The price of the new iPhone 3G dropped by $200. Although the AT&T bills necessary to take advantage of the phone’s faster data speeds rose beyond handset savings, many hailed the lower price as an important development. Finally, the price is within the range of what people are willing to pay.
I’ve seen many people, including friends and family, agonize over whether to buy a phone they prefer, or one that’s $200, $100 or even $50 cheaper. And with the economy in the doldrums, the impulse to economize is stronger than ever.
I believe this price sensitivity over handset prices is misplaced. My advice to everyone is to buy the phone you want, regardless of price, within reason.
Let’s say you really want a smart phone that costs $400 but are tempted to save money by buying a $200 phone you don’t like as much. Wow! Half the price! How could you possibly justify paying double for a phone you like only a little bit more?
Here’s how to justify it.
Phones are worth more than you pay. Far more
The low price and small size of handsets has fooled us into thinking that phones aren’t as valuable to us as they really are. In fact, surveys show that cell phones are among the most valuable possessions we own.
A survey conducted earlier this year by the Pew Internet and American Life Project found that most Americans would rather give up the Internet itself than their cell phones. Assuming a two-year life for your cell phone, and for purposes of comparison, how much do you pay for two years of Internet access? (By definition, the amount you pay is what you believe it’s worth.) So if you pay, say, $50 per month for your Internet connection, then you’re paying $1,200 for two years. So to the average American, his or her cell phone is worth more than that.
Another survey conducted in the U.K. about a year ago called the Mobile Life 2007 report found that one in three people in Britain say they wouldn’t give up their cell phones for a million pounds (that’s about 2 million dollars).
Of course, nobody was waving cash, so the proposition was hypothetical. But the fact is that people really do love, need and highly value their cell phones.
A researcher in human behavior, Jan Chipcase, expressed this eloquently in a Ted Conference talk. Chipcase studies the behavior of cell phone users worldwide, of which there are now some 3 billion.
He makes the point that people own many things and choose to carry a variety of objects with them whenever they leave their homes. Of these, just three objects are universally claimed to be most important to people when they’re out and about: keys, money and cell phones. And among these, the one object people are most likely to use is the cell phone. (A study published in May found that one third of Americans said that if they had to leave the house for 24 hours and could take only one object, they would choose their cell phones over keys, wallet and all other possessions.)
Chipcase makes the point that, “the conscience and subconscious decision process implies that the stuff that you do take with you and end up using has some kind of spiritual, emotional or functional value.”
All three of these objects, he said, enhance survival: Keys provide access to shelter, money buys food and other needs, and cell phones can be used in an emergency.
If you look at Abraham Maslow’s psychological theory of human motivation, better known as ” Maslow’s hierarchy of needs,” cell phones, as well as keys and money, help people satisfy the lower two levels of human needs. These levels, starting from the bottom, are: “Physiological” (the survival and maintenance of the physical body) and “Safety” (security of body, of employment, of resources, of morality, of the family, of health and of property).
The idea of this model of motivation is that people concern themselves with any given level only when the levels below are taken care of. In other words, you’re not going to worry about “self esteem” if you don’t have food or shelter.
One of the reasons that all kinds of people — from teens to bankers, and from celebrities to construction workers, and in all countries, rich and poor — value cell phones is that they make a massive contribution to every level of Maslow’s hierarchy. So in addition to the lower rungs mentioned above, they also enhance (continuing up the hierarchy): “Love/Belonging” (friendship, family, sexual intimacy), “Esteem” (self-esteem, confidence, achievement, respect of others, respect by others) and, the highest level, “Self actualization” (morality, creativity, spontaneity, problem solving).
In other words, cell phones represent a kind of “perfect storm” of value to humans. They enhance survival, connect us with loved ones, educate us, enhance our careers and entertain us. Phones with GPS guide us. Camera phones capture our memories. No other possession does all this.
No matter how much you pay for a cell phone, its value to us is very high.
Money saved elsewhere has lower impact
Meanwhile, we pay far more for things that are less important to us. For example, how much did you pay for your laptop or desktop PC? Your TV? Your car and house? How much do you pay over a two-year period for gas, movie theater junk food, over-priced restaurant food, alcohol and other relatively unimportant things?
The average American spends well over $8,000 per year to own a car. Any number of decisions related to the car, such as driving slower, not driving it once in a while, choosing a less expensive car, and others, would save far more than the difference in price between the cheapest cell phone available from your carrier and the most expensive. Yet these changes wouldn’t significantly degrade our lifestyle or happiness, but the better cell phone will.
And the house? Forget it. A quarter of 1% reduction in the interest rate of a mortgage alone would save us enough money to buy hundreds of iPhones, and would have zero-effect on our lifestyles.
OK, If I still haven’t convinced you, then let my try once more with a little thought experiment.
Automobiles are very expensive products because they require a lot of costly materials, design, regulatory processing and other things to produce. But let’s say some genius from MIT figured out how to manufacture cars incredibly cheaply. Let’s say you could suddenly buy a Ferrari 612 Scaglietti for $400, a Toyota Corolla for $200 or you could get a used 1974 Ford Pinto for free.
Would you agonize over this decision? Would you be temped by the cost savings you’d get by choosing the Corolla or the Pinto? Of course not! You’d buy the Ferrari. You would do it because the Ferrari would be a lot more fun, save you time and let you show off a bit.
Yet people don’t make this decision when buying a cell phone, even though a better handset will give you the exact same benefits.
Of course, it’s always good to economize. And sometimes a less expensive phone is better than a pricier one. But when you consider the value of a cell phone — the actual value to you, personally — compared with the low additional cost of a superior one, the choice is clear: Always go for the Ferrari.
Mike Elgan writes about technology and global tech culture. He blogs about the technology needs, desires and successes of mobile warriors in his Computerworld blog, The World Is My Office. Contact Mike at mike.elgan@elgan.com or his blog, The Raw Feed.