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 !!!

Wednesday, 17 September 2014

How Apple Watch will redefine our timekeeping and lifestyle

In the year 1987, a Hindi movie called Mr India, starring Anil Kapoor, captured the public imagination with it’s innovative storyline. In the movie, Anil Kapoor is bequeathed a gold watch that helps him to disappear. The villain Mogambo desperately wants that wonder watch and finally the good prevail over the evil. The film went on to become the second highest grosser of the year and till today is considered among one of the cult classic movies of Bollywood.

The humble watch that we use to keep track of time has gone through several transformations.  Initially it was the hourglass that used to indicate the correct time. Later, that evolved into the sundial, water clocks and pendulum clocks. The wristwatches were initially mechanical devices driven by clockwork and springs. The mechanical devices were later replaced by vibrating quartz crystals that gave more accuracy in measuring time. The next stage of evolution was the digital watches which ran on electronics technology.

Wristwatches started becoming popular after the Second World War. It was also a popular item given as gift in marriages. The wristwatch was also used as a credit card --- if you were short of cash, you could keep your wristwatch as a security till you arranged the cash. However, with mass production and the prices of watches coming down drastically, the popularity and esteem value of watches also started coming down.

While the Japanese watchmakers like Seiko and Casio popularized the digital watch, the Swiss watchmakers breathed a new life into the watch industry by making it a fashion accessory. Rolex, Rado, Omega and Swatch came up with breath-taking designs that added the gleam to your personality when you adorned their watches. These models were also a precious possession bought by people who travelled abroad and gave gifts to their acquaintances.

The launch of the Apple Watch has brought in a whiff of fresh air into the watch industry and is also all set to pose a serious threat to the traditional watch makers. As per information given by CNET, “The Apple Watch is a music player like an iPod, a fitness tracker with heart-rate measurements, a communications device that will send and receive messages, calls and audio recordings, and a handheld portal to other apps, too. It also makes payments via Apple Pay.  It can also control your Apple TV and act as a remote for connected smart home devices.” This electronic device will monitor heart beats, track calories burnt and take dictations. The most remarkable feature of this watch is a “haptic” processor that will send subtle vibration feedback for notifications, alarms and other messages.

How will Apple Watch change the contours of the watch industry? Just the day after Apple Watch was unveiled, we got a shocking news --- HMT was closing down after 53 years of operation. The company whose punchline was “timekeepers of the nation” could not face the onslaught of the new age watchmakers who promised more beauty, elegance and style in addition to accurate time. And how are other watchmakers gearing up to face the competition from Apple? The luxury watch makers had previously successful fended the challenge from quartz and digital watch makers, but this time they are up against a much formidable competitor. The high end watchmakers will continue to have patrons who will vouchsafe for their quality, design and craftsmanship. But, as the adage goes, once Apple enters a particular category, it leaves very little room for competitors to maneuver. 

How will it change our lifestyle ? Well, we might just stop using mobile phones and switch over to the Apple Watch. So no more botherations of having to pull that brick out of your pocket to make calls. It might make us very very health conscious and calorie conscious. And as the haptic engine of the Apple Watch promises to convey feelings through taps and vibrations, we might just stop hugging and kissing our loved ones and send subtle tap signals instead !!! Shall we see James Bond ditching the Omega Seamaster Aqua Terra wristwatch and switching over to Apple ? Whatever it is, the Apple Watch promises to be an exciting device that might radically transform the way we communicate and live.