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The Price-Parity Conundrum

by Sage Lane | September 11, 2011September 11, 2011 6:00 am PDT

Samsung Galaxy Note with Stylus

I was excited. Enamored, actually. I had just laid eyes on one of the most beautiful devices ever created by man. It was the Galaxy Note, a device with a gorgeous design and breathtaking spec sheet: dual core 1.4GHz processor, 1GB of RAM, 8MP camera capable of 1080p recording and 2mp front-facing camera wrapped up in a sleek body and sporting an absolutely stunning 5.3-inch 1280×800 Super AMOLED display. I was love-stuck. I have long been a fan of 4-inch+ displays, and 5.3-inch is downright epic. I own a 5-inch Galaxy Player 70 (or so it’s known in Korea, Galaxy Wi-Fi everywhere else), and I use it constantly. Despite what you may think, 5-inch is absolutely pocketable, and delivers a very robust experience. However, at 800×480 resolution, text on the Galaxy Player can become quite pixelated. But I wouldn’t have to worry about that anymore. I would be getting a Galaxy Note, and we would live happily every after at 285ppi. Then, the bomb hit. A 600 pound bomb. Sorry, that should read a 600£ bomb. The object of my desire, only days after its debut, had been priced out of my reach.

Nursing a broken heart, the only thought my tear-stained brain could muster was, “Why?”.

Why, indeed. The device is attractive, certainly. But what would induce a company to price a device of this category so high. Perhaps we should define what this category is. In case you haven’t heard, the Galaxy Note is a hybrid, the product of a cellphone-tablet union. Unfortunately, it costs as much as a top tier smartphone and tablet combined. Yes, I realize the ~$1,000 price point floating around is the unsubsidized price, and that the price will probably be $100-200 less in the States, but, regardless of BOTH those facts, this is ridiculousness.

Unlocked cellphones typically sell for several times their on-contract price. Case in point is the iPhone 4, which on-contract is a mere $199.99, yet unlocked runs a much less generous $649.00. With an unlocked price tag of nearly a grip, the Note will probably run anywhere from $300-$500 subsidized by carriers. I understand, it’s a giant phone that comes with a giant price-tag. But should that be the reality? The very duality of its existence begs the question: Should it be priced more like a tablet or more like a smartphone?

One reason cellphones have such large prices for such small devices lies in the nature of their components, being quite small and more difficult to manufacture. That said, the Note is freaking huge, and Samsung should have found some way to keep the production costs down. This is not the first time the company has launched a product at a higher-than-predicted price. This current episode reminds me of another Samsung product, that at the time of launch, occupied a niche of it’s own: The original Galaxy Tab.

At 7-inches the Tab was smaller than the iPad. It was well-built. It was also $600 at launch. That wouldn’t have been a problem had the product been launched a year earlier. Unfortunately, this was fall 2010, and whether or not Samsung wanted to admit it, it was competing with the iPad, which was more competent and priced $100 cheaper. Samsung wanted to believe that they had a niche with the Tab, and that they could justify the pricing by satisfying this niche. I’m not saying it didn’t occupy a particular corner of the market, but a tablet is a tablet, and any tablet in the market is compared to the iPad. That was bad news for Samsung. When there is a clear market leader, consumers either want differentiation at the same price point, or something reasonably comparable at a cheaper price point. To justify a higher price, the device needs to offer some distinct advantages. They ignored these facts, and the Galaxy Tab suffered abysmal sales.

I thought Samsung was on track. They have a powerful competitor in the full-sized Galaxy Tab 10.1, and they launched at the exact same price-point as the iPad. This gave me hope. I thought that they had surely learned their lesson from the original Tab, and that the Note would be given a more attainable price tag. Nope. A device with a screen-size half a big at double the price. What are they thinking?

They’re thinking that the Note is a niche product that appeals to a broad swath but competes with few. Unfortunately, just because you’ve got a giant screen doens’t meant you’re not in competition with other devices. Consumers looking for large smartphones are still going to see 4.5-4.7-inch devices going for hundreds of dollars less. Do ‘roided-up specs justify the difference?

I envision the Note occupying an alternate role, an additional device. 5.3-inch is certainly pocketable, but even I get tired of lugging around my Galaxy Player. It would make so much sense to offer the Note at $500, making it attractive to buyers who might not want to be burdened by such a large device as their daily driver.

Depressingly, the fact is that price disparity is an industry wide mistake that companies refuse to consider rationally. Case-in-point: The HTC Jetstream. $699.99 … on contract. Are you kidding me? Unless your device cooks breakfast and runs Crysis, it needs to be priced competitively with the market leader, and for better or worse that market leader thinks that $499.99 is a pretty fair deal. What is really scary is the thought of the Galaxy Tab 7.7’s pricing. It uses the same 1.4Ghz dual core processor and has the same 1280×800 AMOLED display, albeit stretched out over several more inches. How is this going to be priced compared to the Note? If it’s higher, nobody will be able to afford it. If it’s lower, the pricing of the Note will seem that much more ludicrous.

Samsung, I don’t need a dual-core 1.4Ghz processor. Make it Tegra 2 if you have to. Take away the 8 megapixel camera and give me 5. Eliminate the front-facing camera completely. Take away the bluetooth and the “S” pen. Keep the gorgeous display. Achieve competitive pricing and the hordes will follow.


Sage Lane

Sage is a wandering vagabond currently based out of Seoul. When he's not busy scouring the web for the latest tech news and gossip, he does his best...

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