The brand entered with a perceived bang - with interest through flash sales etc. With others adopting the same, it has become the norm. How do you plan to keep the brand relevant in a crowded market in India?
To keep the user excitement high, the company works towards keeping the consumer happy. The entire marketing strategy is about being ‘For the fans, with the fans’. We do not do any big bang ATL campaigns. We don’t have print, outdoor or TV campaigns. We look at social media to engage with the fans. We also have a forum which allows Mi fans to connect to each other. This also allows our fans to engage and connect with employees. The product team engages with fans directly. We have more than half a million people who are active on the Mi forum in India. On top of that we continue to do a lot of fan events. Anytime, me or members of the team travel to a city, we actually do a fan event out there. We put out a social media post saying that we are in the city, and would love to catch up with fans if they’re free. We have 50 to 100 fans turning up at these events and we have one-on-one interactions with them. Everything we do is around our fans.
The company recently changed its 'flash sale' only on Flipkart model to one that's available across platforms. What's been the response to this? Will all new products be launched using the 'flash sale' model?
We did flash sales because we saw huge disparity in demand and supply. For the first sale we did on Flipkart, more than 3,00,000 people actually came onto the site. We only had 10,000 units. Flipkart’s site crashed for the first time in their history because of this. The second sale, again 3,00,000 people showed interest and the stock went out within two seconds. The demand was higher than the supply.
Over a period of time we increased supply of our devices and that disparity we saw earlier is not seen anymore. In fact most of our products are now at a demand-supply equilibrium. That’s why we’ve moved most of our products out of the flash sales format.
The only two products which go on flash sales still are the Mi Band and power banks. Even today the demand for these two products is higher than we can supply. We have 10,000 Mi Bands that go on sale every week and we run out of stock in a few minutes. So we continue to work towards increasing our supply.
Do you believe you'll need to change this approach to include TV advertising in the coming months?
No. Look at how we work in our home market (China) – we build a strong brand only around our product and social media. So, right now it’s working really well. In Q2 2015, we had our best ever year in India and sold over one million units. It’s the first time we’ve crossed that mark. So, we’ve been doing pretty well using this strategy and we want to continue using it.
At the end of the day it’s about increasing our margins as a company. Other companies use their marketing efforts and make their phones more expensive to compensate. We don’t want to do that. We want to reduce all these marketing costs and pass on the benefit to the consumers.
But competition is looking at properties like the IPL. One of them has taken title sponsorship for the tournament for the reach…
Ya. If you look at the last year, a lot of people came to me and said you’re doing an incorrect thing by just being present online. They told me that the strategy was incorrect by not spending on print and TV. If you look at the last year, a lot of other brands have tried to copy-paste our strategy. Even before a company launched their brand, they tried to copy our strategy. That’s a great testimony to what we have been able to achieve and how it’s a new marketing method we have introduced in the market.
A great product and a loyal fan base can help the company grow. You don’t need TV ads. If your product is good, the people who buy the product become a brand ambassador and advocate this to friends and family members. Today, you will be surprised to know we sell goods in more than 1,500 cities and towns across India. A lot of them are from smaller towns and the way that they get to know about Xiaomi was through family members. It works like this generally – a family member from a smaller town looks to a family member in a bigger city and asks for a recommendation for a phone to buy. And this person who is more social media savvy tells them about the Mi and gets them to consider it.
If you talk to Xiaomi consumers, that’s how they get to know about the product. So we believe that the consumer is far more important than just having TV ads.
What would you call your flagship product in India?
We have two devices in the phone portfolio – the Mi and the RedMi. The Mi is the flagship range. It comes with the highest possible specs. It competes with devices priced at around Rs 40,000 to Rs 50,000. But it’s much more affordable (at Rs 14,000 onwards).
The RedMi device is even more affordable priced at around Rs 10,000. We look at the best features that can be put in the device at that price point. These phones compete against phones in the Rs 20,000 price range.
Between mobile phones, the MiPad, the Mi band and the accessories segment, what's the sales split?
Phones dominate and are the highest contributor since the phone market is bigger than the tablet market. Within the phones, the Made in India, RedMi2 Prime is our highest selling phone. Mi Band and power banks are doing exceptionally well too. If I remember correctly there was a research done a few months ago, which put Xiaomi as the number one wearable company in India with the Mi Band.
If you look at tablets, we see that the MiPad is the highest selling product on a lot of sites. Amazon allows you to see bestsellers and during all their special sales, the MiPad was the highest selling SKU. In fact, during Diwali Xiaomi had a product in each of the top four places on the Amazon store in India.
What’s Xiaomi’s ideal TG?
Our current audience has two sets of people. The first set consists of loyal Mi fans. They are typically in the age group of 16 to 30 years. They are social media and digital savvy. They are college students or first time jobbers. They are looking for something that’s amazing on specs for a good price. They check reviews online and do their homework. They are what we call our loyal fan base.
The second set of consumers is probably older, in the 35 to 60 age group, from smaller cities. They rely on somebody in the first category to buy, or help them with the buying decision. The first category consumers become brand advocates.
The biggest focus for us is the youth – the online and social media savvy consumer.
How has Xiaomi joining 'Make In India' impacted the company? Have margins increased?
We announced plans for ‘Make In India’ in January 2015, even before the government had announced special benefits. The reason was very simple. We weren’t doing it only to save money; we were doing it to be close to the consumer. When one imports goods, the lead time for you to order and plan is significantly higher. It takes about four to five weeks for this. When we manufacture locally in India the lead time reduces to about two to three weeks. In a company like ours which works on efficiency, we need to do activities like this.
Tax benefits also help. We began manufacturing in India in July 2015. When we announced it in January we thought it would take two years, but we were up and running in six months. We launched our first ‘Made in India’ phone in August.
The second phone that will be made in India will be the Redmi 2. Some units of this phone will be made in India. We want to have most of our devices which will be sold in India, to be made in India.
Who would you call competition in a crowded market place in India?
If you look at Xiaomi, it is not just a smart phone company globally. It’s an e-commerce company; the third largest e-commerce company in Beijing. We sell our products on our own e-commerce site – Mi.com. We are also a technology company because we build our own OS, which is over and above Android and has some features which Android phones don’t have.
Then, we are also a smart phone company. So, we are a very different type of a company. No other company does all of this. There are many players across the world, which are only e-commerce, or only smart phone, or only technology companies. We are a combination of all three. This means our competition is across all these categories.
The July-September period saw you sell 1 million phones across India. What's the target for the next year and where are the opportunities?
The opportunity is massive. What excites me is the Indian market, which is very unique. This is a mobile-first market. The next set of 100 million people who come online in the country, will be through a smart phone. My dad is an example. For the first 60 years of his life he hadn’t gone online. Now, he does through his smart phone and he’s online across Google Maps, Facebook etc. This he couldn’t do earlier as he found it too complicated. So for a country like India there’s a massive opportunity.
We need to understand that the Indian user is very different from the phone user globally and that’s why one needs to come up with very different products. This needs to be across hardware and software and is very critical.
Will Mi be comfortable in the mass zone or is there scope to penetrate in the high end?
If you look at our flagship phones – the Mi3, Mi4 and Mi4i – the Mi4 can compete with phones priced more than double (its price). The chipset this phone has is better than most of those. We launched this a year ago at a price point of sub-Rs 20,000. Today, it’s available for less than Rs 15,000. So, if you look at it, our phone can compete with any other flagship from a technology and quality perspective. So, there’s nothing more beyond that we can launch. We can launch a new product with the similar specs at a higher price, but that’s something we want to avoid.
(This article first appeared in the 11 December issue of Campaign India)
Top news, insights and analysis every weekday
Sign up for Campaign Bulletins