But Chinese smartphone vendor Alcatel OneTouch doesn't believe flagship necessarily has to equal expensive.
"It's all of the right technology at a great price for the masses," Steve Cistulli, senior vice president for the North America region, said in an interview on Wednesday. His idea for how much a flagship product should cost: less than $300.
Never heard of Alcatel OneTouch? You're not alone. The company, a unit of Chinese television vendor TCL, has quietly built its brand in the US by selling affordable smartphones and ramping up its marketing effort. It's also one of several vendors that have opted to sell smartphones directly to consumers in an effort to build a relationship with them.
Motorola has adopted the strategy with its latest flagship smartphone, the Moto X Style, known as the Moto X Pure Edition in the US, eschewing its traditionally strong carrier relationships. After ZTE launched its flagship Axon brand, the company said it too would sell the first Axon smartphone on its website or through retail partners such as Amazon or Best Buy. Fellow Chinese vendor Huawei included a warranty when it launched its own direct-to-consumer smartphone in June.
It's that direct-to-consumer approach where it hopes to make the biggest waves. In May, Alcatel launched the Idol 3, a $250 smartphone that it touts as its "flagship" product. Later this year, it plans to launch a smaller version of the Idol 3 online to press its momentum, and Cistulli hinted that a US carrier would also sell the phone.
The Idol 3 isn't trying to be the next iPhone killer. At nearly a third of the typical cost of premium phones, Alcatel is presenting the smartphone -- and subsequent devices in the Idol family -- as a flagship for more price-conscious customers. While its unlocked smartphones only work on AT&T and T-Mobile, Cistulli has plans to introduce phones that will support all four major carriers.
"The $250 price is deliberate," he said. "It's pretty much the down payment (on a premium phone)."
The focus on price comes at the right time. The US carriers have changed their plans to break out the cost of the device from their service plans, exposing the true price tag on smartphones. Previously, carriers would offer a subsidy to cover the bulk of the smartphone cost in exchange for a two-year contract and higher service fee.
But shining a light on the price of smartphones forces consumers to rethink how much they want to spend on a device. While monthly installment plans help some consumers spread out their payments over two years, only customers that pass credit checks enjoy that advantage. Customers with less-than-ideal credit scores often pay higher upfront payments and monthly device fees.
Sales of the Idol 3 have doubled the company's forecast, Cistulli said, although he declined to provide specific numbers. (CNET Senior Editor Jessica Dolcourt touts the "mega-affordable" phone's large display and outdoor photo quality, but dings it for sluggishness and low-light photos.)
Still, the direct-to-consumer approach only addresses a small sliver of potential buyers; a majority of folks still buy their smartphones through a carrier. As such, Alcatel hasn't given up on the traditional model of selling its smartphones through carrier stores.
While the carrier model remains the most effective way of selling phones, Cistulli said he expects a quick transition to the direct sales approach. He believes that the market will hit an inflection point in the middle of next year.
"Momentum will pick up in an exponential way," he said, adding that he believes that the mix of sales from its direct approach will become its primary source of revenue in the US by 2018.
By next year, Cistulli said he expects the pace of new product introductions to quicken, with the company potentially putting out three to five new unlocked smartphones to keep up with the pace of consumer demand for something new.
Alcatel is in the midst of a dogfight with ZTE and Motorola for the position as the fourth-largest smartphone vendor in the US. Cistulli said he hopes to end the year as the No. 4 vendor, which would displace ZTE.
"Out all of the (vendors), we have the greatest potential to grow," he said.
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