Google (NASDAQ:GOOGL)’s Nexus 6: A Possible Price Tag and Cumulative Sales Irony
The smartphones war between Electronics Company can already inspire a trilogy as the battle ensues in order to gain the most sales through continuous device upgrades and incorporation of new and improvement of the gadgets’ features.
Google (NASDAQ:GOOGL)’s Nexus handsets have a reputation of being affordable. While it still costs less than Apple Inc. (NASDAQ:AAPL)’s iPhone 6 Plus and Samsung (OTCMKTS:SSNLF)’s Galaxy Note 4, the latest addition to the line, however, is still significantly more expensive than Google (NASDAQ:GOOGL)’s older Nexus models; priced at $649 off contract.
Will this pricing scheme be a “Nay” or a “Yay” for Google (NASDAQ:GOOGL), or will it be their price to pay over time?
Nexus 6 costs almost twice as Nexus 5 with a whopping $300 more price tag, while the latter was sold for only $50 more than Nexus 4, at $299 back in 2012. An accurate comparison cannot actually be made as Nexus 6 belongs to a different device class: phablets. It does have an improved battery and an improved camera; however, it cannot be denied that while Nexus 4 and Nexus 5 cost half 50% less than those of their competitors, Nexus 6 is only $100 cheaper.
A seemingly irony, Google (NASDAQ:GOOGL)’s pricing of the Nexus 6 might actually lead to higher sales.
When Nexus 4 was launched, it was only made available through Google (NASDAQ:GOOGL) Play. The phone was sold out within minutes, and it remained back ordered for weeks. Being the largest carriers in the U.S., Google (NASDAQ:GOOGL) made sure this time, to break into their walls and have them sell their phablet as Nexus 6 will be soon made available through all major carriers.
Out of habit, Americans seem to find it more comforting to purchase their handsets from their carriers as opposed to purchasing the devices online. Another factor may be affordability as a direct store purchase may save a lot of money overtime, but a $299 or $345 upfront payment is not in any way pocket friendly.
Customers increasingly patronize subsidiary-free plans and give up two-year contracts. While they will be paying for their devices’ full prize, the installments will be staggered over a two-year period.
A study conducted by the Consumer Intelligence Research Partners earlier this year showed that consumers tend to go with more expensive models when they finance their phones. On the other hand, consumers who opted for subsidiary-free plans bought Apple (NASDAQ:APPL)’s flagship smartphone iPhone 5S instead of their more affordable models.
There are no upfront payments in phone financing. A less economical iPhone 5S is more likely to appear more attractive when a down payment of $200 is not required.
Applying the discussion above to Google (NASDAQ:GOOGL)’s Nexus 6, it can be purchased at less than $23 per month or at $250 under a contract. Both of these amounts are by far easier to shell out as compared to the $349 payment needed to purchase its predecessor Nexus 5.
Whether or not, the new Nexus with the hefty price tag is accepted well; only time will tell.