Moto G: Motorola's surprise hit, honed at knifepoint

While cheaper and less powerful than the Moto X, the Moto G is more critical to getting consumers back on the Motorola bandwagon, particularly in the world's fastest growing markets.

Roger Cheng Former Executive Editor / Head of News
Roger Cheng (he/him/his) was the executive editor in charge of CNET News, managing everything from daily breaking news to in-depth investigative packages. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade and got his start writing and laying out pages at a local paper in Southern California. He's a devoted Trojan alum and thinks sleep is the perfect -- if unattainable -- hobby for a parent.
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Roger Cheng
8 min read

The new Moto G improves upon the original, but retains the same low price. It's been a winner for Motorola. Sarah Tew/CNET

For one Motorola Mobility employee, it was customer feedback of the most extreme kind.

About six months ago, members of a research team from Motorola traveled from Chicago and Sunnyvale, Calif., to an undisclosed city in the heartland of Brazil. Their mission: to visit a customer testing a prototype of a new version of the Moto G, the handset it introduced in November 2013 for less than $200 to appeal to budget-conscious consumers.

The group, which consisted of two designers, two product managers, a software engineer, and a researcher, were trying to determine the effectiveness of an emergency alert application being designed for the Moto G that would be able to quickly send a message to a listed contact or sound an alarm from the phone. When the customer complained it took too long to trigger the alarm, Motorola software product manager Meet Jariwala offered a few suggestions to improve the app. But the customer, a stocky, 5-foot-4 man who had suffered through a few bad experiences, felt his message wasn't getting through.

"Do you want me to show you?" the customer said. He headed into the kitchen, returned with a knife, grabbed the 5-foot, 3-inch engineer from behind and pointed the tip at his throat. "Here's how it exactly feels," Jariwala recalled the man saying.

Meet Jariwala, a product manager for Motorola, had a jaw-dropping experience while researching how customers use Motorola phones. Motorola

While Jariwala was scared (he wasn't in actual danger), it was a valuable lesson in truly understanding the needs of customers. As a result, Motorola is working on a way to let people in urgent situations trigger an alert on their phone without looking at the screen. That capability will eventually come as a free update to the existing MotoAlert app, found exclusively on the new Moto G, according to Stokes Jones, the researcher who led the field team when the mock mugging happened. The company hasn't set a release date for the update, since the phone was just released on Thursday.

That Motorola has gone so far to figure out the whims and interests of people in emerging markets -- not the typical source of customers for flagship smartphones such as the iPhone 5S or Galaxy S5 -- underscores the difference in its priorities from its rivals. While the company holds up its shiny, $500 Moto X as its premiere smartphone, it's really the lower cost, and lower profile Moto G that's drawing people to Motorola and away from market leaders such as Apple.

Motorola Mobility, which suffered sustained losses for the past four years, needs a hit as it looks to new life under Chinese electronics giant Lenovo, which agreed to buy the business from Google for $2.9 billion this year. Motorola holds 2.8 percent of the global market for smartphones, a paltry figure considering it invented the cell phone. But tack on Lenovo's 5.2 percent share, and the combined businesses are now a solid third, just behind Samsung, with 25 percent of the market, and Apple, with 12 percent, according to market research firm IDC.

Yes, the Moto X gives it a high-end offering to compete against Apple's iPhone and Samsung's Galaxy franchise. But Motorola is looking for more success at the bottom, where it can appeal to customers in areas where budgets are limited and owning the latest and greatest gadget isn't a high priority.

"The Moto G is clearly the hero product for Motorola," said Avi Greengart, an analyst for Current Analysis.

The smartphone has been a surprise hit for Motorola. The business claims that the Moto G is its best-selling smartphone of all time -- surpassing even sales records for the original, high-profile Droid. Motorola hasn't disclosed specific Moto G sales, but it has said it played the largest role in the company shipping 8.6 million devices in the second quarter -- up 130 percent from a year ago.

The Moto G has also helped the company regain its foothold in certain markets, including the UK, India, and Brazil. In Brazil, which is the world-fourth-largest market for smartphones, it's the top-selling smartphone.

"Moto G has absolutely been crucial for us," Motorola President and Chief Operating Officer Rick Osterloh said in an interview Thursday. "It's a primary reason we've gone from no share to something relevant now in some markets."

With the new Moto G , unveiled Sept. 4, Motorola packed in a bigger 5-inch display, improved 8-megapixel camera, and a slot for additional memory. More critically, the handset will be sold at the same $180 price without requiring that customers lock themselves into a specific wireless contract. Most smartphone makers require you tie yourself to a two-year contract in order to get a handset at a lower price.

"Moto G brings a really mainstream audience a killer smartphone," Osterloh said.

Immersion work

Every smartphone manufacturer rattles off about all the effort they put into figuring out what people want. Motorola believes it goes a step further with its "immersion work," which involves following customers around, from their homes to their work places, and watching everything they do with a phone. "We're in their home, observing them, looking at pain points," said Lauren Gellman, head of marketing for Moto G.

Stokes Jones is a social anthropologist for Motorola who led the field research team when the mock mugging happened.. Sarah Tew/CNET

Later in the process, Motorola will seed prototype phones to them to get their reaction -- as the team did in Brazil. "We have to do front-end work to plug the gaps in the experience," said Jones, who is a social anthropologist employed by Motorola.

Jones will typically fly in first, giving prototype smartphones loaded with test apps. In the case of Moto G, 15 households in Brazil and 15 in India -- chosen from different regions and with varying levels of income -- tested the phone. After monitoring them for two weeks, Motorola engineers and product managers are brought in for a group session in each home.

It was at one of these sessions that Jariwala met that passionate customer.

Jariwala's moment of fear was the kind of perspective he needed to understand how a person might respond in the middle of a mugging. There are only 5 to 10 seconds to react, and few will have the presence of mind to tap on their phone to send an alert.

Motorola's newest Moto G shows off its colors (pictures)

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It's telling that the research conducted isn't for a feature for the Moto X, although it might make its way on to the high-end smartphone eventually. For now, MotoAlert is only available on the Moto G.

That kind of thinking is a reversal of the standard paradigm that dictates that the more expensive devices get the newest features first. And it shows budget-conscious customers that Motorola really cares about them, which in turn helps sales. "The Moto G is important because we're seeing more growth in the more affordable smartphone segment," said Ross Rubin, an analyst at Reticule Research.

While smartphone sales in mature markets will grow at a rate of 5 percent this year, sales from the emerging markets will jump by 32.4 percent, according to IDC.

An identity reboot

The idea that Motorola is putting as much resources into developing a mid-to-low-tier smartphone as it is in its premium product runs counter to the company's own history.

Motorola made its mark with high-profile, blockbuster devices. The bulky DynaTAC brick phone, introduced in 1983, remains an iconic image of the classic mobile phone. Its StarTAC, introduced in 1996, was the first ever clamshell phone, while the ultra-slim Razr boosted demand for flip phones after its 2004 launch.

Remember the original Motorola Razr? Seemingly everyone owned one. Motorola

While Motorola had a significant presence in emerging markets, Nokia outmuscled the company with broader reach around the turn of the millennium.

Even in the modern smartphone era, Motorola had what many considered the first legitimate competitor to Apple's iPhone with the Droid, which was backed by a $100 million marketing campaign and an alliance among Motorola, Verizon Wireless, and Google. The smartphone was released in 2009, when AT&T still had the exclusive rights to sell the iPhone in the US.

Even as most handset manufacturers today invest in a solid flagship product -- think the iPhone 5S, Samsung Galaxy S5, HTC One M8 or the LG G3 -- Motorola has been thinking different. It changed course when Google purchased the mobility business in May 2012 for $12.5 billion. Under former Google executive Dennis Woodside, the company simplified its product line down to the Moto devices, which offered a version of the Android software that is free from the kind of additional software loaded on by other handset manufacturers. Its push began with the Moto X a year ago, followed up by the Moto G in November.

The identity change extended to Motorola's place of work. It was under Woodside that the business began plans to relocate from Schaumburg, Ill. -- a sleepy suburb of Chicago -- first to another suburb called Libertyville and then into downtown Chicago's historic Merchandise Mart building.

Woodside didn't stick around for the move, leaving in February, a month after Google and Lenovo struck their deal. (He now serves as chief operating officer of cloud storage provider Dropbox.)

By the time Motorola was ready to move, there were fewer employees. As of June, the business employed 3,485 people, down from 4,600 a year ago and 20,293 in 2012, when a home set-top box division was still part of Motorola. Workers started filling the new Merchandise Mart office in February, with the move completed in April.

Motorola subjects its devices to various torture tests to determine its durability. Sarah Tew/CNET
It was around this time that Osterloh, who joined Motorola in 2012 during the reboot, took the reins as president and chief operating officer, a step up from his role as head of the product management group. Motorola hasn't named a new CEO and may keep the post vacant, Osterloh said.

Motorola used its new digs -- white open workspaces with splashes of colors reminiscent of a place befitting a Silicon Valley company -- to host its latest product launch. At the new Chicago downtown office and labs, it unveiled the latest Moto G and Moto X, as well as an accessory earpiece called the Moto Hint. It also provided more details on the Moto 360 smartwatch, including the $250 price the development process behind the device, and showed off the facilities it used to create those products.

To emphasize the importance of customers in overseas markets, Motorola also held six other launch events around the world that same day.

Life under Lenovo

Critics have questioned whether Motorola will keep offering lower-priced smartphones, especially under new ownership. Incoming parent Lenovo has a track record of successfully acquiring and integrating US business, having catapulted into the PC market through its acquisition of IBM's personal computing division in 2004. It already makes smartphones, but hasn't cracked the US market.

Lenovo declined to comment about Motorola's future, citing the uncompleted deal.

Osterloh, however, said he's confident Motorola won't change -- even as new priorities and goals are set. "We're going to keep doing this until everyone knows about it," Osterloh said in an interview. "It might take 10 years, it might take two; it doesn't matter to us."

President and Chief Operating Officer Rick Osterloh addresses the media at the company's launch event on Thursday. Sarah Tew/CNET

For now, outsiders are looking for sales and profit. Motorola was a drag on Google's earnings. In the last quarterly report, Google posted a net loss from discontinued operations of $68 million, and placed the blame on Motorola. Osterloh said the unit makes money on the smartphones it sells, and said its losses are narrowing.

Motorola should be able to tap into Lenovo's more efficient manufacturing process, as well take advantage of the combined company's ability to negotiate for cheaper components. There's also little overlap in markets where Lenovo and Motorola serves, which means they can continue to win customers without worrying about cannibalizing each other.

Lenovo has said it expects the business to generate a profit four to six quarters after the deal closes by the end of the year, and Osterloh reiterated the timetable. One reason he's so optimistic is the Moto G.

"We hit a part of the market that is converting to smartphone right now with a product that is great," Osterloh said. "We were very fortunate to have that come together. "

Watch this: The new Moto G stays super-affordable, and gets even better