HTC thinks it will do well in 2014. Here’s why


HTC’s chief marketing officer Benjamin Ho is in the fight of his life. Since taking over the role in 2012, he has been trying to reverse the phone maker’s flagging fortunes and make the brand desirable to consumers once more.

The results were mixed. Despite launching the HTC One to critical acclaim, the company wasn’t profitable in the first quarter of 2014. That was its third loss in three quarters. You can’t blame marketing for everything, but it did play a part.

Now, the company’s top brass hopes the sequel to the HTC One, dubbed the M8, can bring it out of the doldrums. It’s a repeat of 2013: critics are fawning over the phone, which has a sleek aluminum finish, a depth sensor for the camera, and some nifty touch gestures.

But as the first version of the One showed, excellent design alone won’t be enough to win the day. But here’s why the company still believes it can have a good 2014.

HTC flagship phone may be the one, but it’s not a solo effort

Without divulging any hard targets, Ho believes HTC can improve on its global smartphone market share of three percent due to a bigger line-up of products. Besides the One, the company has the Desire line of mid-tier phones.

It’s also planning to launch a tablet and a smartwatch in the latter part of 2014. While details about the smartwatch are scant, the tablet is reportedly an 8.9 inch Nexus model.

“In one quarter we announced three new models. We will have a much richer and fuller portfolio,” says Ho. The wider array of products could allow HTC to sell more units and make up for lost time.

Champagne, anyone? You can now get a gold HTC One at an ordinary price

It’s taking a bite out of Apple’s playbook

HTC emulates Apple in many ways. It targets discerning consumers in developed markets that shell out more for better phones – exactly the same kind of gadget lovers coveted by Apple. It is selling the first version of the One even as it promotes the M8, just like how Apple is still shifting the iPhone 5 despite already releasing the 5s.

HTC also believes in taking a slower, more deliberate pace to innovation. It’s not clamoring to be the first few to market like Samsung with the Galaxy Gear. Rather, it is studying consumer behavior – including that of HTC customers – to figure out why they would want a smartwatch.

“Sometimes it’s good to be first. But with new product categories, I prefer to be the first to observe and first to learn.”

Besides a thin form factor, Ho believes health tracking will be the killer app for smartwatches – an approach that follows Apple’s rumored iWatch. Conserving battery life is also a priority – consumers expect smartwatches to have more stamina than their phones – although there’s no sign how it plans to achieve that.

“You don’t want a big chunky piece as your watch. Do we have to design it more like a lifestyle watch? I think there’s a compelling reason for it.”

Robert Downey Jr. has paved the way for HTC

With a much smaller marketing budget than competitors like Apple and Samsung (HTC is outspent 13 to 14 times by them), it needs to make every dollar count.

The phone maker received a lot of attention – and ridicule – when it paid Iron Man star Robert Downey, Jr. to front a publicity drive that gave consumers no indication of what the brand is about.

But Ho insists it was worth it. HTC does not have the luxury of time to go on a traditional brand building exercise because the industry moves fast.

“We need rocket fuel. That’s the reason why we went with Robert Downey, Jr. to give us that kind of boost.”

Due to these efforts, HTC’s brand awareness in English-speaking markets that played those ads jumped from 10 percent to 15 percent.

Building on that, it began a series of ads in which actor Gary Oldman invites consumers to go online to check out how the One compares to other phones. It’s meant to show that HTC is confident in the quality of their products.

Quarterly earnings don’t reflect the true health of the company

Ho is not rattled by HTC’s Q1 2014 financial results, in which it suffered a net loss of US$62 million on US$1.4 billion in revenue. In fact, he points out that the company made a small profit in 2013. That’s not a cause for celebration though: HTC’s revenues that year were the lowest since 2010.

The financial results – and the endless scrutiny surrounding them – highlights HTC’s awkward position. Unlike rising star Xiaomi, it lacks the flexibility to pursue a growth-first strategy and sell phones at cost for the sake of achieving critical mass. Instead, it needs to answer to profit-minded shareholders in the stock market.

Also, as a pure hardware firm with only three percent market share and no other reliable revenue streams, HTC is at a disadvantage against Apple and Samsung in what’s essentially a volume game. It needs to stay listed to raise enough money to keep up with the giants.

The ‘RSVP’ approach

HTC’s status as a listed company influences its business decisions. While it aspires to, in Ho’s words, be a “thought leader”, it needs a dose of pragmatism. Ho calls this the “RSVP” approach to building a business – focusing on relevance, scalability, viability, and profitability.

Counting HTC out now would be a mistake. Fortunes change quickly in the mobile industry – Motorola, Nokia, and BlackBerry have all seen their fortunes fade in the span of a few years.

On the flip side, Apple was able to reverse its trajectory after Steve Jobs retook the helm as CEO and introduced the iMac.

HTC doesn’t have Steve Jobs, but it’s standing at an interesting, epoch-making time in computing: wearable devices could go mainstream in the next couple of years, buoyed by interesting apps like activity tracking and the internet of things. Ideas like modular phones and virtual reality are emerging too.

If the company plays its cards right, it could propel itself back on top by gaining a foothold in new product categories, while at the same time incrementally building its smartphone market share by taking advantage of a mature Android ecosystem.

The HTC One, despite all its flash and pizazz, is in reality a defensive maneuver. The smartphone market is getting increasingly competitive, with many up-and-comers like Oppo and Xiaomi competing for attention against incumbent phone-makers for ever-shrinking profit margins.

What competitors need to pay attention to is the stuff HTC has shrouded in mystery.

This article was originally published in our bi-weekly Insights emagazine. Find out more info about TiA Insights here.

Editing by Steven Millward
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