LG needs a new pricing strategy and it needs it fast. Over the past two years it has dropped the prices of its smartphones faster than every other major manufacturer. The one year old LG G5 can be purchased for $200-300 new. It was released at a price of $600-700, meaning it has dropped over 50% off its manufacturer value in just one year. The LG G6 was released back in March/April and came with a $600-700 price tag similar to last year’s model. We’re only in July and the price has already dropped by $200-250. Why is that bad? Many people bought the LG G6 because it had similar specs to Samsung’s Galaxy S8 offering with a price tag at about $100 less. Sure the early adopters of the G6 saved that $100, but if they waited just three months, they could have saved up to $350. That’s a significant savings off the initial launch price and if I were one of those users I’d be upset.
Apple, Google, and Samsung don’t come anywhere near this level of depreciation with their smartphones. I bought last year’s LG G5 in hopes modularity would take off, but instead LG abandoned that concept and dropped the price of it so low that it’s barely worth reselling. LG not only abandoned that concept, but it abandoned the customers who it had promised modularity. In turn, I abandoned LG and no longer trust it as a company with smartphones. The G6 price drop over the first three months only validates my decision to leave LG.
LG acknowledged it made a mistake with modularity but it should have done something to appease its customers. LG could have offered a higher trade-in value for the G5 to upgrade to the G6 or V20, instead it did nothing.
If LG wants to stay a smartphone competitor, which I hope it does, it should consider adopting the pricing model of OnePlus. It should start with a lower price, like $450-500, and keep it at that level. LG phones are good, but they’ve never been as good as what Samsung and Apple have to offer and its pricing should better reflect that.
LG may not make as much money up front on early adopters, but it should make more money long-term by selling more units. It also doesn’t have to build an excessive amount of stock that it needs to put on a fire sale later to rid itself of excess inventory. By doing that, it helps consumers get better value for their money when they trade it in or resell it on a site like Swappa.
You can see, the LG G5 has dropped to an average selling price of $186 as of June 2017. That means the G5’s value is just 31% of what is was when it came out new ($600). If you paid more for it, then it even has lesser value. Samsung’s Galaxy S7 Edge (Verizon) on the other hand still holds 49% of its starting value with an average resale price of $367.
2015’s Apple iPhone 6S Plus, which is several months older than the S7 Edge and G5 has a resale value of 51% of its starting price at $385.
It might seem like an unfair comparison to put up the G5 against the powerhouses of the iPhone and S7 Edge, but the HTC 10 falls into the same resale value percentage at 47% of its initial $699 price. If you remember, HTC even offered the HTC 10 at a $100 off for anyone who preordered it before its release. HTC rewarded its early adopters with a lower entry point.
It’s crystal clear that LG smartphones have the worst resale of any major manufacturer. LG’s pricing model punishes early adopters and abandons its user base. Many LG users are quite loyal to the company but if it continues this poor pricing model, fewer of them will actually buy the phone in the first three months. That will lead to poorer sales numbers overall and less profit returns on the phones for LG.
In no way am I saying LG phones are bad. I’m simply stating LG needs to fix its pricing model to not only help its own sales numbers, but to also give its customers better value.