Hi guys,
Just a thought that came to my mind, but with some of the contracts out there, it seems like they’re bound to make a loss. In this example, I’ll go with a Google Pixel 7. A 128GB of that would cost £599. With the airtime with it, let’s go with a guess of £10 a month, thus £240 for a 2 year contract. So in total, that’s £839.
Here’s the kicker, the contract is priced at £25 for 24 months. Even accounting for let’s say a 13.9% hike each February that would add up to £679. So… I can’t quite wrap my head around where they are making the money!
In: 1
A couple of reasons. More people will sign on to the contract, meaning that (pulled numbers from my butt) for every 4 or 5 people might buy a phone outright, 8 or 10 people will sign up for a contract. In two years, the phone company earns more revenue from contracts.
Second, in both cases the device is marked up substantially, likely 5 or more times than its lowest market price. This is where companies really make their money.
So while person who signs up for the contract feels good about saving money, after 2 years the company walks away with 5 or more times as much money as it cost them to provode the phonr and service.
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