Enterprise Account Executive
OR Saying Goodbye to Planned Obsolescence
Last week Sprint announced a new “iPhone for Life” program, in which customers will have the opportunity to rent an iPhone for twenty dollars a month and get a free upgrade every two years. Renting rather than buying means that customers will also be able to skip the sales tax on the full unsubsidized cost of the phone (the plan turns out to be cheaper than buying a subsidized phone for $200 – see the chart above). Finally, the iPhone will be available as a recurring service! Perhaps this news will rouse my current iPhone 5 from it’s ever-growing depression.
My friends and I have a running joke that the closer Apple comes to releasing the next iPhone, the closer our phones come to putting their digital selves out of their misery. With each iOS update, the tick tock of my phone’s technological clock gradually counts down to complete system failure.
Why do people keep buying new iPhones? Maybe out of envy: leaked pictures of the newest models always lead with elegant new designs and follow with the promise of new functions. Maybe out of planned obsolescence: a manufacturer’s guarantee that your phone’s lifespan is limited. But I think it’s mostly because of good old fashioned capitalism.
If we’re constantly willing to buy the latest version of something for hundreds of dollars, why shouldn’t Apple let us? It certainly encourages this behavior by letting our iPhone batteries hold less and less and less power until they’re virtually unusable. I’m personally very excited to buy an iPhone 6, and soon my old iPhone 5 will be covered in cheerios and the sticky fingerprints of my four-year old, if it doesn’t take matters into its own hands first.
If you’ve ever worked with a sales rep you’re familiar with the concept that compensation drives behavior. We are essentially coin-operated. The same goes for large companies. Revenue drives behavior. In the traditional product sales model, organizations are incentivized to manufacture products that are relatively durable but don’t last forever, so consumers return to buy again and again. They build world-class customer service centers to retain customer loyalty, but in most cases require their product to fail in order to get a significant bump in additional revenue per customer.
Some companies even promote the failure of their products to make a paradoxical value proposition to their customers: “Our razors fail quickly, so why don’t you buy more? How about a twelve pack for a dollar off?” (I’m sure there is a durable metal that can survive cutting strands of hair, right?). But ultimately as consumers we’re the ones driving this strange behavior.
Fortunately there’s hope – for both consumers and my iPhone. When the physical products stop being the primary source of revenue, and start acting as the delivery method for a recurring service, then companies are incentivized to form long-term relationships with their customers. They will focus on reducing churn by providing goods and services that are only upgraded and enhanced, not completely replaced or thrown to the four year-olds.
In the Subscription Economy, consumers stop buying into a single invention and instead invest into a company’s long-term vision. With a subscription, consumerism turns into a contract that makes both sides accountable, and accountability is always a good thing.
So it seems all is not lost for my poor iPhone – it will live again in a shinier, better self (with hopefully more battery life). Sprint has taken the next step towards the Subscription Economy, though they should really work on their coverage plan, if they want this relationship to last. The customer is now in control.