Consumers Feel Smart Phone Obsolescence

When asked, 62 percent of respondents to a Retrevo survey said they currently feel their smart phone already is "out of date," or will be before their service contracts expire. That speaks both to the rapid pace of smart device innovation and the upside for providers of the latest smart phone models.

The solution, some would argue, are shorter contracts, or no contracts. One is reminded of the surveys taken to assess consumer receptivity to advertising. Those surveys virtually always find that people don't really like ads. But they like the idea of paying more for their desired content even less.

That's essentially what the Retrevo survey found as well.

When asked if they would be willing to pay extra for a shorter contract, most responded as you would guess, with a "no." But some would pay as much as $100 extra to get a one-year contract rather than a two-year contract.

Those sorts of questions and answers are instructive, but also hinge on consumer desire, at least in the U.S. market, for high subsidies on their devices. Few consumers really want to pay $400 to $500 for their devices, to get a contract-free service plan. Most put up with contracts so they can buy those devices for $200 to $250.

You can argue all you want about the wisdom of those preferences. Most of the money a consumer spends over the length of the relationship is service fees. The device cost is a relatively small matter in comparison. But consumers have voted with their wallets, and service providers, though not enamored of the operating expense the subsidies represent, do not seem likely to abandon the model, simply because it works.

One also might argue that the subsidies, which encourage users to swap out their devices more frequently, are one reason the U.S. market now is the world leader in terms of application innovation. A user that has invested $500 to $600 in a mobile device is likely to feel obligated to use that device as long as possible.

A user that has invested only $200 to $250 is less likely to be wedded to any particular device, and is likely to feel that investing in another, updated device makes sense.

http://www.retrevo.com/content/blog/2011/04/are-you-prisoner-your-phone-carrier