Pressing the price button

In India, success comes at a price. The right price, that is. And smartphone makers are using this insight to sell their wares, announcing finance schemes where the E in EMI may well stand for ‘easy’ and not just ‘equated’. The war between smartphone makers has gotten more and more intense day by day and each one of them is pulling out all the stops to get customers to loosen their purse strings.

A recent report by Bloomberg quoting IDC says Apple’s shipments of iPhones in India rose to a record 2.54 lakh units in the fourth quarter of 2012 from 52,000 in the third quarter, after it opened the iTunes store in the country in December and cut the prices of the older models. EMI/zero per cent finance schemes on expensive gizmos such as the S4 and iPhone5 have helped companies such as Samsung and Apple net customers who could not afford to shell out the money in one go.

This has led to the EMI wars, as the lack of a finance scheme may otherwise ensure the phones fail in the market.

“The zero per cent finance offers are meant to promote upgrades to these high-end devices and were introduced because we sensed a strong desire amongst consumers for these feature-rich, smart devices. It is helping consumers upgrade more easily by making the devices more affordable to a wider consumer set,” Vineet Taneja, Country Head, Samsung Mobile, said. The schemes made it that much more simpler for consumers already considering buying these devices as well as for those who were mulling an upgrade. It is not that the distributors are pushing for such schemes to get the products moving, the initiative comes from the companies themselves.

Options such as buyback and EMI schemes help these companies garner consumers from low-income group as well as first-time buyers from the Tier 2 and 3 cities.

“We have met with a very positive response for our zero per cent finance offer from our customers. It is available for our high-end smartphones like the Galaxy S3, Note II, Galaxy Note, Galaxy Camera, Note 800 and Galaxy Grand. Sales of the zero per cent finance-linked devices have trebled between January and April this year,” says Taneja.

BlackBerry also recently introduced new EMI schemes for ‘Z10’ and ‘Curve 9220’ devices for credit card holders of Axis Bank, Citibank, HDFC Bank, HSBC, ICICI Bank, Kotak, SBI Card and Standard Chartered. While Z10 is available at Rs 4,799 per month for nine months for these card holders, Curve 9220 is available at an EMI of Rs 799 per month for 12 months. There is no down payment to be made in these schemes, nor a processing fee or interest, and the plan is available through 3,000 BlackBerry outlets across the country.

However, there are a few companies that are not using all the weapons in this war. One of the reasons is also that not many in India own a credit card.

While Samsung and Apple were marketing their brands through EMI schemes, Micromax ran ads saying 'Can own without an EMI' for its Canvas series. Was the idea to beat Samsung and Apple or to say that at less than half the price of their products, Micromax can offer customers a similar experience?

“The idea behind the ad campaign was very simple – one doesn’t need an EMI plan to buy a Micromax smartphone, and if your product is worth it, people would buy it anyhow,” Shubhodip Pal, Chief Marketing Officer, Micromax India, explained. “It was great to witness consumers wait until 12 a.m. for their chance to book the Canvas HD on Valentine’s Day selling 9,000 units in less than 24 hours with all the consumers paying 100 per cent upfront,” he said, adding that the company has always strived to provide the consumers with the best innovations without burning a hole in their pockets.

According to analysts, it makes sense for international players to offer such schemes to generate more revenue as their products are costly. This results in growing demand and the result could be seen in the second quarter of this year.

“India is a growing market for smartphones and the market focus is different for companies like Samsung, Apple and HTC. While, these companies will gain revenue through high prices, local companies like Micromax will look for volumes,” Manasi Yadav, Senior Market Analyst – Mobile and Tablet devices at IDC, said.

It is not that smartphones of local marketers such as Micromax and Karbonn are not bought by consumers in tier-I cities. Many of them buy such products as a second phone, she said.

Micromax believes its campaign has given other brands a tough fight.

“Considering the way Micromax has taken an unprecedented leap in the mobile ecosystem in India by offering affordable innovations which directly address consumer needs, this campaign is complementing the company’s success,” Pal, its CMO, said.

He points out, though, that there are online retailers, large-format retail outlets and banks offering convenient financing so a consumer is free to opt for such options if required.

Looking at such trends that catapult the sales of its products, Panasonic India has also decided to come out with zero per cent finance schemes for its smartphones soon. The company recently launched its first smartphone in India - Panasonic P51 - priced at Rs 26,990, as it believes such schemes will help grow the sales in the market.

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