Is the Zenfone 3 overpriced?

A lot of our readers have chimed in the comments and asked us directly if we agree that the Zenfone 3 is overpriced, so we’re giving you a more thorough answer here. We also tackled this topic last week but we did not zero in on the rationale — Why are people disappointed with the Zenfone 3?

First off let’s break down the retail prices first:

• ASUS Zenfone 3 Max (3GB RAM / 32GB ROM) – Php8,995
• ASUS Zenfone 3 Laser (4GB RAM / 32GB ROM) – Php11,995
• ASUS Zenfone 3 (5.2-inch / 4GB RAM / 64GB ROM) – Php16,995
• ASUS Zenfone 3 (5.5-inch / 4GB RAM / 64GB ROM) – Php18,995
• ASUS Zenfone 3 Deluxe (6GB RAM / 64GB ROM) – Php34,995
• ASUS Zenfone 3 Deluxe Special Edition (SD821 / 6GB RAM / 256GB ROM) – Php44,995
• ASUS Zenfone 3 Ultra (4GB RAM / 64GB ROM) – Php32,995

Asus PH has practically covered almost all price points in the market, starting with the sub-Php9,000 Zenfone 3 Max all the way up to the Php45k Zenfone 3 Deluxe Special Edition.

When we say overpriced, especially in the Android ecosystem, we always refer to the hardware specifications. If the set of specs are lower than what other competitors are offering in the market (in terms of SRP), then the phone is not overpriced. We list down 6 Smartphones that Asus wants the Zenfone 3 to Compete Against.

The list includes a couple of Samsung Galaxy A series, as well as Huawei, OPPO and Vivo. Most of these are considered contemporaries or desired competition for Asus. Our chart shows that the mid-range Zenfone 3 have competitive hardware compared to the alternatives.

A better way to look at it is remove the brand names and labels of each device and simply look at the specs. From that perspective, we can now agree that the Zenfone 3 is not really overpriced.

However, we think the proper term to use for the disappointed that a lot of people are voicing out is that the Zenfone 3 is “over-valued“. A phone can be competitively priced yet over-valued. Let us explain.

When a brand puts a price tag on a specific product that they release, the price tag includes a number of factors — build cost, logistics cost, taxes and duties, brand equity, distribution margins.

Build Cost – this is the basic cost of components as well as the assembly of the device. Pretty straightforward.

Logistics Cost. This includes shipment, packaging, fulfillment and related factors.

Taxes and Duties. Some countries have very expensive import cost while others have zero import taxes levied on the devices. Other countries also state/city taxes, federal taxes, sales taxes, and for the Philippines it’s the 12% VAT.

Distribution Margins. Except for a few ones like Xiaomi or OnePlus, vendors do not directly sell their products to customers. It goes thru various entities like distributors and dealers. These 3rd parties may get between 8% to 30% margins (individually combined) or sometimes even higher but in the electronics industry a 10% margin for dealers is the average. Smartphone cases can have 200% – 300% margins so if you buy an original Spigen case for your iPhone 6s for Php990, the dealers cost could be just Php250 to Php350.

Brand Equity. This is the tricky part since this can be arbitrarily imposed by the vendor. This cost includes marketing budgets as well as service and warranty offers. Brands can put 20% or can go up to 200% for this factor.

Big named brands like Apple can demand much higher margins for brand equity. The iPhone 6s has an estimated build cost of about $236 but they can sell it for $700. That’s a huge margin that’s mostly attributed to the brand’s value.

In comparison, the Zenfone 3 can also have more or less the same $236 build cost and they end up selling it in the Philippines for $360. That’s just half of the selling price of an iPhone 6S that costs the same to produce. But we bet, the iPhone 6s is the hotter item of the two and people are willing to pony up for the much higher price tag.

How come customers will accept Apple’s pricing but not Asus? That’s where the “over-valued” perception comes in. Perception matters. That’s why Apple spends a lot on advertising. Samsung too (remember the time Sony, Motorola and BlackBerry phones were all valued much higher than a Samsung phone?).

So yes, the Zenfone 3 is not over-priced, it’s just over-valued.