Motorola is redefining the low-end again. But why?

May 20, 2014
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Without doubt, Motorola redefined what the term “low-end” means with the Moto G. Now Motorola is trying to redefine it yet again with the Moto E.

This raises the question: why do the same thing twice in less than a year’s time? Motorola has a gap between the flagship Moto X and the entry-level Moto G. Why not try to fill that first?

According to Canalys, 5-inch plus devices grew by 369% in the first quarter of 2014, compared to a year before, significantly outperforming the growth of the global smartphone market. Indeed, throughout last year, regional brands like China’s Lenovo or India’s Micromax and Karbon had been able to enjoy tremendous growth by launching well spec’ed devices with large screens sitting in the low mid-range price bracket.

Currently, Motorola has nothing to offer in this high growth segment, but they don’t seem to be the least bit bothered by it. How could an underdog company looking to grow its market share be neglecting this potential?

This might look like a case of poor judgment by Motorola, but it isn’t.

Let me explain.

There was a chink in Samsung’s armor

Last year, an increasing number of emerging market consumers started looking for devices that would not only replace their old phones but also their netbooks. Manufacturers responded to this by flooding the market with a myriad of affordable large screen phones. As we discussed in a previous piece, among the most lucrative segments is the lower mid-range  price bracket (sub $350).

Naturally, Samsung had such a device in this segment, the Galaxy Grand. However, the original Galaxy Grand had poorer specs compared to similarly-priced or cheaper models from regional manufacturers. It had a 5-inch WVGA screen and an older dual-core chip, at a time when Chinese and local manufacturers had started offering phablets with 720p displays and quad-cores for the same price. Consumers were expected to shell out around $500 for the Galaxy Mega 6.3 to get a Samsung phablet with a 720p screen.

Things are different this year though, as Samsung’s Galaxy Grand 2 comes equipped with specs that are on par with its competitors and it is still available for less than $350. The lower mid-range phablet segment is no longer Samsung’s Achilles heel that competitors can easily exploit.

Competitors now have to look for other avenues to give their devices a competitive advantage over Samsung’s. For example, Lenovo now has two phablets with aluminum bodies and one with a glass back in the sub $350 segment, while Huawei and Asus are betting on even larger screen sizes to compete.

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The low end is now Samsung’s Achilles’ heel

While Samsung might have properly patched a hole in its armor, that does not mean Samsung is now invincible. There is still a weakness that competitors can exploit, but this one is situated at a lower price point.

Look at Samsung’s present offerings in the sub $250 segment. Here, Samsung has phones like the Galaxy Ace Plus, Galaxy Core, or Galaxy S Duos, which, at best, are rehashes of the three-year-old Galaxy S2, or, even worse, the original Galaxy S.

In the Moto G's segment, Samsung is offering rehashes of the three-year-old Galaxy S2, or, even worse, the original Galaxy S.

That’s why the Moto G has been selling so well in places like India. In its price range, there is simply nothing from Samsung that could even come close to the Moto G in terms of specs or user experience.

This weakness becomes more apparent if we venture even lower down the price range.

For around $150, the Galaxy Fame comes with a 3.5-inch screen and QVGA resolution. In case you’re wondering, yes, that is the resolution of the 2007 iPhone!

Samsung is not the only culprit here. Outside of Xiaomi, which currently only operates in a limited number of markets, one would struggle to find a compelling device in the sub $150 segment from any manufacturer. No one’s losing sleep over the LG L5 II or Xperia E Dual, right?

With the Moto E, Motorola positioned itself to grab an even bigger share of the superlative growth potential available in emerging markets, by attacking the segment where Samsung, and most manufacturers, are now the weakest.

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There’s still growth to be had in mature markets, if you know where to look

While it is true that developed markets, like the US, are reaching their points of saturation, it does not mean that there is absolutely no growth left there.

UK-based research outfit Mediacells predicts that there will be 47.5 million smartphones sold to new users in the US this year.

Meanwhile, according to Consumer Intelligence Research Partners, there were around 28 million US customers that chose to ditch carrier subsidy in the last 9 months.

Because the Moto E’s price tag is close to the lower boundaries of what the average American consumers usually pay upfront for subsidized phones, Motorola is currently in the best position not only to attract new smartphone owners but also to lure people looking to leave the carrier subsidy model.

Competitors beware

By apparently ignoring the increasingly heated mid-range and high-end battle, Motorola has set itself in a good position to improve its market share, by exploiting potential growth available not only in emerging markets, but also in more developed regions.

That’s a smart move for an underdog, and competitors better take note or risk being left behind.

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