Cutting Room: HTC admits its marketing failings

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As HTC admits it hasn’t spent enough on marketing to push the brand, Ian White looks at how the manufacturer has failed to take advantage of the failings of some of its rivals

It takes a special kind of complacency to lose 91 per cent of your profit because you failed to spend the marketing bucks necessary to stop rivals ripping your business apart.

Yet that seems to have been the case at HTC if comments made to the Wall Street Journal by HTC CEO Peter Chou are correct (and we have no reason to believe they are not).

In case you’ve only just returned from an extended Christmas holiday in St Barts, HTC’s 2012 financials were a blood bath – share price down 80 per cent from 2010,Q4 profits of £21.47 million, down 91 per cent, revenue down from £2.18 billion to £1.29 billion. And Chou reportedly admitted: “Our competitors were too strong and very resourceful, pouring lots of money into marketing. We haven’t done enough on the marketing front.”

As any first-year business college student will tell you, it takes years to build a brand and only months to destroy it. Yet this seems to be a lesson continually lost on the technology sector where advertising is the first casualty when times are tight.

The HTC example is one of the more dramatic demonstrations of what happens when marketing is left to wither on the vine. The pathos surrounding HTC’s plummet from grace is especially worthy of note.

Three or four years ago, HTC had everything going for it. It was all set to be the Next Big Thing in mobile. The Taiwanese company had emerged from the anonymity of being an OEM manufacturer to being a respected innovator and manufacturer of quality smartphones in its own right. The Hero, Desire and One X are just some of the devices that were acknowledged to be among the best of their kind.

HTC’s rivals RIM, LG, Nokia, Motorola and Sony were all pressing the self-destruct button with uncompetitive offerings and brand confusion. The way was clear for HTC to mop up high-tier market share with its innovative and popular devices along with Samsung and Apple.

In 2009, HTC had come from nowhere to be a global leader in the smartphone space. With its once-strong competitors in a race to the bottom, HTC had a once-in-a-commercial-lifetime chance to establish itself as a household brand. It would have cost a few billion dollars but the rewards would have been immense. Certainly it would have been cheaper than losing more than £200 million in profits that Chou says was due to a lack of marketing support.

Yet lack of marketing nous seems to be a constant in the mobile telecoms sector. The industry is driven by its priority of technical innovation. “Let’s look after the next multiple-megapixel camera on our new device and the sales will look after themselves,” seems to be the attitude.

Yet, in the brown goods sector the only real differentiator is the brand. BlackBerry 10 is likely to be a superior OS to Android and iOS. Yet does anyone seriously imagine that BlackBerry 10 will restore RIM to its previous position of dominance just because it offers more functionality that most consumers probably wouldn’t notice? Nokia was once the king of cool in mobile. Now it can’t get arrested in the smartphone space despite the brilliance of the Lumia 920.

Alas it seems HTC’s Chou still hasn’t got it, telling the Wall Street Journal: “Although we don’t have as much money to counter [Samsung and Apple], the most important thing is to have unique products that appeal to consumers.” Regrettably for Mr Chou, consumers don’t buy innovation – they buy a brand.

Just ask Apple, which has developed the art of brand management into a religious cult. Samsung has elevated itself to the must-have Apple alternative. Consider this – if HTC brought out the world’s most feature-packed smartphone this month, would it create as much consumer hysteria as a lower-specced Samsung Galaxy IV or a marginally tweaked iPhone 5S?

Marketing folks, half your budget will be wasted. The trouble is you’ll never know which half. And Peter Chou will tell you what happens when you try to keep the marketing money in the bank.

HTC’s slogan is ‘Quietly Brilliant’. Perhaps too quietly.

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