Monday, 26 September 2016

Understanding The Smartphone, And The Market


The market for Smartphones in India is one of the most talked-about in pink papers as well as white sheets alike, with regular articles on top and budget smartphones making headlines all too often; yet, paradoxically, it is the least understood outside the trade, i.e. those of us who are actually in the handset trade. For the pink sheets and white sheets, it is the Apples and the premium phones that matter, or the budget smartphones with a range of online as well as offline offerings being highlighted.

This is a very simplistic look at one of the most complex markets in my experience, which spans telecom services, data, insurance, FMCG/D  - for a number of reasons, some known and some unlisted insofar as my reading goes. The pace of technology development is one of the well-understood reasons; as is the pricing factor. These are just of the factors that make this market such  a fascinating yet complex study. The speed of change means products change every few months; the attendant pricing pressure changes the market dynamics every so often – all this is well understood. Here I attempt to look at some of the nuances not covered in the most articles on this subject.

The smartphone is not just a touchscreen, or a multimedia device; it isn’t a music player with hi-fi; it isn’t a vivid display; and it isn’t an internet access device; it is all  that and much more; this understanding is absolutely critical. And yet, paradoxically, in the Indian context, it is also true that the smartphone in some segments is just that : a touchscreen device, with an attractive interface. India is a market in which feature phones still sell, where smartphone adoption is still on the upswing; this creates two clear markets, which are as alike as Refrigerators and Chwayanprash; we are talking of two completely different markets in just about every marketing parameter you can care to define.

A proper understanding of the smartphone requires viewing as the sum of its parts, and as a solution; a service, not as a product. By itself, it is almost useless. It requires a sim card and an operator connection with Data for its power to be unlocked. And that is why it is absolutely critical to approach this market as a service rather than a product in order to realize its full potential both for consumers as well as for handset manufacturers. The screen you see is a window into a land of infinite options and opportunities, of facilities and methods and of solutions; understanding firstly the need of consumers in various segments, and secondly the capabilities and their combinations is the need of the hour!

Before we move into India-specific analyses, let us try and understand what I mean when I say solution. The smartphone device is a complete package, a combination of the hardware and the software. Amoled displays or Octa-Core processing power by itself is valueless, unless it has the software present to utilize these facilities. And that will be the future of the market; the ultimate winners will be the ones who will place a product solution that meets the consumer’s requirements along these parameters.

The first point of contact for the consumer is the UI – the User Interface; the second is the App Store. The entire layman user experience is around these two only. This being a nascent market, currently there is a lot of fuzziness and experimentation at both company and consumer level; this is par for the course. But, over time, the consumer is bound to settle into a defined choice range in what he or she likes or prefers; at that point, solutions with a better integration and seamless performance of the desired functions are going to be the winners in this race; which is partly why you see companies now beginning to develop their own UIs in their solutions.

These functions can be a vivid display at the software levels – colourful themes & wallpapers, or on-board office capabilities, good music output in terms of clarity and loudness both; the internet experience; overall device performance in terms of heating, durability; integrated apps within the UI like office or Amazon; Guides like maps etc – these uses will increase with increasing requirements and further inroads of the internet. Note that I don’t highlight battery – with increasing computing power, battery is always going to be a tremendous challenge for everyone in this market

I highlight App integration because a well-integrated on-board app will perform better and give a much smoother consumer experience than one that is not native to the device or the solution – think Apple here. This is going to be the battlefield of the future – and once demand further develops and crystallizes into clearly defined segments, this is going to be the be-all and end-all of this market, just as any in any other computing device. An internet resource from more developed markets highlights that 84% of users pitch for a better mobile App performance. {}

For the Android Ecosystem, it means developing a UI, or indeed an entire OS that is Android based, gives the look and feel of an Android, as well as its features, but is developed internally – this leads to a much superior user experience, which even has the capability of changing demand parameters. The longer term winners will be the companies that can craft an integrated experience based around Apps well integrated with the underlying hardware. But that is bound to take time in the Indian market, which is a different ballgame altogether, being comprised of the two segments I refer to above. In simplified choice, it means integrated the most popular Apps on-board the device, developing a unique selling proposition based not on hardware, but on a solution… while not hindering consumer choice in terms of downloading Apps from the net or the Play Store…

India is a land of wide disparities and low income; this needs to be underscored – for from this arises the learning that there is scope for both segments I refer to above in the Indian Market, but more of that later. With reference to a smartphone, the market in India is nascent, with the fascination for a vivid colourful window into technology in the form of the screen, the experience of internet and its power as another factor, and niche groups like music aficionados. Another factor that needs consideration is that not all consumers give importance to all capabilities, leading to vast unutilized features as well as a fuzzy positioning scenario, which I shall look at a little later. The learning from this is that this is a developing market, with generic demand as of now, which has yet to crystallize further

These two markets, in my terminology, are a need-cum-pricing-based segmentation, basis long experience of watching retailers sell to consumers across various geographies in West India.  These segments are the Computing Power segment / Power-User Segment; and the Basic Usage Segment. I have deliberately avoided replacement market, or any other parameters for a reason : and that reason is the product itself. The Smartphone is essentially a solution, as observed  above, or a service; not a product unto itself. It requires another product : Data Connection to become a usable item for the most part. Hence, we need to segment along usage at the primary level, as shall become apparent in my article.

While the Power Users are beginning to become more discerning, the Economy segment is still way behind in the learning curve due to low income as well as undeveloped demand. I say undeveloped as the requirement for the more esoteric as well as advanced apps has yet to gain a defining momentum due to demographic factors, a full study of which is beyond the scope of a blog article. For the Economy segment, the defining pleasure is still at a nascent and beginners level – although some sub-segments within the Economy Segment are beginning to show the demand nature of the Power segment, but are hampered by income  challenges.

Within each primary segment, you can have a series of segments as per your purposes – replacement market, processing power, sound/audio, battery, pricing and so on and so forth. But at the core level, the profile of the consumers in these two segments are completely different. Sure, there will be some overlapping, as in consumers having one handset from both segments, but even that underscores the segmentation – power usage device for power and data intensive usage, and basic device for basic usage, though that is frankly a rarity. But, in the Indian context – the Economy Market is still paramount in terms of volumes as well as potential, as more and more people upgrade… but that poses challenges on a different scale to the companies-  something we shall look at in the second part…  

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