Comparing prices of mobile phones is difficult. I was reminded of this fact recently when I saw Amazon’s price for the Droid X: 1 cent. At launch, the Droid X cost $199 with a two-year commitment. Amazon originally offered the Droid X for a penny in November—only four months after the phone was released. That’s a tremendous phone for a penny. But the point of this post isn’t to convince you that this is a great deal. Instead, I wanted to look at the challenges of trying to compare mobile phone products based on price. Last summer, there were numerous articles comparing the Droid X to the iPhone 4. Nearly every article noted that they cost the same price with a two-year contract. But while the iPhone 4 continues to sell at $199, someone who waited a few months to buy a Droid X can save quite a bit of money. This illustrates some of the problems that come from trying to compare mobile prices. For example:
Because these factors make it difficult to compare the price of phones, I don’t pay much attention to the price that new products are released at. Instead, I look at the average selling price to get a sense of the “real” price of the handsets. The average selling price (ASP) tell us how much money a handset manufacturer is receiving on average for the phones that it sells. The average selling price is usually reported during quarterly financial results and thus can be considered as accurate as possible given regulation on fraudulent reporting. Horace Dediu of Asymco recently charted the ASP for major handset manufacturers. Looking at this chart, it becomes clear the Apple is still selling at the high end of the smart phone market. The average selling price for the iPhone is $635. The nearest competitor is RIM with an ASP that is half of the iPhone ($295). Even if I’m walking out of the store with a new iPhone for $199, someone is ultimately paying $635 for that phone. And my suspicion is that the person ultimately paying that price is the consumer. This is why the average selling price is probably our best metric for comparing how much companies are really charging for their phones over the life of their products. Averaging selling price helps get rid of the distortion of the carrier subsidies and inflated MSRP which only the few customers who buy immediately at launch have to pay. ASP instead shows the “real” price that manufacturers are getting for their phones which makes it easier to compare true costs. Never miss an article!What average selling price tells us?Average selling price (ASP) is the amount of money a product in a specific category is sold for across different markets and channels. This metric is typically affected by the type of product and its life cycle. For example, electronics have a higher average selling price than books.
Why is ASP so important?Understanding Average Selling Price (ASP)
The established ASP for a particular good can act as a benchmark price, helping other manufacturers, producers, or retailers set the prices for their own products. Marketers who try to set a price for a product must also consider where they want their product to be positioned.
Why does ASP increase?Increasing the ASP leads to better margins, as the costs for sourcing and selling products decrease proportionally. However, increasing the ASP does not require brands to increase the prices of their existing offers.
What is the meaning of ASP in retail?The average selling price (ASP) is the typical “street” price of any product.
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