In today’s Best of Comments, someone claiming to be an AT&T employee explains why their iPhone upgrade pricing is really supposed to be pro-consumer, and another commenter tries some armchair psychology on the management of large corporations.
Nathan:Others have chimed in on this, but as an AT&T employee, I feel compelled to add some context. This is the result of two attempts by AT&T to be more consumer friendly.
Previously, AT&T used flat ETFs that did not change at all during the course of the contract. They changed them to decline over the course of the contract in 2008, and changed to a two-tiered ETF system based on device type in 2010 as a result of higher subsidization costs. Smartphone ETFs begin at $325 and decline by $10/month over the course of a contract (as someone pointed out, the ETF is less than the discount to start with).
After the launch of the iPhone 3GS (I think; I’m less sure of the exact timing of this), some customers were upset that they were unable to get a discount on the price of the new phone because of the length of time remaining on their contract, so AT&T introduced “Early iPhone Upgrade Pricing.” This was a partially subsidized price: instead of $450 off the MSRP, it was only $200. This isn’t hidden – upgrade check results online and via *NEW# will let you know if this is available.
When you put these two things together, you get incidents like these, where AT&T attempts to be consumer-friendly instead earn the ire of customers and get it branded as “not making sense.” Were they to not offer the Early Pricing, those other two iPhones would be not $500 more total, but $900 more total. Would AT&T then be paying you $580 to leave? If the ETFs did not decline, would they be draconian?
I should also point out that I am not aware of any such pricing level at Verizon, though I could be wrong.
Pete the Geek: On Saturday I was looking to buy a 2 kg box of generic baking soda. It was $4.95. Then I noticed that the 500 g boxes were $0.98 so bought four of them. Businesses set dumb pricing all the time and I think it sometimes only makes sense from the “big picture” view. You would think that customer-service employees would be empowered to fix issues like the phone upgrade pricing, but I think that business leaders are reluctant to give up control, even when it costs them customers.
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