To buy or not to buy? The answer lies in utility value.

I’ve thought a bit about whether or not I am going to buy a Kindle. I think I’ve made a decision:

The functionality and scenarios provided by the Kindle are really amazing, even if they flubbed the industrial design. However, from a pure utility standpoint, it’s worth about $200 to me. Add a reasonable “early adopter tax” of $100, and you arrive at my magic price point: $300.

Until either Amazon drops the price to $300, or they add features that increase the utility value to me to something closer to the current price point, I’m probably not going to buy one. (I say “probably” because I can’t rule out an impulse buy in a moment of weakness, as you’ll see later in the post.)

To expand on the concept of what I mean by “utility value,” I’ll use the iPhone as a comparison.

The utility of a portable media player (like a Zune or an iPod) has value to a person. For someone like me who is into digital media, this is worth between $200 and $300, depending on features… so let’s say it has a utility value of $250. I would have a tough time personally rationalizing much more for a purchase of such a device.

The utility of a standard mobile phone (phone calls, SMS, etc.) has real value as well… but for me, because I hate using phones, this is unusually low– probably around $50. However, when you add smart phone features like calendars and contacts with sync, email, mobile web browsing, etc. the value I get from such a device increases dramatically. I’m very comfortable paying $250 for a good smart phone because the utility value I get (being able to check email from anywhere, for example) is significant.

When you combine the two devices (a portable media player and a smart phone) you would think that the total utility value for me would be $450-550. However, combining the two creates a total that is greater than the sum of its parts– you’ve eliminated a device from my inventory, which is huge. This consolidation alone has some utility value– I’m quite happy to pay an extra $50 or so to cary one less device around with me if I can do it without compromising the functionality of either. (Of course, the iPhone isn’t quite no-compromises– but for the sake of discussion, let’s pretend like it is.)

The elegant industrial design and pure gadgety goodness of the iPhone has some intrinsic value, too… probably another $50.

So where does this put us in our calculation of the utility value of the iPhone?

$250 Portable Media Player $250 SmartPhone $ 50 One less gadget to carry $ 50 Design/Gadgety-goodness —– $600

So, in theory, the iPhone has a utility value of $600 to me… so why didn’t I buy one when they came out at $599? Why did I only decide to buy one when they price-dropped to $399? It’s simple: in theory, theory is just like practice… but in practice it’s not. :) (Reminder: this is not a product review– I’m only talking about my personal usage– features that are important to ME in MY use. Your mileage will vary, as my needs are somewhat specific.)

The problem is that the iPhone is NOT a no-compromises SmartPhone– it’s missing loads of key functionality. A few notable examples include Exchange support, task management, EVDO, etc. This reduces it’s utility value quite a bit– instead of being $250 worth of SmartPhone, I’ll say it’s worth closer to $150. (That’s being generous… however, it IS a really good phone– I love the voice mail functionality and simple management of calling features like call waiting and conference calling… that helps buttress the value a bit.)

It’s also NOT a no-compromise portable media player. It’s only 8 gig, so I can’t fit much of my library on the device. Also, it lacks hardware buttons, which can be a pain (you have to pull it out of your pocket and look at it to do almost anything.) Finally, it won’t play most of my library because most of my music is WMA, and all of my video is in WMV. I love subscription music services (like Zune and Napster) and can’t consume that content on an iPhone. I love movie online movie rental services like CinemaNow and MovieLink, but I can’t watch them on the iPhone. This significantly reduces the utility value of the device for me. (Again, these are MY needs, not yours.) So instead of having $250 worth of portable media player, it’s more like $100.

Finally, because it doesn’t do Exchange (mentioned above) I lose the “one less device to carry” benefit– I still have to carry my Motorola Q Windows Mobile SmartPhone around to check work email. There goes another $50 in utility value!

So where does this leave me?

$100 Portable Media Player $150 SmartPhone $ 50 Design/Gadgety-goodness —– $200

So the iPhone has about $200 in utility value to me. Tack on another $100 for “early adopter tax” and I am perfectly comfortable paying $300 for a device like an iPhone. In the end, I bought one at $400 anyway in a moment of weakness… but that’s because I’m lame and irrational. :)

Will I do the same with the Kindle? Only time will tell. However, this really is how I make gadget purchase decisions. Frankly, I think to some degree it’s how EVERYONE makes purchase decisions, though in a less than conscious way.