Friday, December 17, 2010

Cell Phones Costing Thousands

Cell phone prices can be a little hard to figure out because they're often part of a service usage package. For instance, a basic phone might be priced as "free" if a buyer commits to a certain service period, two years, say. That said, a cell phone without lots of features might well cost someplace in the range $100-$200.

In contrast, there's the Vertu cell phone line where prices are in the thousands -- many, many thousands of dollars in some cases.

As the Wikipedia link above reports, Frank Nuovo, Nokia's head designer (at the time) was instrumental in creation of the Nokia-bankrolled company; now he serves as head designer at Vertu. The Vertu web site's history page stresses technical innovation related to the "package" -- not the electronic guts -- and the use of precious, luxury materials in some models.

Vertu cell phone with Ferrari motifs

I had never heard of Vertu until a few years ago while strolling through the shop arcade at the Wynn hotel-casino complex in Las Vegas. Right there amongst shops for Chanel, Manolo Blahnik and the like was a Vertu store. The phones on display were attractive and their prices astonishing. I assumed Vertu wouldn't last, yet the store remains: I saw it last month while in town.

Here's my problem with Vertu. Cell phones are still part of a rapidly-evolving corner of technology and marketing. The technology goes from Gen-This to Gen-That every few years. Not to mention the evolution towards multifunctionality: consider inclusion of cameras, the tiny-keypad Blackberry and Apple's multi-app iPhone. Vertu thus far remains a pretty basic cell phone if all the fancy construction and luxury touches are set aside. So a buyer forks out thousands of dollars for one and a year or two later yet another Gen-jump occurs. So what does he do? Keep his luxury item while lagging capability-wise? Or does he spend more thousands for a newer version? I suppose folks who are utterly rich would do the latter without much thought. They might even upgrade so as to have a Vertu with a different décor than that tiresome one purchased last spring. After all, a Vertu phone is all those luxury touches I set aside earlier in this paragraph.

An interesting thing about luxury items is the price multiple over a similar item offering the same core functionality. For automobiles, the ratio can be ten or 20 to one -- a Maseratti Quattroporte goes for about ten times as much as a really cheap, small Korean-made car and some Rolls-Royces for double that.

Ratios are much higher for wristwatches. A cheap watch with a digital face can be had for only a few dollars whereas a middle-line Rolex sells in the thousands. But watch technology and functionality are pretty stable, so a wristwatch purchase can be considered akin to buying jewelery. I suppose the same can be said regarding Vertu, though the functional foundation is far softer.


Anonymous said...

My last cellphone met a tragic end when it slipped out of my shirt pocket as I loaded the dishwasher. It came through the cycle nice and clean, but alas useful only as a paperweight. Imagine if it had been a Vertu.


David Apatoff said...

The cell phone was invented by Motorola, which started by marketing cell phones functionally (the same way it marketed its car radios or its two way radios used by fire departments and the military). However, newer companies such as Nokia jumped into the cell phone business with a totally different marketing approach-- Benetton colors and planned obsolescence to appeal to high school girls who would replace their phones every year or two (much as Hollywood aims movies at a teenage audience that hangs out at the mall and will pay to see a movie such as Titanic ten or twenty times). Soon the new crowd clobbered Motorola's old fashioned marketing approach. Over the past 20 years they took away most of Motorola's market share.

This week, Motorola is splitting into two separate companies, because they concluded that cell phones could not be effectively marketed under the same management as traditional telecommunications equipment. Some audiences are looking for technical competence and functionality, while other audiences are looking for the latest sizzle to impress their stylish friends.

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