More on Mobile Phone Pricing Wars

In follow up to my post last week: "Mobile Pricing Wars and Gas Pricing Study" - Demand is continuing to decrease in the consumer electronics markets as consumers continue to cut extra spending, and cell phone companies are feeling the heat more than most. Recent coverage of this industry is demonstrating what a competitive pricing market this is becoming.

One recent article reads:

Nokia and its main cell phone rivals have started to slash prices as demand falls and retailers cut inventories after lackluster holiday sales.

Consumer electronics demand slumped in the key Christmas season, and handset vendors Motorola and Sony Ericsson have reported grim sales figures.

For 2009, analysts have cut their market estimates with the average forecast now for a 7.9 percent fall in volumes.

Falling demand at a time when retailers and operators are trying to cut inventories has lead to increasingly aggressive pricing. While vendors often cut prices in January, some actions this year have been more aggressive than usual.

"Our researchers have seen significant price cuts in Europe by the major handset vendors as 2009 begins," said Tom Byrd, who leads device-pricing research at CCS Insight.

"This reflects the highly competitive pricing environment we have been predicting for this year," he said.

Read the full article: "Pricing fears rise in shrinking cell phone market". And it isn't just the phone sales that are suffering. Consumers are shrinking the amount of added services and functionality they want to pay for on their phones. (Thus the all you can use bundles we covered in a recent post). Even IPhone App developers are introducing new pricing models to encourage app sales, including a "pay-what-you-want" pricing model.

"iPhone application firm App Cubby—maker of Trip Cubby, Gas Cubby, and Health Cubby—has announced that it is attempting a new pricing strategy in hopes of improving App Store sales. The company, which has been open with its numbers as well as vocally against the $0.99 app store paradigm, has decided to start pricing their applications at $0.99 and to encourage users who are happy with their applications to donate more if they feel the applications are worth it.

"The tactic, which was brought to our attention by iLounge, is of course a calculated move by the company. While it will take five to 10 times as many purchases to earn what the company was previously earning, the developers are no doubt banking on free publicity they will receive from this move. There's also the addition of the impulse-buying costumer not necessarily found at the $5 and $10 price points, and the occasional generous customer who donates lots of moolah.

"This is the first instance I have seen where a company both charges for its product and asks for donations. Programmers of free apps have done the latter for some time, but variable pricing is something that is becoming more popular in the digital lifestyle. The band Radiohead is, of course, the most prominent example with its "pay what you see fit" album Rainbows in 2007. Since then, Nine Inch Nails' Trent Reznor has also dabbled with the concept."

Read the full article: "iPhone dev lowers prices, tries pay-what-you-want model". On another note - and going back to the sports franchise demand pricing trends we have been covering - on franchise is actually going against the flow and increasing ticket and parking pass pricing in 2009. The Houston Texans are so confident in their product and the experience that they provide, that they insist on raising prices to maintain the level of profits they need to preserve the quality of their product:

"The Texans continue to be the hottest sports ticket in the city, with seven consecutive sellout seasons since the team began NFL play in 2002. Since 2006, the league average ticket price has risen by more than 6 percent annually, while Texans tickets have increased an average of 4.25 percent.

"We are sensitive to the economic challenges that our fans are facing,” said Jamey Rootes, Texans president. "We have worked diligently to implement a pricing structure for 2009 which keeps our prices in the lower half of the NFL but is adequate to continue our progress both on the field and off. Fielding a competitive team and delivering a world-class experience for our fans demands that our revenues keep pace with our costs."

Read the full story here: "Houston Texans to raise ticket prices". How will consumers react? We will see. Warmly, EM