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The $32 Million Smartphone: Price for Your Market, Not the One You Want

By Michael Huard
August 23, 2016

WebpageFX recently released an interesting analysis of how much the features of your smartphone would have cost 30 years ago. The resulting price for a 1985 civilian: roughly $32 million.

Pushing aside knee-jerk skepticism about that number, it does raise a good point about the distance a price can go in different time periods. At any given moment, your products are used and valued in a different way than they were last decade/year/month/week.

In just 30 years, we’ve combined a digital watch, video player, film camera, radio, encyclopedia, and more into one piece of technology that also has an incredible amount of storage—all for a few hundred dollars. If WebpageFX were to do the same analysis for every resulting decade, the final price would drop exponentially. The key is that moment in time.

When determining your price for customers, you have to take into account how they’ve purchased in the past and what market conditions were like at the moment.

B2B enterprises in the oil and gas industry deal with this on a monthly basis. Supply and demand fluctuations are one thing, but the rise of alternative energy sources have disrupted their typical pricing strategies. They can look to historical transaction data to see how their customers purchased during supply/demand swings, but there are other external elements that need to be incorporated.

To make sure your price fits the time and place for your customer, remember: Historical transaction data gives insight into the buying patterns on a customer level; Market data provides a look at the industry level.

In practice, Apple or Samsung would not have been able to sell their phones for $32 million in 1985. That’s just not smart. The accurate pricing of such a product would have to take the localized business environment into account.

To avoid pricing yourself out of the market—either by over- or under-pricing—you must find the balance of pricing in a range representative of how you and your customer perceive the value of your product or service. Navigate around this problem by fine-tuning your price to each customer by understanding how they’ve purchased from you in the past and what sort of external pressures they are battling right now.

Even if you think your product is 30 years ahead of its time, a $32 million price tag won’t work today. You have to price to the market you have, not the one you think your product deserves.

  • apple , B2B , data , iPhone , pricing , Samsung

    Michael Huard

    Michael Huard is a Digital Marketing Manager with Vendavo. Before joining Vendavo, he worked as a Web Page Architect and Designer at Pepperdine University in the Integrated Marketing Communications department. He has a Master's degree in Specialized Journalism for the Arts from the University of Southern California and a Bachelor's degree in Linguistics from the University of California, Berkeley.