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Survey: Carrier Financing Programs Stimulate Step-Up Sales

Chicago — Carrier programs to finance unsubsidized smartphones are boosting sales of step-up smartphones, not driving consumers to buy cheaper phones, Consumer Intelligence Research Partners (CIRP) found in a consumer survey.

“When customers are paying the full price of their new phone, the common prediction was that they would gravitate toward less-expensive models,” said CIRP partner Josh Lowitz. “The carriers’ decision to offer interest-free 24-month financing seems to have more than counteracted that pressure.”

In the case of iPhones, purchasers “considering a payment difference of less than $10 per month have chosen to buy the higher-price, premium phones,” he said.

Among iPhones purchased, the step-up iPhone 5s accounted for 73 percent of financed iPhones sold but only about 57 percent of subsidized iPhones sold (see chart), CIRP found in surveying consumers who activated new or used cellphones from July 2013 to March 2014.

“A decision whether to buy a subsidized iPhone 4S, 5c or 5s means a big difference in spending — $100, $200 or more, or immediately spending double or more,” said Lowitz. “In contrast, unsubsidized phone prices tend to differ by about 20 percent, and when they are broken into 24 payments, they [the price differences] are truly marginal.”

“This change in behavior especially surprised us given the retail channels in play,” said Lowitz. “All of these carrier-financed phones are sold at carrier stores and websites, notably not at Apple Stores, and traditionally Apples Stores have been strongest at selling flagship and premium iPhones.”

Phone-Finance Customers Step Up To iPhone 5s