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Motorola Cheaps Out With Moto X’s $500 Million Ad Budget


An attendee inspects Motorola Mobility’s Moto X phone during a launch event in New York on Aug. 1, 2013

Photograph by Scott Eells/Bloomberg

An attendee inspects Motorola Mobility’s Moto X phone during a launch event in New York on Aug. 1, 2013

Motorola’s (GOOG) new phone, the Moto X, has as good a chance as any to succeed (or fail) in the marketplace. Having spent some time with the phone, I can tell you that as a product, it has all that’s necessary and nothing objectionable.

But building a perfectly good device is not how you win in the smartphone wars. For that, you need marketing and advertising. Which is why Motorola is reportedly ready to spend as much as $500 million to get the word out on its newest phone. Now, $500 million is a lot of money, but let’s put that in perspective.

In 2012, Apple (AAPL)  spent $1 billion on advertising.

The same year, Samsung (005930:KS) spent $4 billion on advertising.

According to Asymco’s Horace Dediu, Samsung also spent $5.3 billion on “sales promotion,” which is French for commissions and in-store displays, training, and other expenses. Roll together all of Samsung’s marketing, advertising, and promotional expenses, and you’re looking at an $11 billion budget.

Advertising gets a lot of attention, but marketing, sales, and promotion are arguably more important. For most people, the decision to buy a particular phone happens in a store. And that decision is guided by the quality of the display, the condition of the showroom phones, and the knowledge and enthusiasm behind the sales staff’s recommendations. It’s not as splashy as a Super Bowl ad, but it’s what moves phones.

Not every dollar (or euro, or won) in Samsung’s marketing budget is devoted to smartphones, but many of them are. Exhibit A: the Samsung display at any wireless retailer. You’ll see that all the phones are turned on, all of them work, and all have demo modes to show you what they can do. That’s a far cry from some of the other devices you’ll find there—ones that have been switched off or don’t function at all—and that isn’t an accident. Samsung spends buckets of cash to make sure its devices look spiffy in retail locations.

Earlier this year, Samsung Mobile marketing chief DJ Lee told me the company takes in-store sales very seriously. “We have teams monitoring stores in various countries,” he said. “The best way for us to sell our devices is in the store.”

Motorola knows it has to pay the same attention to detail. Last week, Chief Executive Officer Dennis Woodside explained how the Moto X would be prominently displayed at retail locations. Echoing Samsung’s Lee, he said that Motorola “has teams ready to train in-store staff on the features of the phone, particularly the new Touchless Control features.” AT&T (T) stores will display the full array of colors and options, so people can see how much they can customize their phone online. For those who like to get their account set up in a store but still want to go home and personalize their device, AT&T will also have “X Cards” that contain a code a customer can use to add the account they set up in the store to the phone they’re building online.

If Motorola’s prepared to spend $500 million on ads, then bully for them. The company had also better be prepared to drop an equally large (or larger) amount on the tougher slog of getting that Verizon Wireless employee to suggest the Moto X instead of a Galaxy S4.

The bottom line: Motorola’s $500 million ad budget for the Moto X only works if at least that much is spent on less-glamorous marketing.

Grobart is a senior writer for Bloomberg Businessweek. Follow him on Twitter @samgrobart.

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