AppleInsider wrote about The Smartphone Endgame: Who wins once shipment volumes peak?.
For decades, market research firms have been confidently asserting that the “winners” in PCs, tablets, smartphones and other consumer electronics are not firms that are profitable or even sustainable, but merely those shipping the largest volumes at any given time. This has enabled them to crown a successive line of failed players, then rapidly move on to a new “winner,” often within the same year.
How excited would you be if you were named ’employee of the year’ twice in a row, while a fellow employee earned more than 45 times your salary while working smarter, not harder? Would you feel like a winner, or would you feel like you needed a new strategy, with less pats on the back and more money in the bank?
Now imagine its 2018, and you’re not even employee of the year anymore, and you’re still not making enough money to pay rent, let alone plan for the future in a very competitive market. How do you feel about your life now? Feel like a “winner,” coasting on your past performance headlines and dusty employee of the year plaques?
An even better question: does IDC, Strategy Analytics, Tech Crunch and virtually every other tech journalist and researcher on the planet really think that the key to winning in smartphones is to be hailed as turning in the most shipments and the greatest percentage of shipment growth for a limited period of time, while earning virtually nothing to show for it?
I would say it is fair to pursue market share in the first few years but work to translate that into decent profit. But it is not always that easy. Once consumers are used to seeing the brand as a cheap option, they would be not be that likely to switch to a high end model of that same brand.
Let’s say you have a Toyota Vios. Would you choose to upgrade to a high end Toyota model or would you swap for an Audi, BMW, Mercedes or even a Lamborghini or Ferrari, assuming that all costs involved in that upgrade are equal?
The costs of brand image and marketing do bring in value, both tangible and intangible. Instead of trying to capture more market share through making a loss or breaking even, selling premium models with decent margins result in profits that can be used to build up a better brand reputation.
Market share will increase while there is still a market for new phone users, but that is on the decline and new markets start to decrease. It doesn’t help that there will be competitors entering the market to fight for their own market share in a saturated market.
This reminds me of the old adage about winning the battle and losing the war.