XIAOMI’S MARKETING STRATEGY Presented To Prof: Kishore Thomas John On
16 september 2014
In partial fulfillment of the requirements of the course Marketing Management
By Thomson joseph (p14214)
TABLE OF CONTENTS 1
INTRODUCTION
2
MARKEING STRATEGY
3
OBSERVATIONS
4
CONCLUSION
5
REFERNCNCE
INTRODUCTION Xiaomi, a frequently heard name in newspaper headlines and a familiar name if you do purchases from e-commerce websites like Flipkart. As a marketing student I was tremendously surprised with success of this company, especially its extraordinary sales in India, through flipkart. I investigated further and it revealed the fact that Xiaomi had started the smartphone production only three years ago. It first introduced its first Android-based firmware MIUI On August 16, 2010. Later it started to produce smartphones known as Xiaomi Mi1 smartphone in August 2011. MIUI is the user interface of Xiaomi smartphones. It is very easy to use and learn compared to Apple’s and Samsung OS. Many smartphone manufacturers failed to make presence in Mobile Apps segment, but Xiaomi had created a large pool of apps for customers in china and moreover Xiaomi users spend 7% more time using apps
than Apple iPhone users. The company drew the comparison with the iPhone because it iPhone in the past six years, had beaten every Android phone that it had been tested against, on app usage in china. Taiwanese Foxconn is the manufacturing contractor of Xiaomi, which means Xiaomi could save both time and money concerned about production. Xiaomi’s main line of attack is to make products that consumers scream, rather than what they want at present. MARKETING STRATEGY Xiaomi grabbed the world biggest smartphone market with help of unique marketing and product strategy. Few years from its arrival it had 39% of Chinese smartphone industry. Oliver Verot, the founder of “Gentlemen Marketing Chine” has remarked Xiaomi’s strategy as purely marketing operation based on late Steve Jobs. It is actually creating demand by limiting supply. This Start the rumor of production may be insufficient to stimulate desire in “love brandeur” trigger envy and the purchasing act quickly and therefore ensure maximum sales rate. The increase in purchasing rate will stimulate media attention and other sort of publicity.
Xiaomi has been more aggressive where other competitors were lenient and it has been lenient where others were aggressive. This strategy paid off! , When 4G was introduced many smartphone manufactures tried to incorporate 4G compatible technology to their smartphones, but Xiaomi didn’t do it because most customers were reluctant to move 4G. Xiaomi offers are much more adapted to customers than others are. After analyzing many of their strategy I have divided it to the following based on price, promotion, product and geography (place).
#1: Product – Quality concern Xiaomi was cheaper compared to Apple and Samsung .Price was one of xiaomi’s major strategy, but it does not mean that it was only their core competences. There were many other Chinese companies who had cheaper products however all of them had major flows – poor quality. Essentially, those devices are reverseengineered versions of Samsung and other major brands models built from cheaper materials. Xiaomi was able to provide good quality phones with cheaper price. The phone has a tough body,
high quality screen and a credible battery. It doesn’t break easily, unlike cheaper copycats that start having issues after just a few months of purchase. Providing good quality phone at lower price range was the key strategic move that made Xiaomi resolutely on the map. By building its own Android-based OS called MIUI, xiaomi got new exciting features not found on typical Android devices moreover it had many customizable options. MIUI was easy to use and learn which has made Xiaomi more preferred choice. #2: Price – selling at cost of production Xiaomi was selling their phones at cost of production, means they had little profit on selling units. Xiaomi has also become conscious that selling cheaper phones near their actual cost was not a viable long term strategy, so they decided to go with the Amazon’s model – just cover the cost of the devices and make money from selling content. Although, Xiaomi is often compared to Apple of china, especially considering the fact that their creator, Lei Jun, resembles Steve Jobs in his style and charisma, it is clear that Xiaomi’s true encouragement comes from Amazon.
Xiaomi sells mostly through online because it reduces cost of sales and other operation cost related to distribution and retailing etc. Xiaomi also used social media not only for advertisement but also for engaging with customers. They promoted fans club for their smartphones as well as for their MIUI. The company encouraged their technician to interact with customers and gather feedback about their product and apps. Customer feedbacks are analyzed by Xiaomi for the renewal of their product. #3: Place – capturing home market
FIG (1), source @canalys
This shows how Xiaomi controls the top market share in china about 14%. . The company has claimed that it had sold more than 10 million smart phones in China in the first quarter of 2014. Xiaomi’s target is 40 million, which they are expected to achieve if they are doing well. Although there are rumors of Xiaomi’s expected coming to India, Europe and North America, the company seems to stay focused on their home market, China with 97% of the shipments locally. Moreover they have lot of difficulties to start their operations in EU and US, like spy stuff. BRICS is xiaomi’s main target market especially India and Brazil, since along with China it constitutes most of the mid segment smartphone users in the world. #4: Promotion – Flash style sales Flash style sales means selling limited quantities during limited periods. They always create anticipation and urgency – great factors to win consumers’ minds and hearts. This was case for crashing of flipkart, were lots of anticipated customers queued to register for xiaomi mi3 for online purchase. Due to this huge number the website crashed, this in turn made xiaomi phones
famous within one day. Word of mouth marketing worked very well for Xiaomi and they continue to take full benefit of it. #5: Promotion – social media based Xiaomi has also managed to harness the power of social media by not only broadcasting their messages and announcements but by actively engaging with their customers. Engineers are regularly encouraged to speak directly to clients and use gathered feedback to refine software as well as the products. They used online media for marketing. #6: Promotion – Fan club By using social media, Xiaomi was able to succeed in building a dedicated fan base. The Mi-fans are very active in social media and are, in some ways, comparable to those hardcore Apple fans that we are familiar. Mi-fans are present at Xiaomi’s product launches .where they are known for loud cheering and applauding. This fans are best marketers of the xiaomi products. #7: Promotion – charismatic leader
Apple had Steve jobs and xiaomi have Lei Jun, he does a great job in making his brand look cool. Lei Jun is known for his die hard resemblance to Steve, including jeans and dark shirts. But xiaomi is different from Apple in many factors like Xiaomi has no physical stores nor does it partner with third-party distributors. Instead, all Xiaomi products are sold directly through the company's website in India (flipkart). While there are some resemblances to Apple in many aspects, the ability to customize the software based upon user preferences sets makes xiaomi a class apart. #8: Promotion and price: based on apps and OS
Fig (2) indicates the usage of apps provided by Smartphone companies by customers in china. This shows
how Xiaomi expanded and reached top of the segment in china, surpassing all major players
From this we are able understand that xiaomi apps are doing well, which enables the company to recover money from apps. Apps in turn will help companies to promote their products.
OBSERVATIONS AND CONCLUSION Xiaomi has successfully sold many units of Smartphone’s around the globe. Xiaomi is expanding its presence across the globe. In India they have joined hands with flipkart to sell their smartphones. I firmly believe that they are hyping their demand by limiting supply. Even crash of flipkart website is a marketing tactics to get public attention. Xiaomi will be the ultimate killer for
mid- smartphone segment. As Samsung is leader in this segment, they will be ripped off from their pie. The Chinese sales results shows this trend . They have particularly have gained Chinese market’s major share about 14%. Hugo Barra, Vice President of International, Xiaomi and Lei Jun, CEO of Xiaomi are both visionaries, they are keen to expand their presence around the globe. Their marketing strategy is both different and promising. Xiaomi smartphones are having great hardware compared to its competitors. Due to small size its manufacturing and servicing sector is very small. Moreover, if ONE PLUS ONE another imminent Chinese brand with superior specs, manages to nail the price and make superior models, it will eventually cause problems to xiaomi.
