HTC’s Pricing Strategy: Is it wise to ignore low end phones?

HTC has always faced challenges with its branding strategies and establishing a distinctive identity to their smartphones. Their confusing strategy of renaming the same phone with multiple names for different carriers and markets has proved to be a significant challenge for the company in the past. And now, the company is facing a similar challenge with its decision to avoid introducing smartphones in the low-end segment, and focusing immediately on mid-range and high-range smartphones. A look at HTC mobiles price list shows that the phones are priced only in the mid and high segments ignoring a large chunk of the entry-level segment in the price range below INR 10K.

The company claims that by investing in equipping their phones with better quality materials and charging buyers accordingly for the same, they can leverage their presence in the market. HTC’s plan might seem credible on some levels. By incorporating latest technologies into their phones, the company is targeting smartphone aficionados who are willing to pay for a better operating system and other advanced hardware features. They are gunning for a place which is firmly reserved by Apple with its premium range of iPhones series. However, HTC might not have made the best choice in this matter.

HTC’s Predicament in High-End Segment

While HTC has been noted for their solid design, build quality and hardware specifications, they have been facing tough competition over the last couple of years from the Apple iPhone and the Samsung Galaxy S range. So, it is tough for the company to maintain an exclusive status even with the promise of technological supremacy.

Besides, the target of major players in the smartphone arena is to offer style and ‘good-enough’ configuration at a reasonable price. This has been the strategy of Nokia, Samsung and LG. However, HTC claims that it finds it impossible to produce the same calibre of phones at an affordable price due to the fact that, they do not produce smartphone components by themselves and have to buy them from other players like Qualcomm, Toshiba and Sony. While others like Samsung and Sony manufacture most of the smartphone components by themselves and this gives them an option to price their handsets lower than HTC as there are no middlemen. For this reason, HTC has fallen behind in markets like China, where they end up charging customers at least 10% higher than their ideal cost. Samsung has managed to design and price products to cater various segments of the market. In this way, their target audience is much more in numbers compared to that of HTC’s.

Successful Low Priced Smartphones

On the other hand, brands like Micromax and Samsung are proving that consumers don’t need to pay premium to buy a good enough smartphones by launching them at entry-level price of below INR 10K mark. An Ernst & Young report states that the average price an Indian customer is willing to pay for a cell phone is INR 2300, and this amount is likely to rise to INR 2,950 by the year 2020. This has given smartphone makers an idea of the appropriate pricing for their phones. An average India with a budget of more than INR 5K always looks to buy a smartphone while those with a budget below it buy a good feature phone (better if it has dual SIM option). This goes on to show how HTC is facing huge challenges with its pricing.

Take an example of Samsung Galaxy Y which is one of the most successful smartphones in the Indian market. It has an 832 MHz processor, Android 2.3.3, TouchWiz UI and a 2 MP camera and is priced as cheap as INR 6,999. The success of this smartphone reflects what an average Indian mobile consumer is looking for. Micromax has come up with a wide range of smartphones in the low-price segment like the Micromax A45 or Micromax A50 is available in the INR sub-4K range.

Conclusion

HTC is riding on a rough road due to their unstable pricing strategy resulting in rather modest sales record. Because of its rather limited focus, the company has failed to address the demands of various market segments. In addition, it seems to be struggling to establish a unique identity for its high-end smartphones. But all is not doom for HTC as there is some silver line of hope due to reduced prices of their smartphones in recent months in the wake of the market situation. Last year, they priced the Sensation similar to Samsung Galaxy S2 even though it offered less value for money and performance compared to its competitor.

But prior to the launch of HTC One X, they dropped the price of HTC Sensation heavily and as a result all the units went completely out of stock in offline as well as online stores. Also, they have priced the HTC One X at INR 32,990 which is quite lower compared to its main competitors Samsung Galaxy S3 (priced at INR 36,890) and Apple iPhone 4S (priced at INR 40,799 for 16 GB version). If they price their products well, they can sell smartphones in very good numbers.

About The Author

Ashwin works with Mysmartprice.com which is a price comparison website that helps users find the best price of mobiles, books, camera and lots more. Ashwin is a graduate of State University New York with an MS in Information Systems and an MBA from Amrita School of Business Bangalore. He writes on smartphones, gadgets, technology , ecommerce and marketing.