Know Your Customer, Know Your Pricing Model
Over the years, several mobile device trade-in channels have become popular paths for consumers, with each offering a different pricing model. Each business model has its own goals and preferred customer types.
Once you have carefully defined the parameters for your offer, you can investigate reseller pricing — understanding where you fit in the four major tiers of mobile device trade-in programs is essential to determining the prices you can offer and furthermore optimizing the margin on each and every transaction. So before moving on, take the quiz below!
The 4 Major Tiers of Mobile Device Trade-in Programs
Tier-One Carriers:Big service providers like Verizon, AT&T, Sprint, and T-Mobile sit atop the trade-in program tiers, positions that allow them to offer more value to consumers who are looking to sell an old device. These providers are not solely focused on the lofty economics of buying and selling used devices.
They use trade-in programs to attract customers and sign them to either an equipment installment plan (EIP) or lease that lasts anywhere from 12 to 18 to 24 months. This model lends itself to a litany of promotions, especially related to trade-in offers.
For the sake of consistency, let’s examine the value of the iPhone 6 with the recent release of the iPhone 6S and iPhone 6S Plus. When the new iPhone models were released in September, the big service providers offered to match competitor trade-in values and gave out credits valued higher than many other buyback programs.
For example, T-Mobile will let customers pay as little as $5 per month for an iPhone6s by trading in the iPhone 6 model. If they turned in an “old” iPhone 5s, they could get the iPhone6s for $10 per month. Not to be outdone, Sprint responded to T-Mobile’s deal by offering the iPhone6s for $1 per month with the trade-in of an iPhone 6.
No matter how much they offer, mobile device trade-in programs are a vital piece of business for tier-one carriers, but it’s clear that they are supplemental programs built to incentivize sign-ups and renewals for EIPs and leases.
Apple Store:When Apple unveiled its iPhone 6 and other new products in September, the tech giant also jumped into the mobile device trade-in game. Apple announced it will sell the iPhone 6S and iPhone 6S Plus with the option for customers to pay full price for a device over a 24-month period but, in turn, also be eligible to receive a new phone within a year. Consumers can buy a new phone every year and also receive the service repair program AppleCare+ for $32 per month for two years. They still need to choose a carrier for service.
Apple’s move into the leasing business says a lot about the aftermarket for old phones. But like the tier-one carriers, Apple wants to use its trade-in program as a means to ensure sales in the long term, hoping customers will choose to keep coming back for the latest smartphones.
Device Retailers:Retailers such as Best Buy, Target, and Wal-Mart all offer trade-in programs for mobile devices and can renew customer contracts on behalf of major service providers. These retailers rely on promotions like tier-one carriers, but are more dependent on the economics of buying and selling second-hand devices.
Bundling the promotion within the mobile trade-in also helps defray the cost of the new line of service activated in the bundle. For example, let's say Best Buy offeres $315 for a used, 16-GB iPhone 6 in excellent condition, while Sprint offers up to $310—or less, for the same phone in similar condition. Best Buy can incentivize the offer by providing additional bonuses such as store credits towards accessories, but they don’t typically throw caution to the wind just to get more devices in hand.
True Online Buyers:It’s becoming easier for consumers to get money quickly through online device trade-in programs. Companies in this category, like Gazelle and uSell, are solely focused on the economics of buying and selling devices in the aftermarket.
Value is everything for these companies. Offering too much leads to losses for the whole company, but offering too little leads consumers to trade their devices in elsewhere. To increase mobile device trade-ins, Gazelle recently offered a 10% bonus promotion paying customers more for their used mobile devices, which Gazelle will turn around and sell in the aftermarket.
The biggest incentive to use online buy back companies is the instantaneous reward without having customers leave the comfort of their home.
Now that you have read the 4 tiers of the mobile trade-in market, how would you characterize your trade-in goals?
Share your ideas below.
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