Early upgrade programs
“If you want to get really mad, just keep the math going to 24 months, at which point you'll have paid $650 in Edge payments for the phone and Verizon will have collected $480 of device subsidies built into your plan. Compare that to Verizon's standard two year contract, which would have cost you just $199 up-front and then nothing additional monthly: the built-in plan subsidy would have paid off the phone in the background, and you would simply walk away with the phone in hand. It is the clearest proof that Edge is designed to keep Verizon's prices high while making you pay for phones more directly.”
Since then, the carriers have updated and tweaked these programs based on this earlier feedback, including better pricing plans associated with the programs. Sprint even launched an iPhone for Life leasing program, allowing customers to pay $20 a month for 24 months on their iPhones for two years, in which they can turn in the device for a new iPhone. The following table provides an overview of the other traditional early upgrade programs:
Most of these programs require a credit check if you are a new customer and carriers like Verizon initially rolled out their Edge program only to their highest credit class customers. And, as mentioned, all of the programs require the customer to trade-in the original smartphone purchased when signing up. The device must be at least in working condition and, for some carriers like T-Mobile, must pass a three-point inspection.
Earlier in the year, 53% of our survey respondents told us they are NOT interested in early upgrade programs because they keep their phones as long as they can. In our most recent survey, that number decreased to 44%, implying that more people are showing interest in these programs.
However, when we asked about the requirement to turn their old phones back in if they are on a program; less people were inclined to want to do so than at the first of this year.
In our latest survey, about 25% of mobile users told us that they upgrade their phones, in general, because their old device was not working. Interesting since most of the early upgrade programs require the device to be in working condition. And, if it is not, the customer is responsible for repairing the device unless they sign up for the insurance program (and they still need to pay the deductible). At least with T-Mobile’s Jump program the insurance plan is included.
Conversely, what if you just bought a brand new Samsung Galaxy S5 on an early upgrade plan but now really want to try the iPhone 6? On the Verizon Edge Up plan, the customer can upgrade after 30 days if the device is 60% paid off. This is interesting from a recommerce perspective since the carriers may end up collecting smartphones in pristine condition with high resale value. And, in many cases, will not be offering any additional incentive to the customer for their gently-used device. This looks like another plus for the carrier, yet not so much the consumer.
Apple will start shipping the new devices soon and the carriers have already started to tweak their early upgrade and trade-in programs with promotions and additional marketing in this area. They really want customers to embrace and adopt these plans to increase their gross additions and improve profit margins. As a way to combat these plans, it might be helpful for the standalone recommerce players to adopt some sales strategies that expose some of these shortcomings and to focus on those mobile users who are not tied to an early upgrade program and who find less value in doing so.
About the Author
Pearce is also the Editor-in-Chief of Bamboo Mobile (www.bamboo-mobile.com), an information hub designed as a resource for news and insight about mobile device reuse and recycling. Bamboo Mobile promotes device reuse and recycling as well as other sustainability efforts going on in the mobile industry. She has been quoted in major news and technology publications, including CBS News, New York Times, CNET, St. Louis Post Dispatch and Business Week.
She holds a Bachelor of Arts degree from the University of Missouri-Columbia and currently resides in Kansas City area. You can contact Kate at firstname.lastname@example.org
For more information, please visit our Reuse and Recycling research track on the Compass Intelligence website.