Special: The new wave of mobile handsets

By Prajjal Saha & Biprorshee Das , afaqs!, New Delhi | In Marketing | June 10, 2010
A new breed of mobile phone marketers - helped by a Chinese push - is making merry at the cost of the big players

IPL is a favourite playground for the big and large brands. But this season, some half-a-dozen small mobile handset marketers stole the show from right under the former's noses. And they were brands that many Indian consumers probably hadn't heard of.

& #BANNER1 & #Today, brands such as Micromax, Karbonn, Maxx Mobile, Lava and Olive are becoming household names. Not counting the biggies, there are 20-odd Indian mobile handset brands with annual advertising spends of about Rs 1,000 crore. That is an amount media owners won't sneeze at. Who are they and what are they doing?

Home-grown - and attractive

During the last two years, the 100-odd handset brands launched (there is no exact figure) are giving the Nokias and Samsungs of the world a run for their money. They have captured almost a 25 per cent share of the market (by volume) forcing market leader Nokia's share to shrink by 15 per cent (by volume).

These brands sell on the basic premise of offering the flashiest of features at affordable prices. Interestingly, these handsets did not just copy the feature of an aspirational MNC brand and offer it for a lower price. They introduced innovative products suitable for local needs too.

For instance, when Micromax launched its first handset with a 30-day battery back-up, it was a perfect product for semi urban India where power cuts are a major concern. The brand became an instant hit and the model contributed to 80 per cent of the sales for the company. Today, Micromax claims to sell around 1 million handsets a month. Other brands also entered the market around the same time with various innovations.

Intex, the company known for IT products, pioneered the dual-SIM mobile phone category which enabled the user to use a GSM as well as a CDMA service on a single phone. The idea was soon lapped up by other brands, which launched phones with dual SIMs. QWERTY was the other route to make phone look aspirational. Today, dual SIM and QWERTY phones are the largest selling categories in the country.


These brands entered the market, when the cellular phones were penetrating deeper into the semi urban markets, thanks to lower tariffs offered by the service providers. Though the MNC brands too catered to the market, they failed to gauge the needs of small-town India, filling the market with basic phones at a low price segment. It was believed - by most big multinationals - that consumers in small-town India wanted less for less. However, as it turns out, those consumers wanted more at lower prices. And they took to technology with an enthusiasm.

It was found that the small-town consumers wanted much more than the basic phone. There was also a segment of consumers who wanted to upgrade to a phone with additional features such as a coloured screen or a camera.

The government also contributed. The Department of Telecom's decision to ban all handsets without a valid IMEI (international mobile equipment identity) number arrested the growth of the grey market, which was made up of non-branded Chinese phones.

This void in the market was filled by these new Indian brands which offered multiple features at a price which the MNC brands offered on a basic phone. The other factor that helped the Indian brands was a change in the mindset of the consumers who did not consider durability in the category of 'fast moving consumer durables' where a consumer is ready to change the product every 12 months.

Breaking the door down

Micromax, which is currently challenging the No. 3 position, has been fairly successful from the start, with one innovative product. The success of Micromax actually opened the doors for many in the segment which was once solely dominated by a single Finnish brand.

In the last two years, the Indian mobile handset market has seen new players almost every quarter. On one hand where brands such as Onida and Videocon - already popular names in the durables segment - ventured into this category, there are 80-odd sundry brands which have flooded the market.

Only a few of these home grown brands believe in a pan-India presence - many of them are content with a strong regional focus. There are also a large number of brands, which are restricted to just a few districts. In fact, most of these lesser-known mobile handset brands are owned by distributors or traders who were already present in the business before deciding to launch a brand of their own.

A senior industry observer says, "If one has a control over distribution in certain geographic area, it's not difficult to sell 100,000 handsets a month." If a company achieves this minimum target of 100,000 phones a month - which is 0.1 per cent of the market, it would imply that the company would have a turnover of Rs 240 crore (the average selling price is around Rs 2,000). Such are the dynamics of this industry.

Easy come, easy go

Ease in procurement is what is driving the growth of such brands. Many of these traders scout for differentiated products in the Chinese market, book a consignment and then brand it on their own. Some call them the 'Box Movers'.

An industry practitioner says, "All you need is Rs 50 lakh to enter the mobile phone handset business." However, some significant Indian players do believe in research and development before introducing a product in the market even though they shop in the same Eastern market.

A mobile phone marketer clarifies why picking up from the Chinese market is a feasible deal than setting up a manufacturing unit back home. As he puts it, a mobile phone consists of around 250 small components. Procuring all these components from various overseas markets is always a challenge while all of them are easily available in China.

In order to maintain quality, some of the bigger players in the segment prefer to have dedicated assembly lines in large production units based in China. The Chinese market also helps the companies to turn around its product portfolio every six months, which is currently the need of the hour.

Show them off

Most of these players entered the market on an experimental basis. But once they achieved a fair amount of success, the need to build itself as a brand took shape. TV was the obvious route for brand building, which is why 50 per cent of the budget goes to this medium.

Currently, the brands seem to be playing the media game by heavily advertising on television and trying to create maximum recall for its brand so that the consumer isn't ignorant of the brand at the retailer's level. It seems like a mad rush to announce, "Hey look! I am there too."

Industry observers are of the opinion that currently there is no differentiation in thought amongst brands, which is not healthy in the long term. Besides, the huge amount of money being spent on creating brand recall is turning out to be an expensive awareness campaign. Many also tried the regional television route as it was less expensive, but soon realised that it was difficult to create an aura around the brand unless it was seen on a national channel.

The next major share of the advertising spends goes into print and a small part to BTL - the motive is to please the retailers, who play a major role in pushing the brand at the point of purchase. On an average, 10 million mobile phones are sold very month in the country. Of this, Nokia still has a share of 55 per cent (by volume), though, in the last two years, its market share has shrunk from 70 per cent. The number two position in the segment has always been a slippery one. The likes of Samsung - which is at No. 2 at present, Motorola, Sony Ericsson and LG together take away another 18 per cent of the market. The high-end smart phones have a 2 per cent market share, while the remaining 25 per cent of the market is with the home grown brands.

The Indian brands are not only eating into the pie of the market leader, but also the other MNC brands. Sony Ericsson, for instance, has seen a drop in share - thanks to its strategy to be in the mid- and high-end segments.

The 'Nokia' benchmark

Consumer affinity towards brand Nokia is still very high even in semi-urban areas. The brand continues to be the first choice for many. At the retail outlet, the consumer first asks for Nokia and compares other products with it.

The lack of a best-choice product from Nokia's stable, which fits into a consumer's budget and matches their expectations, pushes the consumer to opt for a substitute brand. In such a situation, the market scenario could change if Nokia starts matching its product offering with the Indian brands at their price.

Currently, Nokia has announced the launch of a QWERTY phone - a hot favourite among low-end consumers because it provides an aspirational look - priced at, according to sources, under Rs 6,000. This has certainly given sleepless nights to many Indian marketers.

However, the counter point of view is that it will be difficult for Nokia to maintain a wider range of products. In case it offers a feature-led business phone at a lower price, it could annoy the high-end loyalists. If it doesn't, it will keep losing its market share to the Micromaxes of the world.

Besides, as Nokia caters to both ends of the market - the top end doesn't take the pride of owning the brand, nor will the low end find it aspirational. The probable way out of this dilemma for Nokia would be to have a second brand.

The dusty road ahead

With the apparent clutter, isn't the industry bursting at its seams already? The challenge before the Indian brands clearly would be to find a way to sustain themselves in the long run. Continuing a price game is not the way forward. Many feel that prices have hit rockbottom - the basic phones are available at sub- Rs 1000 - already and innovation is the only way ahead.

Today, brands are trying out different innovations be it a phone which serves as a master remote control or which has a space for a pencil battery to be used in times of emergency. While many feel that there is room for infinite technological innovations, there are others who are of the opinion that there is a limit to innovations as well.

While, there is a serious attempt to differentiate the product, there is no clear brand differentiation amongst the Indian players. A head of a large agency says, "It is like a stampede right now. Everybody is thinking the same way and you know that it is a recipe for disaster."

Building brand affinity will be a major challenge for these brands, which will decide their fate. And to build the brand, the companies have to do many things right like providing quality products, proper service and support.

Many compare this industry with the watch segment where the both the mass and premium brands co-exist and cater to both ends of the society, though there is no basic functional difference between the two. A similar kind of situation is expected in this segment.

At present, the mobile handset industry is primarily a trading business with China being the provider of components. But there is a serious risk involved - any delay in the delivery of consignments could mean an instant departure from the market and also from the consumers' mind. In such a scenario, the serious players will have to set up a manufacturing base, be it in India or China.

It's also a fact that the market cannot accommodate so many players and only the strong would survive. While some of the players would be forced to shut shop, the stronger ones could be bought over by even bigger and stronger players.

Based on interviews with:

Asim Warsi, Samsung India, Avijit Dutt, Olive Telecommunication, Harish Bijoor, Harish Bijoor Consults, Jaideep Ghosh, KPMG, Kevin D'souza, Pickle Lintas, Kishore Chakraborti, McCann Erickson, Mona Jain, Vivaki Exchange, Partha Sinha, BBH India, Rahul Goel, Videocon Industries, Samit Sinha, Alchemist Brand Consulting, Sashin Devsare, Karbonn Mobile, Shibu Tharakan, KPMG Advisory, Sudha Natarajan, Lintas Media Group, Suman Srivastava, Euro RSCG India, Sudhir Kumar and Vinayak Lal, Intex Technologies (India) and Vikas Jain, Micromax Informatics.