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Did Xiaomi botch its chances by overpricing Mi4?

It is said that those who live by the sword die by it.

For Xiaomi, it was a matter of pride that tens of thousands of its phones disappeared from etailers’ sites within seconds every time a flash sale was held. In fact, so much was the demand for the Xiaomi’s first model, the Mi3, that the company had to specially charter a plane from China to Bangalore to bring its phones.

The anticipation and excitement among Xiaomi fans was feverish, and they couldn’t stop singing the company’s praises. Offering top-end specifications at Rs 13,999, Xiaomi was creating more buzz than a blender in a closet.

That is, until the Xiaomi Mi4 was born.mi4

The phone was launched a good six months after it was unveiled in Xiaomi’s home market.

But that was still ok. But what was not ok with the expectant fans was the decision by Xiaomi to reposition itself from the value-for-money brand that it was to a ‘premium’ brand with the introduction of Mi4.

Instead of the Rs 16,000 price that fans expected, Xiaomi chose to price the phone ‘richly’ – at Rs 19,999.

Shock, dismay, disappointment.. the fans felt helpless.

But the Chinese major held on, hoping that the initial buzz that it created by selling Mi3 for a song would ensure that Mi4 would also fly off the virtual shelves. Mi4, they thought, would get a roaring welcome.

WELCOME TO INDIA

Instead, what Xiaomi got was a lesson in the Indian consumer’s psyche.

Used to bargains from the brand, they were clearly unwilling to buy the premium image that the company was trying to project. Overheating problems (some suggested that people in the Himalayas should buy the phone to keep themselves warm) did not help either.

Demand for the Mi4, and sales, crashed to a fraction of what it was for the Mi3.

And Xiaomi’s biggest USP – the scarcity of its phones – was gone.

Nothing illustrates this as much as the current status of the Mi4 on Flipkart.

Two days after seeing its price cut to Rs 14,999 — which is actually less than what fans were willing to pay for it initially — the phone continues to remain ‘in stock’ for ready purchase. It’s the ultimate insult that Indian consumers could throw at a brand which no one could get enough of just eight months earlier.

So what went wrong? Was it pricing? Was it the ‘flash sale’ model? Was it the heating issue?

It was all these.

The attempted transition from a ‘value-for-money’ brand to a premium brand was too abrupt. By abandoning its earlier strategy of cut-throat pricing and extremely large volumes too abruptly, Xiaomi gave an opening to others to copy it.

And two players – Lenovo and Micromax Yu – generously took up on the offer and launched their own Xiaomi-type offerings.

While Lenovo came up with the A6000, Yu came up with Yureka.

Suddenly, the same fans who were tattooing Xiaomi’s names on their chests and arms rushed to get themselves inked with ‘Yu’ and ‘Lenovo’ tattoos – a lesson on how fickle brand loyalty is in India.

The fact is that people in India loved Xiaomi because it was like Santa Claus – someone who provided unbelievable deals at prices (almost) everyone could afford. To continue to maintain that affection, Xiaomi will have to play that role for some more time.

If it wants to transition, it will have to do that gradually – not at one go.

In fact, the Mi 4i was the model that would have worked as a successor to the Mi3 because that phone more closely represents what Xiaomi is in Indian consumers’ minds – a company that provides extreme value-for-money products.

All said, Xiaomi can easily be credited with one thing – showing to everyone (including themselves) what kind of demand lies dormant in India if the price point is correct.

No one would have believed that you can sell 1 mln phones of a single model in just one month through just one online retail outlet. Xiaomi proved you can, and its competitors learnt their lessons well.

The online-only, low-cost smartphone market in India has exploded since the Mi3 revolution. It is doubtful whether models such as the Lenovo A6000 Plus, Yu Yuphoria, ZTE Blade Q Lux and Coolpad Dazen 1 would ever have been launched in India if it hadn’t been for the eye-popping sales that Mi3 saw. And that credit rightly belongs to Xiaomi. [socialpoll id=”2278392″]

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