HTC One Mini will cannibalize smartphone sales

Last week, HTC released a Mini version of its flagship HTC One smartphone. Although it has a smaller form factor and is powered by a lower performance processor, HTC One Mini comes with similar features to those incorporated into the phone it is derived from.
 
The Mini seems to offer the HTC One experience in more adapted phone form factor and, most importantly, at significantly lower price point. Our early investigations suggest that, with similar storage capacity, HTC One Mini will be about $150 (€113) cheaper than the original version and will be targeted at the mid-range segment of the smartphone market.
 
HTC seems to be following in the footsteps of Samsung in pursuing a “Mini” strategy. It needs to be careful though as, if this strategy is not carefully implemented, HTC could expose its flagship brand to cannibalization from the much cheaper HTC One Mini.
 
Indeed, since both versions provide similar experiences, with the exception of the display size, the majority of consumers are likely to go for the cheaper version. It may even be that, for practical reasons, mobile phone users will prefer the 4.3” display featured in HTC One Mini to the 4.7” display featured in the original version.
 
In contrast, the price differential between Samsung’s Galaxy S4 and Galaxy S4 Mini is about $90 on average and the original version comes with a number of additional features that clearly differentiate it from the Mini version. As a result, the risk of cannibalization is lower because the two versions are clearly differentiated and are targeting separate audiences with different affordability levels.
 
One thing is certain, though, mobile operators worldwide will be enthusiastic about the HTC One Mini. The HTC One is available in 180 regions on 583 networks, and it is likely that the HTC One Mini will have similar availability.
 
 
What impact could strategy have on HTC’s brand?
HTC has always prioritized the look and feel of its handsets, realizing that these are important factors for consumers in their selection of a handset. The aim of HTC One was initially to differentiate using its distinctive styling and high performance, and the device has clearly helped raise HTC’s brand awareness amongst consumers.
 
The company aims to capitalize on the halo effect created by the HTC One, extending market opportunities to a lower price point using its Mini version.
 
However, this strategy could backfire. Its specifications and the price it is offered at means that there is no doubt HTC One Mini will be a success for HTC but this success will come at the expense of its flagship product. The risk of cannibalization is considerable and it could shift the company’s positioning from being a key provider of premium devices capable of competing against devices like iPhone 5 and Galaxy S4 to being a mid-range smartphone maker playing in the Galaxy S4 Mini or iPhone 4s area.
 
One could argue that this is a good strategy if HTC manages to aggressively push HTC One Mini to the market as a new product in its own right and not just as a cheaper version of its HTC One flagship device. Sales of HTC One Mini need to be twice as high as those of HTC One if the company aims to improve the profitability of this brand.
 
Malik Kamal-Saadi is a principal analyst with Informa Telecoms & Media. For more information, visit http://www.informatandm.com

 

 

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