Smartphone Pricing's Up, But Customers Are Happier - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


Smartphone Pricing's Up, But Customers Are Happier

J.D. Power reports that costs for smartphone customers have increased, but that these consumers are happier than they've ever been -- especially with AT&T.

iPhone 7 Rumors: 7 That Have People Talking
iPhone 7 Rumors: 7 That Have People Talking
(Click image for larger view and slideshow.)

Buying a smartphone is more expensive than it used to be, but customers are happier with the process than they've ever been, according to two J.D. Power studies released Feb. 18.

One study measured purchasing from full-service carriers, while the other measured buying from more limited-service, contract-free carriers. In each case, six factors were measured, in order of importance -- store sales representative, website, offerings and promotions, phone sales representative, store facility, and cost of service -- and satisfaction was calculated on a 1,000-point scale.

In both instances, customer satisfaction was up 6 points over respective 2015 studies. In the case of the full-service carriers, the rating reached 803, the highest satisfaction level since the inception of the study in 2004.

In the case of the non-contract carriers, the rating reached 791, again the highest since the segment was added to the study in 2009.

That's despite an average increase of $31 (for a total of $276), from the 2015 study of full-service carriers six months earlier.

(Image: Mutlu Kurtbas/iStockphoto)

(Image: Mutlu Kurtbas/iStockphoto)

"Even with a notable increase in out-of-pocket costs for the customer, overall satisfaction has hit an all-time high," Kirk Parsons, a senior director at J.D. Power said in a statement.

"While this may seem counterintuitive," he continued, "wireless service providers have been aggressively offering more data plan minutes, with some even tethered to unlimited usage plans, to offset the high cost of ownership."

What was the highest ranking of the four leading full-service carriers? That honor went to AT&T, which scored 813, and did particularly well in the offers and promotions and the phone sales representative categories. T-Mobile was hot on its heels, with 812, while Verizon Wireless scored 797, and Sprint scored 784.

Among the contract-free carriers, TracFone took the crown with a score of 802, followed by Virgin Mobile with 796, and Cricket with 795.

In 2013, T-Mobile, under the direction of a new CEO, churned up an industry that had settled on a model of subsidized devices tied to two-year contracts. T-Mobile separated the cost of its services from its devices and eliminated the two-year contracts that had become de rigueur around the time of the first iPhone's debut on AT&T.

That rise in cost to customers, said the firm, is due in part to equipment installment plans (EIPs) -- plans that allow full-cost devices to be "leased out" over a period. Another contributor is the rising cost of flagship smartphones like Apple's iPhone 6S Plus and Samsung's Galaxy line.

While customers have taken on these additional costs, the new models increase customer's perception of added value and have improved the overall purchase experience, said the study.

[Read AT&T's 5G Plans Include Software, Education, Empathy.]

Unlimited data plans also have a strong, positive impact on customer satisfaction, the reports found, having "a halo effect on satisfaction in all other factors."

Customers with unlimited data plans reported a "satisfaction with cost" that was 52 points higher than customers without unlimited data.

Additional findings included that nearly everyone preferred to purchase a device in-store. Some 69% of full-service customers made their purchases in a store, compared to 43% over the phone and 53% online. Among non-contract customers, 60% of transactions happened in a store and 34% were over the phone.

That said, the non-contract customers were in and out more quickly. While the full-service experience takes approximately 48 minutes, the non-contract experience was, on average, a full five minutes faster.

Does your company offer the most rewarding place to work in IT? Do you know of an organization that stands out from the pack when it comes to how IT workers are treated? Make your voice heard. Submit your entry now for InformationWeek's People's Choice Award. Full details and a submission form can be found here.

Michelle Maisto is a writer, a reader, a plotter, a cook, and a thinker whose career has revolved around food and technology. She has been, among other things, the editor-in-chief of Mobile Enterprise Magazine, a reporter on consumer mobile products and wireless networks for ... View Full Bio

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
User Rank: Ninja
2/27/2016 | 8:56:27 PM
Re: The psychology of pricing
In my view the customers are more focus on the features than the price. 
Per Sjofors
Per Sjofors,
User Rank: Apprentice
2/22/2016 | 12:24:09 PM
The psychology of pricing
First a disclaimer: I founded and run America's most trusted pricing research and advisory firm. (Atenga Inc)

It is no surprise for me that higher prices of smartphones drives higher satisfaction - anytime we buy something that we see as an aspirational purchase (we buy something that we wanted to buy for some time and finally were able to do to so), we are more likely to feel more satisfied with it. We like to pat ourselves on the back.

In a famous experiment from a couple of years ago, researchers put volunteers in MRI machines and had them taste wine. When they were told they tasted expensive wine, the pleasure center in their brains fired up. When they were told they tasted cheap plonk, it did not. But the wines they tasted were actually always the same wine! So higher prices, to a point, drives higher consumer satisfaction. The trick, of course, is to know exactly where that point is.  
User Rank: Ninja
2/21/2016 | 9:41:37 PM
Re: I'm happier!
Interesting article. I think the main reason is the options it has given to the customers. At the same time its more user friendly and easy to use.
User Rank: Ninja
2/19/2016 | 1:38:33 PM
I'm happier!
I've always had to administer our AT&T company account, make all plan changes, order new phones, etc. I've absolutely hated that (my real job is IT developer/manager). With this new paradigm of separating phone purchase from plans, it's led us to create a BYOD program and just reimburse employees a specified amount each month for plan, then give them $500 allowance every two years for phone. Then they can optimize with their families and their personal usage, I'm out of loop. Woo hoo!

Here is the best part. It became clear our AT&T biz rep was AT&T's rep, not ours. Once they began publishing phone costs in Premier web portal separate from 2 year contract plans, I noticed our plan costs did not decrease. We were paying $40 for 450 minutes voice, $20 for unlimited text and $26 for 2GB of data, that was best I could do. The consumer AT&T plans were $55 for unlimited voice and text and 2GB of data. The consumer AT&T reps were laughing when they heard what we were paying on biz side with our FAN discounts.

How sad is that. You'd like to think reps would look at your biz from time to time and help you optimize when things changed. Not these clowns. I was happy with quality of the National Business Center reps when I'd have to call for things I couldn't do in portal. But these AT&T account reps are a joke, strictly a sales function where optimizing their commission appears to be primary goal.
10 Top Cloud Computing Startups
Cynthia Harvey, Freelance Journalist, InformationWeek,  8/3/2020
How Enterprises Can Adopt Video Game Cloud Strategy
Joao-Pierre S. Ruth, Senior Writer,  7/28/2020
Conversational AI Comes of Age
Guest Commentary, Guest Commentary,  8/7/2020
White Papers
Register for InformationWeek Newsletters
2020 State of DevOps Report
2020 State of DevOps Report
Download this report today to learn more about the key tools and technologies being utilized, and how organizations deal with the cultural and process changes that DevOps brings. The report also examines the barriers organizations face, as well as the rewards from DevOps including faster application delivery, higher quality products, and quicker recovery from errors in production.
Current Issue
Special Report: Why Performance Testing is Crucial Today
This special report will help enterprises determine what they should expect from performance testing solutions and how to put them to work most efficiently. Get it today!
Flash Poll