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January 14, 2014

Motorola Mobility's Chromecast Bundle Casts Doubt on Success of Moto X

Motorola Mobility is making what has to be a last ditch effort to boost sales of the Moto X, announcing a one week opportunity January 8-14 to receive Google Chromecast for free with the purchase of an unlocked Moto X. Chromecast normally sells for $35. It’s a puzzling strategy for Motorola who is seeking to regain its footing in the mobile device market.

Motorola Mobility and parent company Google hoped the Moto X would be the device to bring Motorola back to the place of respect it once held as the developer of the RAZR. While the Droid smartphone brought a nice sales bump in 2010, nothing else has been able to steadily compete with the Samsung or HTC lines of Android phones.

After five consecutive quarters posting losses, Motorola Mobility was acquired by Google to shore up the latter’s patent holdings. Motorola holds over 17,000 patents and has over 7,000 more pending. In development of its next big release after the buyout, Google commissioned Motorola to focus on quality by designing a handset that could lure buyers away from Apple or Samsung.

Early reviews of the Moto X did not live up to the mandate with comments about cheap construction outweighing the company’s attempt to attract the public with Moto Maker, a portal that lets consumers choose from a variety of color combinations for the casing. At its debut the device retailed for $600, with cell companies listing it between $200 and $300 with a contract. On Cyber Monday Motorola announced a $150 discount on the device and thereafter carriers began selling it for as low as $49. While a price drop is normal after at least six months on the market, for a device barely three months off introduction, it’s not a good sign.

A good deal of market research has examined the role that discounts play in consumer perception. While overall, lowering prices does drive sales up that response if generally limited to a one time price drop. Consistent price drops, especially over a short time period, can actually backfire by making consumers believe you overcharged them to begin with. One double-blind study actually found that consumers believe discounted products don’t work as well as the full priced counterparts. While this may not be functionally accurate it is what buyer’s perceive – and that’s ultimately what matters. After a strategy of deep discounts getting consumers to reframe their focus on quality and value is difficult and a company may never be able to sell at their original price tier. Apple is notorious for protecting their perceived value with fixed, high prices. The result is consumer frenzy at even the smallest discount, and consistent belief in the high quality of Apple products.

Casting further doubt on the success of the Moto X has been Motorola’s reluctance to release sales data, leading to speculation that it is not meeting goals. The Chromecast deal runs through January 14 on unlocked phones only, retailing on the Motorola website for $399.

Edited by Ryan Sartor

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