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Gaining Advantage In The Bargain Smartphone Game

This week at Mobile World Congress in Barcelona we’re seeing a new generation of premium smartphones take the stage from tier-one vendors like Samsung and HTC, among many, many others.

But there’s also a new and quickly growing story in mobility – the rise of the low-cost smartphone. On those same Barcelona stages, smartphone vendors like Xiaomi of China will surely unveil low-cost options that are sufficient for an ever-increasing contingent of the global market.

We have reached a point where it is not simply a luxury but an absolute necessity to own a mobile phone, preferably a smart one that grants access to the entire world at your fingertips. Gartner estimates that by 2018, nine out of 10 phones will be smartphones.

As the sales of smartphones ramp, prices continue to plummet. According to Gartner, by the end of 2014 smartphone prices were already down to $40 and come 2020, nearly 75 percent of us will spend less than $100 on our devices.

This has given rise to more affordable smartphone makers like Coolpad, Oppo and ZTE in China and MicroMax in India. There’s even French OEM success story Wiko with its $96 device (also made in China). All of them are giving the more established OEMs a run for their money.

The majority of these low-cost device makers are in China, which is also their largest market: China became the world’s biggest smartphone market in 2014, and according to Gartner 78 percent of global smartphone sales will occur in developing economies and markets.

In the U.S., both consumers and enterprise workers are shielded from high prices by two-year contracts, so the low-cost trend is likely to remain overseas for the foreseeable future.

Among the major OEMs, these international players are a cause for increasing concern. Apple may be able to continue to rationalize its high prices through its dynamic content ecosystem and strong branding tactics, but Android will likely have a harder time doing so, as its market is more diverse and splintered, making for fiercer competition among manufacturers.

Samsung, with its big ad budgets for flagship phones, will likely be hit hardest by these developments.

Cost is becoming king. In emerging economies, premium features such as HD screens and high-end bundled software are not influencing buying habits as much as price, giving the lowest-cost phones the greatest traction. On the other hand, in the U.S. and Europe, premium features are important, and customer service is actually the number one purchase criteria for consumers.

One way both premium and low-cost OEMs can gain an advantage and competitive margins is by partnering with technology companies focused on building customer service platforms that deliver high-quality service and support on a global scale, but at lower cost and with increased efficiencies. With already established networks and localized resources worldwide, these partners offer a significant advantage at an affordable rate.

The bargain device makers can improve their margins by provisioning more basic support, repair and return/exchange functions through these third-party platforms, and pass savings on to consumers. The premium OEMs can offer exclusive face-to-face support through in-person service and repair centers, without the need to set up their own costly and complex global service organization.

The mobile landscape will continue to become increasingly competitive and mobile device manufacturers will always look for ways to gain any edge in the market, especially when it comes to pricing. It’s often the first decision criteria, and one that can give OEMs huge advantages in the right markets. Now OEMs can look to customer service technology as another way to gain advantage, both through premium services and lower costs to pass on to the consumer.

In the end, we’ll all benefit as smartphone owners.

Raul Sfat is strategy VP at B2X, a leading provider of customer care solutions for smartphone devices to manufacturers. The company’s Smart Service Platform consists of Cloud-based technology services to improve customer care and best-practice service delivery processes.