This morning while getting my laundry out of the dryer in my apartment complex’s laundry room, I saw a bunch of hangars laying on a folding table with a note saying, “free hangars”. I immediately thought of the word value followed quickly by the word entitlement. At 7:15 in the morning while trying to get your ten-year old son ready for school all types of signals can run through your head, but for some reason those two words jumbled together.
Anyway, after taking the offspring unit to school, I stopped by McDonald’s for my once a week fast food indulgence (Don’t tell my trainer, but it was actually my second trip this week. She’ll kill me if she knew …). I get home and turn up NPR and there is a discussion about T-Mobile’s new pricing plan. T-Mobile plans to get rid of the two-year contract (yeah) and give consumers the option of either paying for a phone up front (like any other consumer purchase) or paying for the phone via interest free installments (which means no financing, which is good.) Both options seem pretty logical and the consumer may also benefit because they may see a decrease in the amount they pay for their monthly data plans given that T-Mobile won’t have to subsidize the cost of the phone just to get a consumer on to their network.
The Bloomberg analyst appearing on the program raised the concern that the pricing plan may be seen as “complex” because of the requirement to pay upfront for the phone and teh requirement to pay for data plans. I don’t see a problem as long as the sales people are clear with the consumer. Consumers will have to get over the perception that their phone is “free” and get comfortable with paying for the hardware and the service. It’s just like the “old” days when all of us were tethered to a land line and we went out and bought a phone and then called Sprint or BellSouth (yes, I’m that old) to provide us with monthly service.
Since the T-Mobile announcement was made last night, I probably had this news on my mind this morning, hence my thinking about the words entitlement, free, and value. I’m sure the consumer advocate types who have managed to make a constituency out of groups of people who believe the rest of the world exists in order to give them something priced below its value will be out and about with their press releases and dire warnings of a reduction in consumer welfare, but of course they will be wrong.
Why would they be wrong? Because T-Mobile’s pricing model caters to the dreaded “T” word, “transparency”. Consumers will acknowledge that they are paying for separate items, no longer deluding themselves into thinking they are getting something for free. They will have to do their due diligence about the value of the product they are purchasing. They will send out pricing signals to the hardware community that they may be in the market for better priced phones once they come face to face with the ridiculous prices they to pay for a micro tablet that they can also use to make phone calls.
T-Mobile’s pricing plan injects transparency and reality into the market. It forces the consumer to consider real value. It gets rid of the delusion of free and entitlement.