A Case Study On Marketing Strategy of Xiaomi: September 2019
A Case Study On Marketing Strategy of Xiaomi: September 2019
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Ashok Panigrahi
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Ashok Panigrahi
Associate Professor, NMIMS University, Shirpur, Maharashtra.
E-mail: [email protected]
Area/Section: Management.
Type of the Paper: Research Case Study.
Type of Review: Peer Reviewed.
Indexed in: OpenAIRE.
DOI: http://doi.org/10.5281/zenodo.3466131.
Google Scholar Citation: IJMTS
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Ashok Panigrahi
Associate Professor, NMIMS University, Shirpur, Maharashtra.
E-mail: [email protected]
ABSTRACT
With the intense development and growth of China's mobile communication and technology
industry, many manufacturers have come up to take the advantage of growing market of mobile
phone users. Approximately 1 billion people own a smartphone. This has led to birth of many of
the world’s famous mobile phone brands. One of the major brand, emerged in 2010 was Xiaomi.
In this paper, background of Xiaomi’s, its marketing strategies, business models have been
presented. Also, comparative analysis of marketing strategy of Xiaomi and other manufacturers
has been done to understand the reasons for the market success and the exponential growth
exhibited by the company. The current state of information available through various platforms
has been used to perform the study. It has been inferred that, the primary reason for this
exceptional growth has been the product quality at cheaper rate with a focus on customer
feedback and requirements. The testimony to this fact is its ever expanding portfolio into various
domains such as smart TVs, Speakers, home appliances, personal computers to name a few.
Keywords: Marketing Strategy, Xiaomi, Pricing, Branding, India.
1. INTRODUCTION :
exclusive partnership with ecommerce giant
In the last 5 years it has been observed that the Flipkart to sell its smartphones but later on 7th
smartphone industry has grown exponentially. April 2015 they changed their distribution
Long gone is the time when the consumers needed strategy and announced partnership with Amazon
to carry 2-3 kg laptops for their daily and Snapdeal.
requirements. Nowadays big brands like Xiaomi They first started productions in Sricity (A.P.) at
have been adopting the strategies of hunger that time 200 million people owned a
marketing where the availability of the product is smartphone out of 1.2 billion people. By the end
intentionally restricted by the manufacturer to same year, they captured 1.5% of Indian market
create surplus demand in the market. A major share which doubled in 2015 competing along
change has been identified in the usage pattern of with homegrown brands like Micromax, Lava and
consumers which has been strategically tapped by other international brands like Samsung.77% of
companies [2]. the smartphones were locally made that benefited
Xiaomi’s first android based firmware MiUi was them in reducing the operational costs. By the
launched on 16th August 2010 and a year later it same time Xiaomi had overtook Samsung and
launched is first smartphone Mi1 in China [5]. Apple by the end of 2015 in China [2].
The product became successful and further new Xiaomi.inc which was ranked 2nd amongst 50
models were launched namely M2, M3 and other reviewed reputed companies (viz. Apple,
Redmi phones on the domestic front. Xiaomi Google, Microsoft etc.) by MIT technology
hired Hugo Barra (ex. Google Android Executive) review (2015). This happened just within a year
who paved the way for its expansion in the Xiaomi stepped in the Indian markets.
offshore markets.
2. RESEARCH OBJECTIVES :
After successfully capturing significant market
shares in the rest of Asia, Xiaomi entered Indian The objective of this paper is to analyze the
markets in July 2014. Initially Xiaomi made an marketing strategies of Xiaomi and to find out its
secret of success of in India common items [3]. The core competitive
3. MARKETING STRATEGIES : strategies adopted by Xiaomi competitive cost,
quick expansion in the offshore markets, less
3.1 Introduction to marketing strategy margins and selling products online exclusively.
Penetration into any foreign markets requires Indian market is very diverse and large and it is
various mix of marketing strategies which will difficult to penetrate it in one go hence Xiaomi
impact success of any firm. It can be achieved in chose a narrow segment to cater initially which
2 ways. They can either use traditional marketing aspired to produce a great product but at the same
mix or can customize their existing mix according time at lower costs for the cost conscious
to the requirement of the country. If same customers. These are the following market
marketing mix is used in the export country to strategies adopted by Xiaomi [6].
attract customers, standardization strategy is 3.3 Innovating the products
normally used by the firm as it requires less Xiaomi always believed in a system in which
investment as compared to adaptation strategy but there is continuous innovation not only for their
the trends observed in the present scenario reveals operating system but also for their marketing
thatcompanies are customizing products strategies and programs. The products mainly
according to consumer needs rather than smartphones manufactured by the company are of
providing a single product throughout its superior quality and their aimed to provide value
worldwide market [9]. Creating brand loyal for money proposition to their customers its sub
customers is an important step to ensure future brands known as MI and Redmi have been
expansion and it can be done by exceeding their delivering great value for money smartphone
expectations [4]. models. Some of its famous mobile phones were
Companies need to face competition in order to 4S, MI 4 and Redmi Note 3. These mobile phones
survive in the market. As smartphone had rocked the market with huge sales and
manufacturing has gained momentum the primary continue to do so with their latest upgraded
way of having a competitive advantage and models being released regularly by the company.
ensure survival it is important that firms maintain Redmi Note 3 as per IDC was the highest shipped
their profit margins while simultaneously device in the history of online smartphone
expanding the customer base [11]. industry with more than 2.4 million within 6
3.2 Marketing Strategies adopted by Xiaomi months.
Xiaomi has expanded and established itself as a
valued startup and it has a chance of becoming the
world's top most smartphone company. There are
two basic competitive strategies followed by
Xiaomi that are manufacturing products with
superior qualities and features and produced at a
lesser cost. In addition, there are certain extra
features that are present in Xiaomi phones that
drive the attention of the customers towards it.
Before launching its phone, the company had
surveyed the market aggressively and analyzed
the competitive strategies of smartphone giants
like Apple and Samsung. Those were having
strong customer loyalty having a robust operating
system that is Android. Android was chosen as
the operating system and Xiaomi designed MI UI
its own customized operating system based on Fig.1: Number of Patent Applications
Android with added cloud services, security, apps,
music, video player, browser and many more 3.4 Focusing on aggressive pricing and
maintaining high quality standards
Initially, the markets were dominated by the medium for promotion. The company saw the
smartphone giants like Samsung and Apple, and potential of the app and decided to sell phones
local players of the specific market and Xiaomi directly from it.
had realized that it is very difficult to compete
with them and hence had to focus on expanding
its customer base by providing high quality
products and charging low premium for them.
Xiaomi did this by offering limited number of
products toward targeted customer base of range
10000 -15000 rupees in Indian market by
reducing its advertisement cost by adopting the
online advertisement strategies. Another way of
reducing the price was exclusive partnership with
online retailers like Flipkart and Amazon that
reduced the logistic costs. These online retailers
also had history of consumer satisfaction and trust
which was also utilized buy Xiaomi.
3.5 Minimum investment on conventional
advertising
Xiaomi was one of the few brands which
promoted a unique marketing approach to appeal
the market it was the brainchild of CEO of the
company Lei Gen. Word of mouth publicity was
used as it was believed by the company that
satisfied customers create positive vibes in the Fig.2: Number of Mobile Phone Channels
market and it is also a cost effective way to
penetrate into the other international markets. Now a days Xiaomi uses online channels like
Minimum expenditure was made on traditional Flipkart, Snapdeal and Amazon for advertisement
advertising and instead social media; online and selling of products to its target customers.
forums were used to connect with the target Customers being the most important aspect also
audience. The engineers of Xiaomi had direct involve themselves completely in designing and
contact with the consumers and hence helped development process where their inputs are taken
them to gather useful information to overcome the through the online mediums such as social media
difficulties and modify the software according to sites, micro blogging platforms and are
the consumer needs. Another plus point with incorporated suggesting changes in the new
Xiaomi was that it advertised itself as a consumer products [1].
friendly brand with establishment of customer 3.7 Earning revenue from the software
care centers which catered the problems and This strategy used by Xiaomi was one of its most
continuously improve upon them. effective strategies executed. Xiaomi, having
3.6 Loyal fan base excellent software based on Android having a
Xiaomi had created a huge fan following who customer base of more than 50 million users,
were the early adopters and the first ones to buy Xiaomi developed its own themes, games and
MI UI smartphones they were known as MI- fans apps which work pre-installed on MI UI and
these were the people mainly consisting of helped contribute more than 6 million sales
bloggers, patrons who constantly created buzz on revenue on a monthly basis. Just like Amazon and
the internet about the company, its products and other e-commerce Xiaomi worked and aspired to
services it provided. China had a micro blogging earn profits via its ecosystems and marketing
platform with more than 400 million subscribers various goodies. In recent times Xiaomi has
known as Sina Weibo and it was used as a allowed advertisement into sum of its apps
installed on MI UI that further help generate
revenue and has received mixed response from domestic as well as international players already
the consumers as well as critics. existing in the Indian smartphone markets. The
3.8 The method of flash sales new Indian customers were also apprehensive that
their data would be directly accessed by the
Chinese government India has a very diverse and
competitive smartphone market and to be
successful and survive and constantly evolve.
Xiaomi had to focus on different strategies and
product mixes to effectively target different
segments. The segmentation was done mainly on
the basis of four factors that were the Purchase
power, the required functionality, the technology
technological familiarity, and the intended use.
Hence three broad customer segments for defined-
(1) Entry level:
This consumer base of Xiaomi consists of people
who belong to low socioeconomic classes and
these people usually spend a very minor portion
of their income on technology based products but
they have a high level of curiosity in owning
Fig. 3: Screenshot of Flash Sale (Source: them. Pricing is always an important factor for
http://st1.bgr.in/wp-content/ uploads/ 2015/ 02/ this people and they always look out for cheaper
Xiaomi-mi-4-sale-numbers.jpg) substitute, they respond highly to advertising and
Older and more established brands like HTC, the better the advertising the better is the chance
Samsung, Apple and many more local players of making them by the intended smartphone
make their products available in the market product.
through third party retailers and stores but on the (2) The mid-range consumers:
other hand Xiaomi does not follow this method This group mainly comprises of the middle class
and sells its products via online flash sales. In people who are moving from the lower sections of
these flash sales a limited quantity of product is the society towards the higher sections. They look
available for sale at a particular time, and the sale for a reasonably priced product which has lot of
continues till the stock lasts with an intention to value added features these people are ready to
encourage customers to go for impulse buying. spend their earnings into new technological
The limited quantity also motivates the customers products provided they get the features they
to buy the product on spot this method increases expect.
the profits of the company, prevent the hoarding (3) High end consumers:
of stock and over production. The main advantage These consumers mainly comprise of the people
of flash sales is that it aids in inventory coming from business backgrounds with high
management avoid the over production and create source of income and they mostly willingly invest
scarcity. For example, a flash sale of company in in new and upcoming technologies dominated by
which Xiaomi launched MI 4. It went on sale via big brands like Apple, Samsung etc. Xiaomi knew
Flipkart in 2015 and in the first flash sale the that these customers are not a big fish for them so
demand of the mobile exceeded it supply by at it did not focus these customers initially but now
least 10 times. after establishing itself in the lower and the
4. ENTRY INTO THE INDIAN MARKET : middle segments it has started focusing this
segment.
After its successful market domination in China
Xiaomi's major move was to establish itself in
India the company had to go neck to neck with
registered and impressive 155% annual shipment
growth. Xiaomi has shipped around 9 million and
has grabbed the market share of above 31% and
this is the highest ever for a vendor since the
quarter 1 of 2014 when Samsung had a share of
33%. It has also been observed that the gap
between Xiaomi and Samsung has increased.
Samsung shipped 7.5 million smartphones,
whereas Oppo took the third place with 2.8
million and Vivo the fourth place with 2.1 million
units. In total, the smartphone market in India
grew at 8 % to 29.5 Million units for the first
quarter of 2018.
Table 1: Market Sales in various countries
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