Why so cheap?

[getbretweir]

I don't know how Moto and other cell phone manufacturers' models work but a basic retail model is based on a 40/10 discount basis. So, based on a stated retail price of $100, the retailer gets a discount of 40%, then a stacked 10% discount. So the wholesaler sells the $100 item to the retailer at a price of $54. The retailer then marks up the item to a price that yields them a reasonable profit margin based on their individual business. So the manufacturer is likely selling their product to the wholesaler at a price a bit under that $54 price so the wholesaler gets a profit. So a product's markup is exponential compared to it's actual manufacturing price.

With smartphones, it seems there is no wholesaler, so it's a direct manufacturer-to-retailer relationship. And if we apply the 40/10 discount model to this relationship, a $699 retail priced smartphone's price paid by a carrier to the manufacturer would be $378. So if Moto were selling their base $699 model to a carrier for $378, they can sell it direct at $399 and make a higher margin per unit. So the price totally makes sense to me.

The main question is whether or not they move the equivalent volume of units in order to make a cumulative profit from their efforts. That being said, I have also seen some comments that indicate the Pure Edition/Style version is a "loss leader" for the company to get their true profit-maker, the Moto

thanks for that info, very interesting.

there's no doubt they'll move less product, especially being the first time using this channel exclusively, but Lenovo obviously has the cash, and more importantly patience, to see if this works. there's no way this is a one time, boom or bust deal. this is a 3 year game plan at minimum, and they'll make whatever necessary adjustments they need to make along the way.

what I'd be interested in, as you eluded to, is what percentage do they need to sell in order to consider it successful. I also wonder what there marketing and advertising expenses, and how they're allocated, look like compared to last year. as a sales/finance/marketing guy I find this fascinating. Lenovo really seems like the perfect partner for Moto. Let the phone guys do their thing, stay out of the way and open the wallets. I'll be rooting (Pure for me. G for my son) for them and it'll be interesting to see it play out. fortunately for moto, the G is gonna be their money maker and they can afford to take the inevitable first year hit.

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[Raptor007]

The pricing is competitive and very aggressive. They don't have to sell it to the carriers for this price and watch them mark it up $200-300+ per unit only to not push it and just sell iphones or samsung phones.

Moto can offer a highly customizable device, aggressive pricing, great warranty and MotoCare which is cheaper than AppleCare.

 

[stanleywinthrop]

A real factor is going to be whether Lenovo drops the cash to properly market this phone. That's one area where Google screwed up -- it refused to market motorola and motorola suffered.

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[getbretweir]

A real factor is going to be whether Lenovo drops the cash to properly market this phone. That's one area where Google screwed up -- it refused to market motorola and motorola suffered.

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this article doesn't directly state that they're gonna allocate x amount of dollars to marketing the pure, but it does discuss the market share it expects. you'd have to expect that in order for them to achieve these results, a significant amount of money would be budgeted towards moto. one thing to also consider would be what percentage of their anticipated revenue comes from the G vs X, which no article that I've read in the past 6 months ever mentioned that.

http://www.wsj.com/articles/lenovo-...te-over-40-of-smartphone-shipments-1420686212

if you Google "Lenovo marketing Motorola" you'll find quite a few articles discussing their expectations. again, we're not gonna find a direct answer to our question, but if you look at enough articles and connect the dots, you quickly realized two things. 1) Lenovo has cash and they're gonna use it to market Motorola and 2) Lenovo is letting Moto be Moto, and letting them do their thing without interfering

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[Ry]

Moto can offer a highly customizable device, aggressive pricing, great warranty and MotoCare which is cheaper than AppleCare.

AppleCare is much better for most people since there's an actual physical location you can go to get service done.

Posted via Android Central App (Moto X)

 

[stanleywinthrop]

AppleCare is much better for most people since there's an actual physical location you can go to get service done.

Posted via Android Central App (Moto X)

But also twice as expensive.

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[jephanie]

But also twice as expensive.

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Apple users are more than willing to pay twice the price for the convenience of physical site service. I'd bet a lot of other people would, too, if they were buying "premium" devices.

 

[Jyscal]

I'd like something akin to Applecare for Motorola, but wouldn't pay as much for it since we don't have the physical locations to conveniently swap stuff out for issues. Either that or do what HTC is doing and go with the first Oops replacement for free.

 

[Ed Briggs]

I laugh when people think these phones should cost near the cost of materials.

Materials
+ hardware engineer salaries
+ software engineer salaries
+ firmware engineer salaries
+ licensing costs
+ marketing costs
+ keeping the lights on
+ making a profit for your investors

...

Posted via Android Central App (Moto X)

You forgot shipping, manufacturing and warehousing costs. A lot of people need to be paid before the phone reaches your grubby little hands.

 

[KWKSLVR]

Part of it is how Apple Care is marketed. It dumbfounds me. I have friends that wouldn't buy an extended warranty for anything citing that they are a waste but will shell out hard earned cash for that crap. If you NEED an extended warranty for a $2500 piece of hardware, then it's not worth the cost. But Apple caters to a customer base that feels good about paying too much for hardware (and that statement is purely in regards to their hardware costs and not any benefit one weighs on their software and ecosystem experience). Case in point, my mom had a $2800 MBP. It literally did nothing for 5 years other than act as a portal to Facebook and as a device to store pictures on. It died right after Apple Care would have expired had we purchased it for her. All the physical store did was charge $400 for a fix that lasted 3 months (without disclosing that the fix was temporary and would last 6 months at best).

That's crap to me. I've never had a laptop NOT last at least that long with no issue (at least where the hardware was concerned) and I have done a lot more with my units than Facebook duty.

I'm currently the owner of a slightly overpriced Alienware 17R2 (which was free to me). It's nice hardware. Regardless of all the ways "people" get up in arms over the brand, it's a solid computer and I have enjoyed it so far. Despite the main appeal to many being above average warranty availability, I won't shell out cash for one. If I bought an extended warranty for every laptop and smart phone I've ever owned, I'd be out thousands of dollars. I've never once thought, "Man, if I only had the extended warranty!" Even my Samsung TV needed a capacitor replaced AFTER the Best Buy warranty I could have bought would have expired. Statistically speaking, it just doesn't make sense. Companies offer extended warranties because it's profitable to do so. If it makes them money, you've lost money. We're talking about a sales model that results in 100% profit. Chew on that for a second. But, somehow, despite this FACT of business economics, otherwise smart people will shell out hundreds for a warranty on a Macbook that costs thousands, and then they feel good about it when they didn't need it as they buy the next one and do the same thing.

To tie all that back into Motorola, bear in mind that the Moto X is not their big seller. Not by a long shot. I think direct sales and competitive pricing is about rebuilding the brand. I have enjoyed my 2014 MX. Because of my personal experience, I have steered other people into Moto G's/E's that would have just gone to AT&T or Verizon and picked whatever the free or $100 phone on a 2 year contract was at that time. Part of building a brand is getting product into people's hands. The reality is that direct sales alone is not necessarily the best way to do that. How many people buy an iPhone directly from Apple compared to going to their carrier store? I would guess that not many do. If you take a new Moto X, an S6, an LG G4 and a HTC One M9 and line them all up in a row inside AT&T and price them all relatively the same with a 2 year contract, we know that the Moto X will be the device with the lowest sales. What's the benefit to Motorola to deal with the hassle of providing different carrier versions when those carriers aren't even going to steer customers to their product through advertising or in stores? Motorola has the Droid line for that with Verizon (and why would Verizon push a different Motorola device).

I kind of think it's about less headache for Motorola and about trying a new sales model. They will sell just as many units to repeat MX users as they would with carrier models, only the consumer pays less and they can spend less time and manpower dealing with 1 device than 3 or 4 and they probably increase profit margins per device sold. The no contract deal is getting bigger and bigger. My own Grandmother didn't want a contract. She didn't care about being on the hook for 2 years as much as just wanting to be able to save some money and have the freedom to try a different carrier if things don't work out after making a move from a dumbphone on AT&T to a smartphone on Straight Talk.

 

[Ry]

Apple users are more than willing to pay twice the price for the convenience of physical site service. I'd bet a lot of other people would, too, if they were buying "premium" devices.

I'd be willing to spend the same amount of money to Motorola if they had a physical location I could go to get a repair done on my device.

 

[Ry]

You forgot shipping, manufacturing and warehousing costs. A lot of people need to be paid before the phone reaches your grubby little hands.

Exactly.

If you want the phone for the cost of the materials, build it yourself.

 

[jephanie]

I was actually thinking about the warranty thing, too, in that the low price of the XPE (or whatever we'll be referring to it in shorthand), makes warranties a waste of money. If something catastrophic happens, I'm going to be much more able to replace it down the road at that price and not feel guilty at having spent nearly that same amount on a warranty program that, at best, would ship me a "certified like new" replacement that wouldn't have my personal customization applied to it.

So not only does this model have disruptive capability with the carriers from a contractual standpoint, it also impacts their ability to sell their stupid warranties.

 

[anon(5506951)]

I was actually thinking about the warranty thing, too, in that the low price of the XPE (or whatever we'll be referring to it in shorthand), makes warranties a waste of money. If something catastrophic happens, I'm going to be much more able to replace it down the road at that price and not feel guilty at having spent nearly that same amount on a warranty program that, at best, would ship me a "certified like new" replacement that wouldn't have my personal customization applied to it.

So not only does this model have disruptive capability with the carriers from a contractual standpoint, it also impacts their ability to sell their stupid warranties.

Good job, XPE it should be.

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[Raptor007]

AppleCare is much better for most people since there's an actual physical location you can go to get service done.

Posted via Android Central App (Moto X)

Not everyone has an Apple store near them and most don't unless you want to drive a couple hours. Its not always perfect or ideal but Moto has taken the step forward to offer a good warranty plan. Plus the other features I suggested do offer value beyond a local store where every phone looks the same and everyone gets the same phone.

 

[Ry]

Not everyone has an Apple store near them and most don't unless you want to drive a couple hours. Its not always perfect or ideal but Moto has taken the step forward to offer a good warranty plan. Plus the other features I suggested do offer value beyond a local store where every phone looks the same and everyone gets the same phone.

But no one has a Motorola store near them.

 

[Premium1]

OK so not to look a gift horse in the mouth here haha, but why is this phone only going to be $399? I assume that's the smallest model, so even assuming the 64gb at $499 perhaps... Why is it so cheap? It seems like it's pretty much top of the line otherwise... I've gone from Note 3 to Note 4 and would go Note 5 but I'm sick of Samsung software issues (and have no interest in rooting), and aside from the processor (which is still one of the best out) and 1GB of RAM less, the Moto X Style is looking like a great alternative... So is there something else about this phone that's much lesser than the Note 5 that makes it so much cheaper?

Just curious.

Because they are selling it without contract/subsidies. These are prices phones should be. No reason to need to spend $600+ for a top of the line phone anymore.

 

[getbretweir]

Because they are selling it without contract/subsidies. These are prices phones should be. No reason to need to spend $600+ for a top of the line phone anymore.

between Moto and today with Verizon, it's been quite the week for Android fans here in the US. I'm sure Moto was well aware of this prior to announcing their new distribution strategy for the Pure. it'll be interesting to see if other OEMs, specifically HTC with M10, take the same route. I sure hope so

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[droidguy1964]

OK so not to look a gift horse in the mouth here haha, but why is this phone only going to be $399? I assume that's the smallest model, so even assuming the 64gb at $499 perhaps... Why is it so cheap? It seems like it's pretty much top of the line otherwise... I've gone from Note 3 to Note 4 and would go Note 5 but I'm sick of Samsung software issues (and have no interest in rooting), and aside from the processor (which is still one of the best out) and 1GB of RAM less, the Moto X Style is looking like a great alternative... So is there something else about this phone that's much lesser than the Note 5 that makes it so much cheaper?

Just curious.

Because the nexus 6 flubbed at 699. Moto doesn't want a repeat.

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[Ry]

Because the nexus 6 flubbed at 699. Moto doesn't want a repeat.

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Google probably has more influence on the price of their Nexus line.

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