Xiaomi, often referred to as “China’s Apple” has taken a fresh approach with brand building in China….and their efforts could have marketers worldwide re-thinking how they look at branding.
Xiaomi are among a group of companies in China (including SmartCar and Mini) who have pioneered a flash-sales technique called a “snap-up” campaign. A “snap-up” is built around a sales event usually scheduled one month in the future, where a limited number of products will be sold at discount (and/or together with rewards).
But, rather than just announce a flash sale, put the products out, and hope for the best, Xiaomi has built a number of steps into the process, which make it more fun for participants, more frenetic, and ultimately much more effective for sales …and branding.
With a sale scheduled for one month out, they start promoting the upcoming sale and ask consumers to first register themselves on the media – binding their bank cards – to where the event is taking place (Tmall, WeChat, Qzone, etc). This registration starts three weeks from the sales event.
The next step, taking place two weeks from the sale, is in asking registered participants to make a deposit (or commitment by taking some other action, like answering a question). This registration reserves an opportunity for participation in the sales event. The deposits are very small (RMB1.00 to RMB0.01 ) but ensure that participants are committed to the ultimate event. Its an important step in the process as it ensures that they already have “skin in the game.” It lubricates the final sale, by making sure that participants already have some vested interest.
A recent “snap-up” campaign for Xiaomi inside of Qzone had 419,000 participants secure reservations for 300,000 available products on offer through the sales event (March 2014).
Xiaomi has experimented with many ways to handle the sales event itself. But it usually involves having participants compete to get into the sale during a few time slots, with each time slot having a limited number of products on offer. When the sales clock hits a pre-arranged time, participants must be present to enter the sale. Once into the sale, its a simple, fun process of confirming the purchase and selecting important (full-priced) accessories and apps to bundle with the discounted phone/tablet.
The whole process of a “snap-up” campaign helps create a routine between consumers and Xiaomi which continues after the purchase through social media, weekly updates to its software (a modified version of Android), and connections to its app store.
Standing on the side of consumers
“Snap-up” sales are designed to be marketing events, raising awareness for the brand and signalling to the market that Xiaomi is a hot product. It might seem a little bit false and manufactured when compared to the overnight lineups Apple’s new product releases have inspired. However, Xiaomi is creating a good quality product at a price that matches a much larger part of China’s urban working class – at prices 1/3 of Apple. They have built a distinct cool factor along the way, by being more closely in sync with China’s youth consumers.
By being more closely aligned with the needs of consumers in China, Xiaomi is a brand that youth consumers online in China care about and respond to. They are being treated really well by a Chinese company that understands the interest they have in technology, design, fashion, media and …price. These consumers have responded well in snapping up a lot of Xiaomi products, helping design and shape new products with the company. Its a brand which is quickly becoming about co-creation and so even more tightly linked with the interests of its core market.
Bigger than Apple (in China)
Xiaomi already sells more phones than Apple in China and is looking to widen its lead. Xiaomi has a sales goal of 60 million smartphones this year and have already sold 26.1 million smartphones during the first half of 2014.
They are succeeding with regular, recurring “snap-up” sales, through a network of online channels, including Tmall.com, WeChat, and Weibo.
In 2013, they held a sales event for their discount model, the Hongmi phone and received 7.4 million pre-orders. While a huge success, they ran into real trouble fulfilling the orders. They have learned from this experience and now hold weekly sales with pre-set inventory limits, typically only 100,000 – 200,000 units.
A more dynamic product life cycle?
What’s most interesting about Xiaomi’s “snap-ups” is the way they could reshape the product sales cycle in their category. The path to purchase for a smartphone is relatively long and the frequency of repurchase is very long (a couple of years on average). For most smartphone producers the complete product life cycle might be 3-4years for any given model – when you include R&D and manufacturing.
What Xiaomi is doing with its approach to marketing and sales is not just about price promotions. They appear to be reshaping the entire product life cycle; with (1)quick, incremental improvement on previous models, followed by; (2)flash sales online with a relatively small numbers of units, (3)back to R&D for the next speedy, incremental improvement – taking customer insights into account along the way.
By selling almost exclusively online with small batches per sale, they have dramatically reduced the time to market and the costs of carrying/distributing unsold inventory. Savings on marketing are also significant, as they are much more focused around concentrated regular sales bursts, rather than on blanket coverage. As a result, Xiaomi spends only 1% of revenue on marketing, where competitors like Samsung assign 5% or more.