HTC hikes marketing spend by 250%, but problems run deeper

Despite having some of the best smartphones in each segment in its portfolio, HTC has been relying on the age-old excuse that its marketing has just not been up to the mark. The Taiwanese company has retained its “Quietly Brilliant” tagline for a while, but maybe the silence is getting to it now.

HTC is about to ditch the slogan and go with something new. The company has decided to market its new HTC One flagship as “bold, authentic and playful.” It’s not altogether surprising that HTC decided to do away with the slogan, as it has made a lot of noise about the One’s so-called advantages over the competition, most notably the Galaxy S4.

“We have a lot of innovative ideas, but we have not publicised them enough in the past,” Benjamin Ho, HTC’s Chief Marketing Officer, was quoted as saying by Focus Taiwan. Demystifying the marketing speak, Ho said “bold” denotes HTC’s aggressive push for its products; “authentic” indicates HTC’s focus on innovation rather than aping the competition, and “playful” suggests that HTC will create more interesting features based on consumer demand.

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Ho said HTC will be increasing its digital marketing budget by 250 percent this year compared with 2012, and traditional media marketing spending by 100 percent. Perhaps HTC is realising that to stay relevant among loud competitors like Samsung and Apple, it has to play their game and play it with all it’s got.

No longer quiet

Last year was a pretty bad one for HTC, especially as it came on the back of a fantastic 2011, when the company made great strides in the US market and topped the sales chart in the third quarter. Not only was the Taiwanese company bested by Samsung in the smartphone race, it was also at the receiving end of multiple patent battles with Apple, which debilitated sales in the US and delayed the availability of its devices.

After Samsung’s massive surge, HTC’s reasoning was that its rivals had stronger budgets in comparison to the Taoyuan-based manufacturer. “Our competitors were too strong and very resourceful, pouring in lots of money into marketing. We haven’t done enough on the marketing front,” the company’s CEO Peter Chou had said last year.

HTC have known for a while that Samsung’s marketing budget, inflated as it may be, has worked wonders for the company. But somehow it has stuck to its quietness and even cut its marketing budget last year along with R&D spending. HTC’s gross margins slid from 28 percent to 25 percent in 2012, forcing it to cut R&D spending by 15 percent, advertising/marketing by nearly 45 percent, and administrative overhead by 30 percent. But this year, the company is going for a bigger push.

Can the HTC One turn the company’s fortunes?

However, HTC’s problems are not only marketing-related, even though increased spending in that department should help their cause. One of the main reasons HTC’s much-lauded One X failed to impress in the market was the lack of availability due to a patent battle with Apple. Apple’s win in that case meant the One X was not available in stores for close to three weeks after launch, before the two companies agreed on a licensing deal. Those three weeks did more damage to HTC’s numbers than any marketing salvo by Samsung.

Another problem was the weak distribution model for HTC’s top phones in the US, the world’s second-largest smartphone market. This was one of the issues Samsung rectified with the Galaxy S3 last year. Previously, the Samsung flagship would launch on various US carriers with a different design and with varying degrees of restriction on each device. Last year, Samsung released the same Galaxy S3 design on all carriers simultaneously.

HTC, on the other hand, released the One X on AT&T alone, while the mid-range HTC One S and the like came on T-Mobile. Later in the year, the Droid DNA ( HTC Butterfly) was added to the Verizon lineup, but this meant there was no HTC phone in Verizon’s lineup for most of 2012. Samsung clearly saw this void and filled it with versions of the S3 and Galaxy Note 2 on the carrier. Lukewarm performance in the US only added to low global sales of HTC’s phones.

HTC is facing problems with the One this year too. It is having trouble delivering the flagship across the world, despite claiming a global roll-out at the launch event. The company is having trouble securing components for the new-fangled Ultrapixel camera, which is one of the key features of the device. As a result, outside the UK, Germany and Taiwan, the One will be delayed by up to a month. We cannot say how deep the impact of this delay will be, but Samsung is waiting in the wings with the Galaxy S4.

The One’s biggest competition

HTC had the opportunity to tie up everything with the One. The HTC One’s hardware has been universally praised and the Sense UI is now toned down greatly. But the missing pieces in the equation mean even an inflated budget for marketing might not help HTC turn its fortunes, or the clock to 2011.