Nokia firms up touchscreen phone plans, says it will focus on ‘mid-range’ markets: “Kai Oistamo, the phone-maker says it will be launching a series of touchscreen devices in the second half the year, with the first model – likely the Tube – aimed at the ‘volume market.’ Oistamo claims that the mid-range market (not the high-end sector that devices like the iPhone 3G occupy) account for 50 percent of the total value of the touchscreen phone game. “
(Via Engadget.)
This may sound like a stupid question right now, but with the recent price drop of the iPhone, what the heck defines the midrange market? I can’t help but wonder that people will look at a $100 phone and ask themselves if the differential of moving up to the iPhone is justifiable.
Right now, it looks like the market has basically defined $200 (for subsidized phones) or the equivalent in local currency as the most that you can justify paying. Only some very specific market niches like high resolution cameras can differentiate themselves sufficiently to be able to demand more than that. When you’re under that value by a little, people perceive that they’ll get a lot more value with the iPhone for a minimal additional investment.
It looks like the market basically falls into three basic categories now:
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the giveaway phone (nominal cost, under $20)
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the $100 phone (that would be the midrange)
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the $200 phone
If you’re between $100 and $200, the value proposition had better be really good compared to the iPhone or people will see more value in paying the difference to upgrade. An $80 to $100 difference is enough to make the jump feel expensive so that basically defines the top price of the midrange at $120. Given the quality difference in the software on the phones, this will be awfully hard to do, especially with the easy extensibility of the iPhone now that it’s coupled with the App Store.
Nokia has some advantages of economies of scale if they push forward touchscreen production, but they’re still expensive items to produce overall, so those $100 phones will require subsidies on the same scale as the iPhone, but will be harder to recoup since they won’t be aligned with premium usage contracts. Ouch.