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October 6, 2016

Why Google Can't Sell Expensive Products

Google announced its first phone and many people wondered why it's as expensive as an iPhone. Nexus phones were sometimes inexpensive (Nexus 4: $299, Nexus 5: $349, Nexus 5X: $379) and sometimes more expensive (Nexus One: $530, Nexus 6: $649, Nexus 6P: $599). Now the 5-inch Pixel costs $649 in the US, while the 5.5-inch Pixel XL costs $769, which is more than any other Nexus phone.


Obviously, Google's pricing was more aggressive when it wanted to sell more products and less aggressive when sales numbers mattered less. The truth is that Google only managed to sell products in high volumes if the price was low enough to make them good value. Chromecast was successful because it offered a lot of value for the money. Nexus 5 was a flagship phone at half the price, so millions of people bought it. Nexus 7 was good enough for $199, but Google's bigger tablets were more expensive and their flaws were more striking.

Google is a "value" brand. Most people associate Google with free ad-supported online services that offer great features. There's no paid Google software for consumers, as Google only sells digital content and subscription services (storage, music). Google is not a lifestyle or luxury brand, so people don't expect to pay much for Google products.

There's a lot of risk associated with Google products, since Google doesn't stand behind them all the time. Some of them are experiments, others are quickly discontinued and forgotten. I still remember that Google stopped selling Nexus One only 6 months after the launch or when Logitech's CEO said back in 2011 that Google TV was a huge and costly mistake. Android One was a flop, Google Play Edition failed, Motorola was acquired by Google and later sold to Lenovo.

Google's commitment issues, its high appetite for releasing beta products, its lack of planning and foresight - all of these problems alienate consumers and make them think twice before buying a Google product. Premium brands are all about image, trust, credibility, heritage.

23 comments:

  1. Google does lot of things wrong, especially in recent months but your opinion is the exact reason Google started it's own HW division to deliver premium quality products and priced them in the way that Apple fans such as yourself consider that those products are already at least as good as Apple's...

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    Replies
    1. You mean, now Google want to sell iPhones that comes with Android OS?

      Delete
    2. Nope. ;) Google now sells "G" phones (with Android) that are in a lot of ways better than iPhones for a similar price.

      Delete
    3. Apple don't use customer information to generate profit, will Google do the same with Android?

      Apple provides updates for up to 4 years in many cases, will Google do the same?

      The iPhone line has been alive for 8 years already, what guarantee do we have Google will now keep this line for longer than a few years before abandoning it?

      iPhones aren't drastically devalued after a year like most Android devices (including Nexus) so I could resell it for as much as 60% their price and upgrade, what probability there is that this time will be different if they are only offering two year of updates?

      Why would an existing iPhone user pay for a phone that looks similar to their iPhone, offers little to none advantages and cost the same? Or why would an existing Nexus user upgrade to a phone that offers little advantage but cost up to 2x-3x than their current one?

      Basically it seems to me that they alienated a lot of people with this poorly thought out strategy.

      Delete
    4. @Tyrion:

      If you buy into the Android ecosystem, you give up certain rights over your information. And don't be deluded into thinking Apple doesn't also use your information.

      iPhone 5s are a laggy mess on iOS 10 so 4 years isn't necessarily a good thing.

      Why wouldn't they? They kept the Nexus line around for 5 years.

      That's market value determined by consumers' perspective. That's based entirely on Apple's advertising and establishment as a luxury brand. Doubt Google will reach that point with Pixels soon, but it's possible that they eventually do.

      Android has a ton of advantages over iOS and the Pixel in particular has a better camera and unlimited storage for full-sized photos and videos, which should appeal to every smartphone user but especially to iPhone users, who take more photos on their phone. The performance difference in negligible in real life. Nexus 6P users might not see Pixel as a big upgrade, but it's a huge upgrade over any other Nexus device.

      The sales will determine whether or not this is a success, not these debates based on hypotheticals.

      Delete
  2. The idea that maybe in two years there's no Pixel line anymore is unpleasant indeed. I think you made a good point.

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  3. There's an error in the Nexus 6P price, it was $499 at launch.

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  4. Google Assistant: How can I help?

    "Show me where I can buy an iPhone and go home, Google, you're drunk!"

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  5. The new iPhone has virtually no advantage to the existing iPhone so why would anyone upgrade to it? But maybe it does when you start using the Airbus.

    Google's new phone has virtually no advantage to the existing phone so why would you upgrade to it? Or maybe it does when you start using the exclusive Assistant software.

    The new Google phone is a flagship phone in every sense and since they finally delivered a flagship device they are charging for it. Yes, Google collects a ton of information about you, but that trade-off might be to your benefit if they can utilize the information to provide the information and related information back to you when you most need it. Over time that difference may be THE difference between the companies - do you want more privacy or do you want more convenience. The market will decide.

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  6. (Blogger ate my comment. I will try again.)
    I'm a techie value buyer, happy with my Nexus 5 and 5X. I upgraded to the 5X so I could switch to Google Fi. Fi has cut my monthly bill by over half, paying for the new phone fairly quickly.

    I will be sorry to see Google leave this market in favor of "premium" devices. Apple gets away with its high prices because of the "cool" factor, but I don't see Google being cool. But real Android, non-bloated, up to date, for a good price -- that's cool to me.

    Next, are we supposed to look for Fi to disappear or to double its price structure? We don't expect much stability from Google, sadly. Maybe we'll stick with it for a couple more years.

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    Replies
    1. When Nexus was launched there wasn't a wide array of solid midrange devices at a decent cost. Plus it was a developer reference device that was adopted by people looking for midrange.

      With midrange affordable devices being common from Moto, HTC, and numerous Chinese/asian OEMs (Oneplus, Huawei, etc) there is less need for Google to keep Subsidizing a nexus line.

      So there focus is now to leverage a more stock Android ui on flagship devices, which is an area that has been lacking since most Flagships have TouchWiz, LG, HTC sense UIs.

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  7. Simply, Pixel is a premium device. Its not target for the nerds like you. ( like they did with Nexus series). And even their marketing strategies were so different. All ads were targeted on mass market.

    So all those company history things won't matter for the premium customers. Its about the name. "Google" is a well known brand name than Apple. everyone uses Google search. but not iPhones. People have a being rely on their services for 18 years. So i think that is enough for the general public to have faith in google.

    I think Google will capture the premium phone market eventually...

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  8. A bit of an overreaction... Regardless of whether the Pixel line of phones takes off or not, Google has promised 2 years of OS updates and 3 years of security updates which is probably fine for the vast majority who would update to a new phone within 3 years. There is no reason to remotely assume they are no longer going to be developing Android, so yeah, there is no risk of a product being abandoned associated with buying a Pixel (the prior 2 years of Nexus phones have so far got Nougat even with Pixel coming out..). It will likely serve as a great smartphone for the 1 - 3 years people keep phones. - I for one hope Pixel pans out and provides the incentive for Google to take a stronger role in improving the "silicon" for Android.

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  9. With respect, this is a very speculative piece. You produce a lot of enjoyable posts that report changes, but this analysis is flawed.

    Perhaps you're right, but I'd be more likely to take seriously the research Google's hardware division almost certainly did when designing these products than a post by someone who's trying to draw simple conclusions.
    It's definitely not as simple as Google does free, ad-supported services and used to sell cheaper phones, so people won't buy more expensive hardware from them.

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  10. Hmm, if I'm correct Motorola was bought for the patents.

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  11. Also at that price range there is Samsung (Amoled) competition ... And Samsung quality is quite great.

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  12. I was kind of waiting for a conclusion here...

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