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The real cost of mobile phones and how to identify the best deals

In this post, we'll explore the real cost of mobile handsets, and ask how you can strive to identify the very best deals.
By Editorial on Feb 19th, 2018   @freelotteriesuk

While this means that customers are spoiled for choice when comparing premium handsets in the current market, they are not always guaranteed to achieve genuine value for their money. The issue can be further complicated by the development of relatively complex promotional deals, which promise a great deal but in some case elevate the average cost of the handset.

In this post, we'll explore the real cost of mobile handsets, and ask how you can strive to identify the very best deals.

The real cost of smartphones, and why they are going up

Let's start with a basic assertion; smartphones remain something of an anomaly in the electronics market. After all, this sector usually sees the cost of items depreciate over time, as the underlying technology becomes more accessible and components are purchased in larger quantities to meet demand.

These developments typically have a cumulative, downward impact on consumer price points, particularly in competitive marketplaces across the globe.

Despite ticking all of these boxes, however, smartphones have managed to buck this trend and become more expensive across the board. According to GfK, the experts in consumer checkout data, the average price of a smartphone increased by 6 per cent to $324 during 2017, while the launch of the iPhone X and the Samsung Galaxy S9 will trigger an another incremental hike this year.

So how exactly have smartphones been able to buck this trends? Much of it has to do with basic supply and demand, as market leading brands such as Apple and Samsung have been able to incrementally increase prices and their margins without deterring customers. In the case of the iPhone X, for example, this handset has topped Apple's sales charts despite its premium, $999 price tag, leveraging a handful of innovative and technology-rich features to engage customers and drive conversions.

This smartphone delivered an initial, gross profit margin of 62.9 per cent for the brand, which is largely typical of the mobile phone market in the modern age.

The rising demand for premium smartphones is also reflected by the slight decline witnessed in the feature phone market, which initially emerged in regions such as China and India. The rise of mid-priced feature handsets helped to lower smartphone prices back in 2014, but concerns over quality and relatively limited specifications saw demand in this market fall by 8.1 per cent in 2017.

By contrast, the demand for more expensive smartphones rose by 4.2 per cent, and this has undoubtedly empowered brands to shift their focus and strive to increase their price points and bottom line margins.

Interestingly, the rising costs of premium smartphones has made it increasingly difficult for customers to purchase handsets outright, regardless of the long-term savings available through SIM-only deals. As a result of this, customers are turning to third-party distributors to alleviate the cost of high-end models, spreading this across 24-month contracts while also accessing a host of innovative bonus features.

When is a deal not a deal? How to avoid costly offers

In the quest for value for money, those looking to purchase a new smartphone can take two key steps towards achieving their objective in the current market. Firstly, they can review the estimated production cost of handsets in relation to their price point, using published data to see which manufacturers boast the best value proposition. Recent data suggests that Apple handsets typically boast a gross profit margin of between 63 per cent and 74 per cent, for example, while Samsung's tend to be a little lower while the $720, Galaxy S8 delivered a margin of just 57.3 per cent.

Secondly, customers can negate the upfront cost of purchasing a handset by entering into a fixed-term contract, so long as their able to identify complex and potentially more expensive offers and avoid these wherever possible.

One of the first red flags to consider is the offer a free gift with your smartphone purchase, particularly this offering assumes the form of a games console or similar, high-end product. Of course, such a lavish deal seems too good to ignore at first glance, but even basic logic suggests that profitable companies cannot afford to giveaway high-end pieces of technology with every smartphone purchase.

Instead, the cost of the free gift is often reflected by the value of the contract and the monthly repayment, meaning that the manufacturer's offering is largely nullified by the time you've paid off the handset. In fact, there are instances where the deployment of expensive free gifts actively increases the cost of your handset, meaning that you're ultimately paying more than you would through a standard contract.

Another consideration is the storage options available through manufacturer's and distributors alike, which has a direct impact on the price point of your handset. While brands are often keen on the notion of promoting 128GB and 256GB handsets, for example, these are far more expensive than standard, 64GB options and may not necessarily offer additional value. This will depend largely on your usage, although typically 64GB of storage is more than adequate to optimise the performance of a handset.

So, by avoiding offers surrounding 128GB and 256GB handsets, you can lower the cost of your phone without impacting on its performance or value proposition.

The last word - What else should you look for in a smartphone deal?

We've already touched briefly on the importance of simplistic smartphone deals, but you should also target those that offer tangible and transparent financial benefit. The distribution outfit Fonehouse features a number of such deals at present, with even premium handsets available with no up-front fee and variable rates of cashback at the point of purchase.

These small concessions can have both short and long-term benefits for consumers, while they offer the type of clear and concise value that customers crave in 2018.

Above all else, the key is to remain informed as a consumer and try to appraise each potential deal with a critical eye. This makes it far easier to distinguish good deals from bad ones, and can help you to make a truly informed decision when choosing your next smartphone.