While surfing the worldwide web few days ago, on Google+ to be precise. I stumbled upon a very interesting status update from +Ethan Rossow, I couldn't resist the urge to +1 and reshare the status update. The update was all about a question many of us always have in mind but we often end up not asking maybe because we don't know who to ask and how to ask, while at the same time most of us have not even thought about the question before. Why do Smartphones cost a little amount to build and are being sold for a huge amount ? I will like to answer this question with the context of my friend's update.
Note that there are few reasons or circumstances surrounding this situation and I'll be using Samsung & the Samsung Galaxy S5 to explain and make my points clear in the illustrations within.
Firstly, there's this fact, even if you don't think that way, many people think that when a Smartphone manufacturer such as Samsung sells a Samsung Galaxy S5 to a customer for $800, they've instantly gotten a $800 profit which goes straight into their pocket. Well, that is not true. Let us assume that a Samsung Galaxy S5 is built for $150 (which is within that range in reality) and sold for $800, that's now a $650 profit for Samsung, but there's more to it. Samsung now has to use $550 out of the $650 profit they made for advertising. We all know how powerful, efficient and sales-driving advertisements are, so if Samsung refuses to advertise this product and the company as a whole, then probably no one would know who they are or what they are selling, which means Samsung wouldn't sell anything.
Furthermore, designing of the phone, its engineering, packaging & shipping and also paying their employees are some other reasons why Smartphones are mostly built with a little amount and sold for a huge price. So, most of the money spent on Samsung and other flagships or high-end Smartphones are spent on its building, maintaining, processing and even advertising the product and the company itself. Back to Samsung's case study, at the end of that deal, building the phone for $150, spending $550 for advertisements & some other necessary stuffs and selling it for $800, they are still left with a $100 profit which is not too much for them as returns on investment.
Now, you've seen the main reason why high-end Smartphones are usually said to be built with just few hundred bucks and they always end up being sold for bigger amounts. Watch out for our next post on another very interesting topic which you'll love to read. Subscribe to our free updates so you won't miss the post. What do you think about this ? You are free to say what's on your mind using the comment box at the bottom, please kindly share this post on your social network profiles and bookmarks. Blessings !!!