The nation’s largest wireless service provider is using Samsung’s new Galaxy S5 phone as a shiny lure to hook customers.
Just as Samsung’s flagship smartphone hits the market, Verizon is offering a buy one, get one free promotion (provided a customer signs a new two-year contract for each phone). A full-page ad in today’s Wall Street Journal touts the offer to purchase the Galaxy S5, which becomes available Friday, for $250 (with a $50 rebate). The second one is sold for $50 with a mail-in rebate that knocks the prize to zero.
The Galaxy S5 is an attractive trinket to grab consumer attention, even if it debuts to less fanfare than its predecessor, the Galaxy S4, which was the subject of a fancy — and controversial — New York launch.
“Nobody’s renting out Radio City Music Hall,” notes Yankee Group analyst Carl Howe. “No Broadway producers have been hired. It’s a lot more like an ordinary, garden variety smartphone launch.”
The offer underscores the competitive nature of the U.S. mobile market, where Verizon faces intense competition from rival AT&T, as well as stepped-up price wars prompted by T-Mobile. Yankee Group estimates AT&T and Verizon are neck-and-neck when it comes to share of domestic mobile phone lines, at roughly 33 percent each.
Buy one, get one free offers are popular with carriers because signing up two customers at once often leads to family plan signups, and such customers tend to change carriers far less often than individuals.
Plus, Samsung’s flagship phone likely requires less subsidizing than, say, Apple’s iPhone. Mobile providers typically subsidize the cost of a smartphone in exchange for a long-term service contract. (For example, a high-end iPhone 5s with 64 gigabytes of memory sells for as much as $850 when consumers purchase an unlocked phone without a contract.)
“Anytime I can get somebody to come in and pay for smartphone service — one of those big data plans, along with unlimited voice and texting — without paying a big subsidy to Apple, I’m in,” Howe said of Verizon’s strategy in this promotion.
Verizon is offering other phones under the same buy one, get one free terms: The HTC 1 (M8) and the Samsung ATIV SE.
Samsung stands to benefit from the offer, which could allow the Galaxy S5 to grab share faster in a market where four out of five customers already have a smartphone.
“They’ve already become the largest Android provider,” said long-time mobile analyst Gerry Purdy of Compass Intelligence. “How do they continue market adoption when the markets in Europe and the U.S. get to be close to saturation?”