Selling a smartphone to the early adopter crowd is relatively easy. You build a “flagship” product with premium design, load it with all the latest features, make sure it’s LTE compatible, then market the heck out of it and wait for the launch day lineups.
If you’re Apple (AAPL) or Samsung (SSNLF), you’ll grab a good chunk of the market and make money doing it, too. Selling smartphones to emerging markets takes a different approach. In this case, price is critical. And while brand awareness is important, releasing an affordable device that has retailer and carrier support is key to grabbing market share.
To put things in perspective, in India — one of the most rapidly expanding wireless markets in the world, but a country where average income hovers around $1,500 — 70% of smartphones sold this year will be priced below $100.
A similar strategy is required for success in established markets. The early adopters have largely been snapped up. As more people begin to move from feature phones to smartphones, this second wave of customers tend to be more price conscious, so a $649 investment is a tough sell. That’s the group that Apple was hoping might grab an iPhone 5C … but $549 isn’t a whole lot better, and poor sales of the plastic-encased smartphone reflect this misstep.
Google (GOOG), on the other hand, is going to make a real play for those numbers when its Motorola division released the low-cost Moto G, a $179 smartphone aimed directly at emerging markets and first-time buyers who aren’t prepared to pony up $600 or more for a flagship smartphone.
This is a similar strategy already employed overseas by Nokia (NOK) with its Asha line of smartphones, not to mention Samsung with the sub-$100 Galaxy Star and the Firefox OS phones recently introduced by ZTE.
Lenovo (LNVGY) is another key player that has seen tremendous success by focusing on affordable smartphones in its home market of China and expanding into other emerging markets. By adopting this approach, LG has pushed out of third spot in global smartphone shipments and is on track to see smartphones account for 50% of its sales within five years, compared to 20% currently.
The Moto G is an interesting compromise. It’s an absolute steal in the U.S. (it costs less to buy outright than the down payment on an iPhone 5S on contract), but it’s priced higher than most of the cheap smartphones it’s going up against in emerging markets. However, Motorola has taken the approach of making the Moto G a “premium” device, with features like a 4.5-inch HD display, quad-core processor and the latest version of Android. It doesn’t look like a bargain-basement phone, and that’s important.