having a mobile phone was cool, and the phone itself really didn’t figure into the style calculation.
Once mobile phones hit a certain critical mass, many customers chose to upgrade to a more expensive phone with better features. Mobile phone carriers subsidize phone costs, so that most phone owners could buy phones at a discounted price when they signed a new contract.
The first phenomenon in the premium phone was the Razr, which literally took the mobile phone world by storm. Smart phones like the Blackberry, Windows Mobile phones and Palm devices soon followed, but the two types of phones bear very little resemblance to each other.
The Razr’s primary feature was style. It was simply a phone, with no advanced, “smart” features, but owning a Razr was considered extremely cool, and the phone commanded premium prices, without offering any extra value in the way of features.
A J.D. Power and Associates survey offers some insight into the popularity of the Razr, and the current popularity of the iPhone. Of 20,000 phone users surveyed, 41% said that they chose their mobile phone primarily based on “style,” with “received for free” coming in second at 25% and “ease of use” at 23%.
The J.D. Power study also showed a decrease in number of phone users owning a free phone (33%, down from 36% one year before). The average price paid for a handset had also increased over the previous six months, from $92 to $101, a record increase.
It is interesting to see what phones people give up to switch to the new iPhone. According to a study by Rubicon Consulting, 24% of iPhone users surveyed had switched from a Razr, compared to 14% from Windows Mobile phones, 13% from Blackberries, and 7% from Palms. Overall, 34% of iPhone users had switched from smart phones, and 24% from Razrs.
While smart phone users most likely turned to the iPhone for its features, including email and applications, most Razr phone users likely switched because the iPhone is the new hot, stylish phone. Consider that most Razr owners had bought their phones at subsidized prices, but paid full-price for iPhones. Now that AT&T is subsidizing iPhones, even more people will switch.
The widespread popularity of the iPhone has proven three things, in terms of mobile phones in the U.S.
The first is that even smart phone owners who’ve owned other models are willing to switch to an iPhone, and many of them were willing to buy the iPhone at full price to take advantage of its advanced features, even before Apple began allowing third parties to develop iPhone-compatible applications.
The second important observation about the iPhone is that many people consider the “cool factor” important enough to switch to an iPhone even from a dumb, carrier-subidized phone, because of the style and popularity of the iPhone.
The third important thing the iPhone teaches, however, is that the majority of mobile phone users in the US will not accept a full-price phone. Although initial iPhone sales were brisk, Apple was forced to work with AT&T to reduce the price on the iPhone to maintain sales. This is telling because it seems to prove that neither style buyers nor smart phone buyers, as a whole, consider the iPhone a big enough deal to pay $500 for it.
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