In a mobile world dominated by Android(s goog) and iOS(s aapl), how can Microsoft(s msft) gain market share with its Windows Phone devices? It’s not a new question, and hints of the answer have been around for the past year or so. Now the strategy is available in public view via Executive Vice President, Microsoft Devices Group, Stephen Elop’s message to employees explaining both staff reductions and future plans:
“In short, we will focus on driving Lumia volume in the areas where we are already successful today in order to make the market for Windows Phone. With more speed, we will build on our success in the affordable smartphone space with new products offering more differentiation. We’ll focus on acquiring new customers in the markets where Microsoft’s services and products are most concentrated. And, we’ll continue building momentum around applications.”
Microsoft has been happy to tout how well its Windows Phone handsets are doing in particular regions. At this week’s Windows Partner Conference, the company reiterated data from earlier this year saying Windows Phones are outshipping iPhones in 24 markets. The platform also holds the no. 2 spot in these 14 countries: India, Mexico, Italy, Chile, Thailand, Vietnam, Malaysia, Poland, South Africa, Ukraine, Hungary, Finland, Czech Republic and Greece.
Look at the bestselling phone, though, and it’s not a device that competes with the iPhone or a comparable Android handset based on price: It’s the Lumia 520, which is the cheapest Windows Phone device and has the most meager hardware components. Look also at the first phones to ship with Windows Phone 8.1: The Lumia 630 and 635 which are also inexpensive; you can buy one outright on pre-paid service for $99.
Now that Microsoft has effectively killed off Android as the software on the inexpensive Nokia X handsets, it’s clear the company thinks it can provide solid Windows Phone experiences for a low cost. And according to Elop’s note, that’s where the focus will be going forward: In the budget-friendly segment, particularly where the company already has a market-share foothold.
Does that mean we won’t see high-end Lumias? Of course not: The new Lumia 930 available around the globe — but not in the U.S. — is a perfect example to suggest otherwise.
But my guess, based on Elop’s note and the company’s actions leading up to it, is that we’ll see far more of a push in the lower-cost Lumias. These will likely launch first in the areas where Windows Phone is already on the rise and slowly filter to the regions where iOS and Android dominate (and probably without much fanfare there).
It’s a smart strategy, and at this point in time, it may be the only one that can work. It’s easier to acquire customers in this market as opposed to consumers in smartphone-saturated markets who have been using alternatives for the past few years.
Application lock-in costs are a barrier to switching platforms, for example. Why not target markets that are not just the fastest growing right now but are also ripe to get customers locked in to Windows Phone apps? Once these customers are ready to step up to a better phone, Microsoft will have a mid-range or high-end Lumia waiting for them.