Deciphering an Enigma: XIAOMI

Published by MBA Skool Team, Published on November 17, 2014

15000 units sold in 2 seconds, this bit of news took up a lot of online webpage real estate. The question that arises in minds of the masses is how, but as a student of marketing I am more perplexed by why. When Xiaomi, a Chinese company plans a move in India the challenges they face are very different than what an apple faces. If I were to answer the why with one word it would be Psychology, whose psychology, not just consumers’ but entire population’s psychology.

The thing is if I walk up to an average Joe and ask him here is a Xiaomi with these specifications and I am selling it for 14 grand, will he buy it? The answer is no. The reason is that many such Chinese phone brands exist in India, right into the rural markets. So the first barrier here is convincing people that Chinese need not always mean poor quality goods. With a brand name that is distinctively Chinese, how to you go on convincing the population that you have such a mighty product.

You can’t target the whole 1.3 billion in a go, so you segment them based on their relative income levels and education. There is a well set rationale behind this. If you want to make inroads into any demography where do you start from, the ones at the bottom of the pyramid or ones at the top? The logical answer is ones at the top of pyramid, they are the trend setters. Now let’ say in an office there is a manager and clerk, if you want your product to strike a chord with both of them then you target the manager because the clerk looks up to him and aspires to be like him. If the manager starts using Xiaomi there is a high chance that it would create a sort of appeal in the clerk’s mind, and he would in due course of time follow suit.

You have now identified your target customer, but how do you reach out to them. There are two main reasons why you can’t foray into the conventional Indian market with such fewer inventories and without taking too many risk. The inventory that Xiaomi started out with i.e. 45000 in three phases, is too less for entire India. That sort of inventory would get lost in this era of aggressive product visibility. Now then the next obvious solution is aiming a single region and growing from there on. That also comes with an added risk. You get branded as a regional player. And even though you have pan-India advertising and promotion (which costs a bomb) the availability of your product would be in limited in most of the part of the country and hence prospective customers will get frustrated and move on to buy a substitute product.

So, right now the two variables are, aiming at the trend setters and at the same time having a Pan-India presence and appeal. The best solution to this problem was Internet it guaranteed an even distribution and presence in the country, opportunity to provide the products to trend setters, chance to play with limited stocks, and get copious amounts of free online publicity.

There are two kinds of buyers, one those who understand the specifications of the technology they are buying and choose accordingly, and the other who considers this to be an important factor but lacks the knowledge and hence depends upon word of mouth. Online platforms give the products a chance to show off their specifications to the buyer. Xiaomi without doubt has a great product and flipkart would help it prepare a customer base that would help spread the word of mouth. Another practice is being perceived as a knowledgeable buyer. A customer may not understand the features fully yet while describing it to his peers it would name all of the features that it remembers and these jargons add immensely to the appeal of the product.

Now time for the final question, why start with an inventory so small in an economy of scale so large. The obvious answer is that lesser the supply greater the demand and hence by creating artificial supply shortage it would create a greater demand for its products. My point of view is that they had something bigger and grander in their mind.

What Xiaomi did was generate news with obnoxious numbers. The public was wary of terms like highest selling brand, leading brand and other clichéd taglines that companies in every sector had used and abused. These three flash sales of Xiaomi gave the customers something new. The forecast of number of mobile units to be sold in India for 2014 is 481 Million1 or 48 crores. It means 13,17808 should be sold daily and 54908 every hour. When you compare that to Xiaomi selling 45000 in a few hours; it isn’t that impossible a deal. But when such reports are published online what sticks with the customer is 2 second. It sensationalizes the whole news. Online media has something catchy and Xiaomi enjoys a huge amount of online real estate without actually paying for many of them. Though Xiaomi provides a phone that’s at par with Samsung Galaxy 5 and iPhone5 in every respect and cost half of what they cost, but being a new entrant with a distinctive Chinese name it needed a lot of clever and well targeted marketing to position itself in the mind of the consumer, which it was effectively able to do.

This article has been authored by Debayan Roy & Neha Dhami from MDI, Gurgaon & HCL



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