HTC banks future on new flagship phone One
New CMO and marketing strategy to spearhead turnaround
IT wasn’t a great 2012 for Taiwan-based smartphone maker HTC, and with a bumpy start to the first quarter of 2013 and continuing supply chain woes, can a fresh flagship product and new marketing strategy turn things around?
Last year, HTC reported a fourth-quarter profit of just NT$1 billion (US$34.5 million) — its lowest quarterly profit since 2004 — on NT$60 billion (US$2.69 billion) in sales.
The company’s net profit fell 91% year-over-year and missed analysts’ NT$1.48 billion (US$49.7 million) consensus by a wide margin.
The first quarter earnings report for 2013 didn’t look much better with HTC managing to pull down only NT$67.8 billion (US$2.3 billion), a nearly 35% dip year-over-year.
When it came to net income after taxes, HTC only raked in NT$4.4 billion (US$149 million) in the first quarter, compared to the NT$14.8 billion (US$501 million) in profits earned this time last year.
HTC has also been losing global market share, slipping to 2% in the third quarter of 2012 from 2.7% in 2011, and dropping from seventh place to 10th, according to market research firm Gartner.
The dismal first quarter came amidst delays with getting it’s newest products to market. The company confirmed that shortages in camera components containing its UltraPixel technology were behind the delays.
Right product, wrong message?
But it isn’t a case of having a bad product, the company’s chief marketing officer Benjamin Ho (pic) says, but rather a problem of not sending the right message when it comes to communicating with its target consumers.
To future illustrate his case, Ho -- who was in Kuala Lumpur recently -- pointed to the company’s latest flagship product, the HTC One, which features what the company claims is the world’s first full zero-gap aluminum 'unibody.'
“In the past, device manufacturers have always been afraid of full metal casings, due to the material affecting radio frequencies,” he said, adding that HTC spent the last 10 years innovating the technology which enables the use of metal with no compromises in user experience.
Ho also pointed to another feature of the HTC One -- front-facing stereo speakers with a dedicated amplifier powered by Beats Audio.
“With more and more consumers looking at videos in landscape mode and sharing, it no longer makes sense for speakers to be placed at the back,” he said.
Another key feature is the One's UltraPixel Camera which features Zoe, which automatically captures up to 20 photos and a three-second video, animating image galleries.
He also pointed to the company’s recent win of four awards at this year’s Mobile World Congress in Barcelona, Spain. “It was an incredible feat and further proof that HTC does stand out in technology and design innovation.”
When asked about the delays in getting the One to market, Ho said that it was due to the need to ensure consistent quality with its specialized components.
“Every piece has to be crafted and if you simply ramp up production there will be quality issues. If we wanted to give the world another plastic phone, we could have easily done it. If you want a Bentley, you have to wait,” he said.
Quiet no more
Since coming on board as HTC’s chief marketer, the third the company has had in less than two years, Ho has taken a more aggressive approach shouting HTC’s plus points to the global marketplace.
According to him, HTC may be a 15-year-old technology company, but spent the first 11 years as an original design manufacturer (ODM) and only four years ago decided to market its own brand.
“Internally, in terms of marketing, HTC is very young ... we’re babies. So in the past, we didn’t represent ourselves at the right level we should have,” he said.
According to a Wall Street Journal report, HTC has bumped up the global marketing budget by 100% for traditional media marketing and a whopping 250% for digital marketing.
The company has also executed a few guerilla-marketing maneuvers. During the New York launch of the Samsung S4, HTC sent teams to the venue to give out hot cocoa and snacks while showing off the One to people lined up in the cold.
It also mounted an aggressive Twitter campaign that mocked the S4 as “#theNextBigFlop” to riff off Samsung's "The Next Big Thing" slogan.
It was a dramatic shift for a company that traditionally refrained from direct comparisons to competitors, preferring to focus on its own products’ features. Then there was Ho’s own remarks to US media, noting: “Looking at the software features of the S4, we think Samsung spent more on marketing than innovation."
When asked about those moves, Ho said that HTC is merely a brand with a strong point of view that challenges the status quo.
“I don’t see why consumers should add to the coffers of my competitors peddling the same thing. Why should the consumer pay more for the more of the same thing? That doesn’t make sense to me,” he added.
According to him, HTC believes in having discipline, continuing to innovate, and doing things “our own way.”
“If we are patient enough and do things right for long enough, I believe we will gain market share. Buying markets, blasting it with marketing and giving margins to retail channels,is a fun thing to do, but I’m not sure its sustainable growth. I have seen many brands that do that last no more than a few years because they could not afford to sustain it,” he said.
A new direction
In addition to a bump in marketing funds, which Ho claimed was necessary as compared to 2012 when the HTC One X was launched with 140 operators around the world, the HTC One will be launched this year via over 200 operators.
“We have to increase spend because operators won’t take your product without some marketing from you folded in,” he added.
The company’s “Quietly Brilliant” tagline remains the corporate mantra but a new tagline – Bold, Authentic and Playful – will become HTC’s consumer-facing image.
“Bold” refers to the innovation the HTC One brings to the table. “Authentic” is about HTC’s ideas being original, while “Playful” is about its smartphones including more features based on what users want.
Ho said the three words sum up what HTC hopes to project to its now more clearly defined core audience of target consumers – “The Exceptionals.”
“Of the five billion people in this world, 1.1 billion or them are considered tech millennial or exceptionals, digitally-savvy individuals defined by a passion to do what others can’t. If a brand is too mainstream, it turns them off and they are characterized by the ability to snack on content,” Ho explained.
The decision to focus on this segment of consumers also drove the company’s major shift to digital marketing channels over traditional.
“It is important to reach these people when they are making their decision, which is in front of their computer or mobile devices, not on television or via print,” he added.
Other changes to HTC’s marketing strategy include an increase willingness to seed phones to members of the press and public ahead of official launches.
“We’re not going to be so ‘KGB’ about our phones. For a gadget like the HTC One, we have to bring it out first and be bold enough to let consumers make up their minds,” he said.
When asked how the brand intends to differentiate itself from other manufacturers carrying Android smartphones, Ho said that unique features such as BlinkFeed on the HTC One as an example.
BlinkFeed is a home screen feed that contains updates from social networks as well as apps and publications that a user wants, enabling easy browsing of "snack-size" content.
Global message, local flavor
While HTC’s global branding will remain consistent and Ho himself is a firm believer in a single global brand and idea, he said the key was localizing its new messaging when drilling down to individual markets.
Sirpa Hannele Ikola (pic), HTC’s senior marketing director for South Asia, said the company’s approach to selling and putting things together differs from market to market -- from language to celebrity ambassadors.
“Despite that, the brand still has to be identical and recognizable. We look closely at available channels in each market,” she said.
Ikola noted that in a market such as Malaysia, there is still a need for traditional media for awareness, with the company’s next step being to ramp up press publicity and out of home media presence.
Experiential marketing will play a big role with plans for roadshows and demo units to be available in stores for consumers to try.
“Usually people are quite surprised after they try out the phone for the first time. There are many ways we can be more personal about communicating our brand essence without blasting it out too loudly,” Ikola added.
Ho said the company’s goal is to be the “sophisticated choice” for savvy consumers who don’t want to be like everyone else.
Published reviews have been positive, declaring it as the “best phone the company has made yet.” The HTC One will make its official Malaysian debut on April 25, and retail at RM2,299 (for the 32GB model), and RM2,499 (for the 64GB model).
“We’ve been doing ourselves a disfavor. If I were to sum our strategy up as a one liner – we are the world’s best kept secret, no more," said Ho.
The secret may be out and marketing can help put HTC on higher terrain when it comes to presenting itself to the digital masses, but it won’t fix all its woes.
On April 23, Finnish phone maker Nokia won an injunction in the Netherlands that will ban HTC from using the current microphone components found in the One. Nokia said it had taken apart the HTC One and found the high-amplitude audio-capture technology was the same as its own.
The injunction is effective immediately and will last until March 2014. It prevents supplier STMicro from selling its microphones to HTC, and the company has said it would be looking for alternatives "immediately".
[Update] HTC has issued a statement clarifying that Dutch proceedings were brought by Nokia solely against STM and judgment against STM states that HTC can continue to use microphones already purchased from STM in its products, because they were purchased in good-faith. Nokia's attempt to obtain a recall of microphones already sold to HTC failed. Click here to read the full post at ZDNet.
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