When I was strolling in a shoppping complex after dinner, I came across the new low-end handset by Motorola, the Motofone, as shown above. This phone has a retail value of RM199 (~ US$55) for the original set. I saw price that went as low as US$32 in some foreign websites.
Here we have Motofone, the latest phone from Motorola that aims to wage war on the low-end (aka cheapo) markets. However I can see a few problems with this approach:
- This destroys the hard-earned cool-gadget brandname won by the Razr family. Consequently when people mention Motorola handsets, words like 'cheapo', 'tacky', and 'low-end' come into mind faster than I can say "Mary cooks the little lamb".
- The low-end market has very little head room for profit margin.
- Existing handphone owners wanting to upgrade/replace/get one more phone
- New customers
Will Motofone and family appeal to the cash-cow group?
"Look guys, I just got a new cool Moto handphone, it has monochromatic six-segment-display-ish screen, and..., and..., well, nothing else. Hey, better still it comes with Walmart's everyday low-price guarantee."
Here Motorola is targetting the new customers in developing countries. Yes the markets are largely undeveloped, but in order to win, a company must have extremely strong cost-control for a profit, and hoping other handset makers will not jump in (especially companies with significant cost advantages). In other words, low-end market is a bone with abysmally thin of meat attached. Motorola is chewing this bone and trying to scrape every bit of meat in sight. It gotta chew tonnes of these to get a decent meal.
Disclaimer: Though I am quite sarcastic and cynical on the company strategy, personally I do think Motofone is a good start for handphones: it is just a plain, simple phone equipped with the necessary features: phone calls, sms, long battery hours. This is what I want from my handphone. Do I need more? No.
3 comments:
Making cheap phones doesn't erode market for more expensive phones. It just price-targets the low price buyers.
Sweet profit doesn't just only mean big margins. You can have small margins * big volume and still make a good profit. In terms of low end cellphones, targeting 3rd world markets like China and India, it could mean lots of money and brand-building for other more expensive phones.
If I don't have enough money, I choose the cheapest functional phone.
Say, if I like MOT MOT's cheap phone, and I got more money, I'd buy MOT MOT's more expensive phones right?
Ya, small margin will need large volume to get a decent profit, that is why I say this market is a bone with abysmally thin of meat (profit) and Moto gotta chew a lot of bones (volume) for profitability.
On the branding issue of cheap vs. expensive phone, your point may be valid. However, to me, 'cheapening' a brand's image by entering a low-end market still doesn't sound a clever tactic (imagine BMW is entering in the Kancil, Kelisa market)
This is the "chap fan" style of business. Cheap with volume.
It could be a good idea for someone like me. I won't be so crazy over it and turn it off most of the time, only turning it on when I want to use it. Could work. ;)
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