Non-existent Price Points

I discovered over the last 24 hours that there are two products/services that I would like to buy or consider buying that don’t actually exist at the price points or feature levels I want.

The first is a new cell phone plan. I don’t really need one, but my first 2-year contract is about to expire. The main reason I am considering getting a new plan is that I am an AT&T Wireless customer; when AT&T Wireless got bought by Cingular last year, I got relegated to a customer service ghetto (I can’t use Cingular’s primary billing site, for one). That’s bound to happen when the company you’re buying a service from ceases to exist but you’re contractually obligated to continue that service.

So here’s the problem: none of the phone companies have the plan I would want (and currently have). My current plan is $30 (not including taxes and fees) for 300 minutes with unlimited nights & weekends, standard caller ID/voice mail/3-way calling, and no data services. Every provider I’ve looked at (Sprint/Nextel, Verizon, TMobile, and Cingular) now only offers a $40 plan with 600 minutes (which I don’t need), or their $30 plan doesn’t include unlimited nights & weekends.

I’d consider pay-as-you-go, but most of those companies have a $1 daily access fee plus actual minute charges. My usage pattern is regular short calls, not irregular long calls (my phone is for quick communication more than conversation). On top of that, all of the pay-as-you-go phones are craptacular. I assume this is because the companies figure that customers who want a cheap plan also want cheap phones.

Even if I were willing to pay more per month, I’d have to pay at least $150 to get a phone with features equivalent to my current phone, the most important being Bluetooth connectivity and iSync compatibility. My current phone was free with my 2-year contract.

The fundamental problem here is that the cost of a phone is subsidized by your payment plan. I think we the customers are being given the illusion that service is expensive and hardware is cheap; I expect that adding one new customer to an existing network is far cheaper than creating all of the parts that go into a new phone. My original phone probably should have cost me $200 or so. You can’t easily buy both the phone and the service you want; you have to value one over the other, because expensive phones are coupled with expensive plans (to offset the cost of the better phone).

The other problem is that certain phone features are coupled. For example, I want Bluetooth, because that makes it easy to synchronize my phone with my Address Book. Bluetooth is considered to be a feature that business users want. Therefore it’s typically available only in phones that have a lot more features than I want, in terms of organizer/PDA capabilities that jack up the price of the phone. A similar thing happens with cars, and lots of other products too. More on that in the next section.

Conclusion: I am not getting a new phone or plan.

The second is a new coat system. My previous winter coat, a Columbia 3-in-1, was not entirely worn out, but was a bit on the small side and had tiny tears near snaps and some zipper problems. I had had it for 8 years, so it was a good giveaway candidate.

I spent most of this afternoon shopping for coats (minus a 2-hour detour to read Marvel 1602 in the Harvard Bookstore). What I determined is that no water-resistant/proof winter coats exist in the $150 range. It’s either a $50 Product of Vietnam at Target, or a $300 coat system (I even saw one that was $650) for mountain climbing or Antarctic expeditions at a sporting goods store.

The water resistance (preferably proofness) is a feature I want because I expect to use at least the outer shell for some winter biking, and certainly for cold-and-rainy early spring/late fall biking. The degrees are roughly None, Coated Nylon (tends to breakdown over time or with washing), Advanced Coatings (claim to be more durable), and Impermeability Layers (GORE-TEX is the only brand I know of). The last is the only truly waterproof one.

You can’t get GORE-TEX in an otherwise cheap coat; they only put that in much fancier multi-layer coat systems. I eventually decided to spend the money, because I really wanted that feature.

The fundamental problem here is one I run into a lot, and which I call “the lack of feature set orthogonality”. There’s probably a real name for it somewhere. The gist of it is that features are not independent from one another. In the case of coats, you can’t get a GORE-TEX layer without also having much higher thread count nylon, fancy zippers, pockets you don’t need, and so on. As I mentioned for phones, Bluetooth isn’t available until you get to generally much fancier phones. Cars are another good example; you typically can’t get, say, a clicker (what I call the little keychain fob remote to unlock doors) without upgrading all of the electronic features.

I do understand from an economics perspective that it’s probably cheaper to put all of the widgets on the same board and subdivide your features into blocks that correlate to certain purchasing groups, but I’m a consumer who would be willing to pay a little extra for the features I actually want in order to not pay a lot more for features I’ll never use. I would assume that I am not alone.

After 4 hours of on-and-off shopping, plus a T-ride out to Andrew on the Red Line (the most T-accessible Target I knew of), I ended up going back to the first coat I found and liked at EMS in Harvard Square (well, technically Brattle Square, but it’s the same shopping district). It’s funny how that works.

Conclusion: I got a new coat.


10 responses to “Non-existent Price Points”

  1. Working Assets has a $30 unlimited nights-and-weekends plan. (I only have long distance from them, so I have no idea what the rest of the plan is like.)

  2. Unless they made everything modular and field-replaceable, there’d be the issue of retailers having to stock even more models of everything, which would make it a practical impossibility.

    Glad you found a coat, though!

  3. Have you and your family considered getting one of the family plans? My family has one for Verizon — I think we have some number of daytime minutes that we all share (300? that’s a pure guess, but I always ask my mother if there’s any problems with going over that time and there never is, because my primary daytime phone calls are to my mom and phone calls to other family members do NOT use any minutes) and unlimited night & weekends. If I make 411 calls it increases my monthly fee slightly, but for my part of the family plan + unlimited texting, I pay my mom like $15.

    I love your analysis of consumer products. In the same vein as conversations we had at Swat, like the reasons Trader Joe’s is inexpensive, it’s a reasoning process unlike anybody else’s. :)

  4. And not at all based in actual economic theory!

    The family plan is a good idea – my dad’s getting a new phone anyway.

  5. There’s something very amusing about reading the line “my dad’s getting a new phone anyway” and seeing just below it: ‘Reply to this parent’.

    Hey, I wanted to reply to Nick!

    Since I’m thinking of getting a pay-as-you-go phone, can you tell me what’s craptacular about them? Is the sound quality unacceptably bad? Do they break in a few months?

  6. Here “craptacular” means “lacking the basic features I require”, mainly Bluetooth and Mac compatibility.

    They are very simple phones, but I doubt they are significantly lower quality than the standard ones.

  7. Whoops, that was me. Is there a way to deanonymize a comment?

  8. I don’t know what’s different about the way comments are handled, from the way entries are handled, but one you can’t edit and one you can. So…uh, delete and re-comment? ;)

    Yeah, family plans work out to be pretty cheap, and since inter-plan phone calls don’t use minutes, they also turn out to have way more minutes than you probably need.

  9. Perhaps for next time you just want a thin poncho to slip over your winter coat when necessary.

  10. I still needed a new winter coat; my old one was retired for being too small and 8 years old.

Nurd Up!