Tuesday, 30 September 2014

Gone in Seconds --- The Amazing Story of Xiaomi’s Market Strategy in India

I will start this article by sharing a personal anecdote. Some years back, I was actually forced into buying Blackberry handset by my boss who wanted to connect all the employees with himself through the BBM (Blackberry Messenger) instant messaging tool. The trigger was that TRAI (Telecom Regulatory Authority in India) had capped the number of SMS that you could send in a particular day. As we were a large organization with more than a thousand employees, he needed to send and receive information from a huge number of people. The BBM option actually helped him to get over the constraint caused due to TRAI notification.  

But after buying Blackberry, I actually thanked him. This was my first smart-phone experience, and I was amazed that you could actually do so much with your handset --- send and receive e-mails, browse the net, listen to songs, watch movies, share pictures and videos, connect with a huge number of people on social media like Facebook, LinkedIn and Twitter and even use Word, Excel and PowerPoint files. And of course, the BBM was the icing on the cake.     

But due to a series of unfortunate events, Blackberry started losing the sheen and their popularity took a nosedive. I could actually sense a lot of my connections moving out of BBM and opting for WhatsApp (Even my boss wrote, “Hey there, I’m using WhatsApp” and disconnected me from the BBM contact list).   To make things worse, my Blackberry handset was getting heated up, the software started hanging frequently, and the rubber paddings started coming out from all sides, giving it an ugly look. I started looking for a new handset that would be sleek, good looking, technologically superior and of course, affordable.

That’s when I read the about the Xiaomi’s launch of Mi3 mobile phones in India. There were no Print Ads, there were no television commercials, no hoardings, no promotions at dealer outlets --- just a plain and simple press release in all major newspapers and internet news sites on July 8th which said that that Xiaomi, who was also known as the “Apple of China” was launching the much popular Mi3 phone in India. The specifications were awesome --- it was offering a 5.00-inch 1080x1920 display powered by 2.3GHz processor with 2GB RAM and 13-megapixel rear camera. But the breath-taking feature of Xiaomi Mi3 was the price --- it was offering all these at a mere Rs 13,999/-.

But the buying process was difficult. Xiaomi had an exclusive channel partnership with Flipkart and you could only buy it over Internet. Before buying, one had to pre-register with Flipkart and Xiaomi. The sales window was supposed to open on 15th July at 12 o’clock afternoon. I waited with bated breath. I was desperate to buy the Mi3. But at the designated moment, a series of mishaps happened. Firstly, I could not enter the site. By the time I managed to enter, the site had crashed. By the time the Flipkart site recovered, there was a message saying “The product is out of stock. Wait for the next announcement.”  

Although Flipkart or Xiaomi did not reveal the actual figures, the various news agencies surmised that they had sold 5,000 units in 30 minutes. Flipkart did send me an e-mail stating that I could again try next Tuesday at 2 PM without any pre-registration. Next Tuesday, the product got sold out in 5 minutes. The news was that this time 10,000 units were sold in 5 minutes. I tried again next Tuesday. The product got sold out in less than a minute.  Xioami had managed to sell 15,000 units in less than a minute. And in the following week, they sold 20,000 units in 5 seconds.  And since I didn’t have a super-computer at my disposable to match those lightning speeds, I gave up on Xiaomi and settled for Alcatel Onetouch, which had similar specifications but priced at Rs 16,999/-.

What Xiaomi has done in India is very remarkable because they managed to get great word-of-mouth publicity without spending a penny on advertising or sales promotions. They literally converted the dynamics from push-marketing to pull-marketing. While other mobile phone companies are busy trying to lure customers with freebies, discounts and big ads featuring bollywood and cricket stars, Xiaomi is quietly doing their job of capturing the markets and building their brand image with a strategy that we call as “Power Pricing”.

Xiaomi is not the pioneer of using the concept of power pricing for brand building in India. Long time back, a company called Akai had given the established consumer durables companies a run for their money by offering high end color televisions at rock bottom prices. Although that blitzkrieg didn’t last long and Akai was eventually acquired by Videocon, it actually demonstrated that you can create a buzz in the markets by getting the pricing right.

In economics, we talk about two zones called the producer’s delight and customer’s delight. Producer’s delight comes when the product can be sold at premium pricing by convincing the customer that although they are paying very high, they are getting value-for-money. Apple follows a similar strategy where the products are given an esteem value. Consumers Delight is the zone where the products are sold at a value lower than what the consumers are ready to pay. In case of consumer’s delight, the customers become very satisfied, but the company ends up with substantial losses or missed opportunity of enhancing profits. In between is the sweet zone where the company ends up with profits and the customers end up with satisfaction.   Xiaomi seems to have successfully discovered the sweet zone and is going great guns by implementing the power pricing strategy to build their brand.

Meanwhile, Xiaomi is still creating tremors in the mobile phone market while I nurse my broken heart of not being able to possess one of their much-talked-about products.  Yesterday (30th September, 2014), they sold 60,000 units of their second mobile phone brand called Redmi 1s through Flipkart in 13.9 seconds . This is one case study which no Professor of Marketing can easily forget to cite in their classrooms. And maybe, next time, I should take help from Carl Lewis or Usain Bolt when I try to buy a Xiaomi product !!!

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