Can Motorola Get Its "Moto" Working?
Fans of cable music channels VH1 and MTV, or CNN viewers, may have noticed the flashy new Motorola ads that started running a few weeks ago. A groom, stuck on the freeway, talks by cell phone -- or "moto" -- with his futuristically dressed, weeping bride while their relatives pace in the church. It may seem like just another youth-oriented cell-phone commercial, but it offers a peak into Motorola's attempt at a rebirth.
The "hello moto" TV spot and numerous print ads are Motorola's latest -- and, perhaps, most important -- move to get its cell-phone business onto the fast track. For the past year, analysts have predicted that aggressive competition from rivals such as market leader Nokia might drive it from the business. But Motorola (MOT ) has persevered. While the cell-phone market is down, Motorola has cut costs and looks poised for a turnaround in this business.
True, it's still bleeding red ink. The company had an overall net loss of $1.2 million in the fourth quarter of 2001 (vs. a $125 million profit in the same quarter a year ago), on revenues that fell 25%, to $7.3 billion. But its cell-phone division has made remarkable strides. It broke even in last year's third quarter and turned the corner in the fourth, when sales totaled $3 billion. Meanwhile, its operating earnings through restructuring jumped 128%, to $189 million. That should help Motorola turn a profit this year of $179 million on sales of $28.3 billion, projects SG Cowen Securities.
Impressive as that may seem, Motorola's mobile-phone division needs to increase its global market share by two percentage points this year to meet analysts' expectations. That'll be a tall order. Motorola gained four points of global share last year, raising its total to 17%, and it hopes eventually to get that to 25%, behind Nokia's 37% market share. But the competition is intensifying, as Nokia and Asian manufacturers are flooding the market with new models.
Motorola's stock price has fallen 12%, to around $13.60 since the beginning of the year. Shares of other mobile-phone makers are dropping, too. But at least Motorola's "moto" ad campaign gives it a strategy for setting itself apart from the pack. After all, "Most people don't know who built their phone," notes Lisa Jo Wilson-Knight, vice-president of marketing at AT&T Wireless.
Motorola's first step: offer the hippest cell phones in the market. The company has hired experts from Apple Computer and footwear giant Nike to give its phones that image. It has also revamped its products. On Mar. 13, Motorola introduced several groundbreaking models, including the swing-open V70, which is "almost a new genre" in cell phones, says John Bucher, an analyst with Gerard Klauer Mattison & Co. Analysts are lauding the new handsets -- which will go on sale in some markets as early as this spring -- for their cool metallic colors and plethora of features, such as voice activation.
Now, it's time for the main act: Motorola's ambitious moto campaign. Though the company won't say how big the total marketing budget will be, a spokesperson says it plans to spend $75 million more on cell-phone marketing this year than it did in 2001. In addition to the "hello moto" spots, it already is running six different print ads featuring catchy lines like "alphamoto," for a phone designed for the driven-business user, and "buddymoto," targeting friends-obsessed teens.
The company got the idea for the ads from Taiwan, where teens already refer to their cell phones as motos, says Geoffrey Frost, head of cell-phone marketing at Motorola. With heavy advertising, it hopes the word moto will become part of the vernacular in the way Coke and Xerox are. If all goes according to plan, moto will become an alternative to words like cell and mobile phone. As in: "What's your moto [cell phone number]?" Or, "Do you moto?"
Turning a brand into a household word is never easy. Motorola is a very distant second to Nokia in a fragmented market. And there are no quick and dirty rules -- or hard and fast ones -- for creating a lasting brand name like Band-Aid or Kleenex. Consumers adopted them for generic use of their own accord. Such usage was then boosted by companies' marketing machines.
That's how this type of branding usually works, says J. Scott Armstrong, a professor of marketing at the University of Pennsylvania's Wharton School, who began his career at Xerox. "Fads are difficult to predict and manage," he adds.
Another big problem with moto: The word is already in use. It refers to motorcycles, points out Jacques Chevron, founder of branding firm JRC&A in La Grange, Ill. A simple Internet search for "moto" brings up a long list of sites for motorcycle enthusiasts and manufacturers, such as Italy's Moto Guzzi.
Yet if Motorola can even partially succeed in branding a commodity like cell phones, it could rise above a market where all companies' handsets look more or less alike. "Brand recognition makes all the difference. In a sea of sameness, you can really stand out," says Nick Shore, co-founder and CEO of branding agency The Way? Group in New York. Motorola is counting on it.
By Olga Kharif in Portland, Ore.
Edited by Thane Peterson