Understanding Xiaomi’s Marketing Strategy And Why They Deserve $10Bn Valuation

Every week, Xiaomi releases a new version of miUI, its customized Android skin, which is then scrutinized by a few hundred thousand hardcore users.

The Xiaomi Mi3 is priced Rs. 14,999 which is like HALF of the exorbitant prices of Samsung Galaxy S4/5, and Apple iPhone 5 series with a similar hardware!

Mi-3 has been touted as one of the fastest smartphone in the world. The phone is powered by a quad-core Qualcomm Snapdragon 800 8274AB 2.3GHz processor running Android 4.3 optimized with MIUI version 5.

Mi3 in India
Mi3 in India

Despite its slim frame, with its thickness coming in at only 8.1mm with a 5.0 inch screen, the Mi-3 packs a 3050 mAh large battery (Galaxy S5 has a 2800 mAh, iphone 5s has 1570 mAh).Its camera feature is also pretty impressive, coming in at 13 megapixels with dual LED flash lights and a 16 GB storage space. Wow, that is some sexy hardware!

Ok, so now the obvious question:

How is Xiaomi able to price its phone cheaper with such a great hardware?

Well the answer could lie in their unique marketing / pricing strategy with a plan to sell high-end smartphone at slightly beyond the cost of materials and eventually monetize through software and services

Strategy 1: Earning profits from its software.

Xiaomi’s revenue stream comes from its software — the highly-customizable MIUI firmware that is based on Android which already has more than 30 million users, earning approx $4.9 million monthly revenue (via) from apps, games, and theme customizations installed on MIUI.xiaomi-mi3-india

Thus unlike Apple, for example, which makes money from margins on selling its phones,Xiaomi is a more like Amazon where it wants to earn via its ecosystem by selling various goodies and reap profits like an ecommerce company.

Thus net result is a lot cheaper phone + a great hardware = a happy buyer.

Strategy 2: Zero Advertising, All Product/Social Marketing        

Unlike regular phone companies, Xiaomi is able to save a ton of cash by avoiding crazy advertising costs and rather deploy some cool innovative marketing strategies.

Step 1: Build a tech fan base

When Lei Jun founded Xiaomi in 2009, the first product was MIUI operating system. Lei Jun didn’t want to spend money on marketing, so his crew began building brand awareness in forums. Their staff spent a lot of time on forums, making comments, sending posts and advertising. They used the same method to do marketing with zero budget, they set up MIUI mobile phone forum, which became the base camp of “me fan” with over 1 million registered users.

 Step 2: Engage with the fans – make them ‘loyal’

  • Every week, Xiaomi releases a new version of miUI, its customized Android skin, which is then scrutinized by a few hundred thousand hardcore users.
  • “Me fan” participated in product research, development, test, spread, marketing and public relation. Fans also organized offline city gatherings.
  • The company thus gained a whole lot of loyal fan-base by soliciting and adding user feedback into the design of its latest sets and Android skins.

Step 3: Sell to your fans. Let them spread the euphoria via social sites.

Naturally, the 1 million “me fan” users became the first buyers of MIUI smartphone.

At the same time, Sina Weibo grew more and more popular. (China’s top twitter like micro-blogging platform with 400 million members). In December 2012, Xiaomi announced that it will sell phones directly from Sina Weibo.

The unusual marketing tactic proved successful: within two days of the announcement, Xiaomi said it had sold 50,000 smartphones in five minutes, with 1.3 million additional reservations.

Final Take

A unique blend of innovative business strategies is really propelling this ~4 year old company by leaps and bounds which already has a valuation crossing $10 billion.

Xiaomi understands the power of influence. Just like a celebrity, Xiaomi knows how to make use of the power it has, and it is little wonder that the company has managed to climb so fast in such a short amount of time.

[Guest article contributed by Puneet Garg]

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