What’s in a Brand? A Look at Honor and its Plans to Achieve Virality.

If you’re in the U.S., you’ve probably never heard of Honor before. That’s not very surprising since the brand has yet to launch any products in the U.S. If you’re in one of the regions where Honor phones can be purchased, then you might recognize them as a sub-brand of Huawei that specializes in e-commerce. Every single one of their devices can be purchased online, as opposed to the devices offered by Huawei which are purchased primarily via retail/carrier stores. So why did Huawei decide to create the Honor brand and how does the company plan on expanding the brand? To get to the answer, I pieced together information I gathered by speaking with Honor representatives and by attending the Honor brand press conference held in Shenzhen, China, this past weekend.

Honor Brand Press Conference, Dec. 12, 2015, Shenzhen, China

Why Honor?

To understand why the Honor brand exists, you first have to consider the standard sales model of most mobile device manufacturers. Despite the prevalence of e-commerce, most smartphone purchases are still completed in brick-and-mortar stores. Smartphones are an expensive investment based highly on personal preference – it’s hard for the average consumer to justify purchasing a phone without first trying it out in person. Physical stores are an expensive investment to maintain – they’re taxed, they need to be staffed for sales and support, and they need regular shipments of products to keep up with the demand for their inventory. Fortunately, carriers and other retailers take the brunt of those costs by building brick-and-mortar stores in nearly every large town in every region. Thus, with the exception of Apple, most manufacturers rarely sell directly to the consumer. According to a survey performed by the Consumer Intelligence Research Partners (CIRP) and published on the Huffington Post, a majority of smartphone purchases occurred through either carrier stores or retailers such as Best Buy. The sticker price on any device you purchase from a brick-and-mortar store is inflated due to the carrier accounting for their middleman-costs plus some additional cost to net some profit. Huawei devices sold in-store are no exception to this price hike, but how they deal with it is rather unique in the smartphone world.

Retailer Share of Smartphone Sales, October-December 2014

Retailer Share of Smartphone Sales, April 2013-December 2014

Smartphone companies have a few options when dealing with the marketing entanglement of carriers. The first and most common option among companies is to offer the same device at the same price both in-store and online. This removes any potential complications arising from undercutting carriers, whom manufacturers wish to maintain a close relationship with. However, this option means the consumers will be paying an artificially inflated price if they choose to purchase a product online. Bad for consumers, but very profitable for the manufacturer. Both Apple and Samsung operate using this model, what with their devices being available in large quantities on every carrier imaginable and through various e-commerce channels as well.

Another option that is more popular with the smaller smartphone brands is to cut out the middleman entirely and only sell product through a single channel – online. Truth be told, this option isn’t usually taken because it’s superior, but because it’s simply prohibitively expensive to go through all the carrier certifications and other steps needed to start selling in-store. That’s not to say it’s a bad route to go. On the contrary, as e-commerce grows worldwide, so does the opportunity to cash in on this growth. These companies are pinning their hopes on the fact that more and more people will turn their eyes towards the Internet for making a smartphone purchase, which is especially true with the explosive growth of online marketing driven by a new generation of reviewers on tech blogs and video sites. OnePlus, and to a lesser extent Motorola, are two examples of manufacturers that offer devices at a comparatively lower price through their online store.

Finally, there’s Huawei. They decided to take a middle of the road approach to get the same product through both online and offline channels, without having to inflate the online price at the expense of the consumer. By splitting their e-commerce division into Honor, Huawei is able to offer the same (but re-branded) device online at a lower price than the sister device sold in-store. Since the two are technically distinct brands, Huawei won’t be competing with their carrier partners by offering a cheaper version of their phones online via Honor. So although a tech savvy consumer could go online and save money by buying from Honor, the average consumer will be none the wiser which is good enough in the eyes of carriers. A very fascinating move by Huawei indeed, but it comes with its own set of marketing complications as Huawei has to re-educate consumers about the existence of this “new” brand.

Hua? No Wei! It’s Honor!

Huawei – ahem, Honor – has some ambitious plans to win over the hearts and minds of consumers. Its focus is on “digital natives” AKA young people – the demographic most actively involved in e-commerce. Young adults are a golden demographic that most marketers have trouble cracking into. What do those darn kids really want, anyways? Some companies have done spectacularly to appeal to this target demographic, such as Red Bull, while others have crashed and failed. We’ve seen how viral marketing has both helped OnePlus (the hype surrounding the specification reveals for the OnePlus One was out of this world) and harmed them (remember the ‘Ladies First’ contest?). Although e-commerce provides an exciting entry into the hyper-competitive smartphone space, the rather unique way companies have to approach marketing for the current generation online provides quite a challenge. Honor believes that pop music and extreme sports are its ticket to achieve cool-kid status.

“For the Brave” – Honor’s Tag-Line

Whether or not this way of marketing will be successful is hard to say given how young the company is. The success of the brand in China, Mexico, and some European countries gives some credence to the idea. However, it’s hard to decouple that success from the fact that people could just be buying the phone because they’re good phones, not because it’s cool to do so. The second anniversary festival for the Honor brand held in Shenzhen was packed full of people enjoying the festivities put on by the company, but does this kind of marketing really translate into brand loyalty? I am skeptical, but choose to withhold judgment to see the full extent of their online media blitz. The real test of the Honor brand will soon occur as the brand makes it first foray into the U.S., unveiling its first smartphone offerings at CES Las Vegas this coming January. Can Honor phones take the online world by storm like the original OnePlus, or will they stagnate? I personally hope the brand can make some waves in the U.S., if at least to disrupt the Samsung/Apple and carrier dominance that leaves us with few flagship offerings and overpriced contract-based services.

Have you ever used an Honor device? Tell us your experiences in the comments below!

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