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15 JUL. 2016

A Battle in the Red Ocean: The Positioning Strategies of Chinese Smartphone Brands

Sharon Shen

The CES Asia 2016 just ended in May. This year, CES Asia mainly focused on the Internet of Things (loT) and interconnectivity. Although the importance of smartphones has paled against the emergence of more advanced technologies such as VR , AR , and Conversational Interfaces , the smartphones market is still considerable and cannot be underestimated. This is all the more true in China, where the smartphones market is saturated with competitive brands both foreign and domestic.

In 2013, Labbrand published an article on the brand positioning strategy of the rising Chinese smartphones brands. At that time, many local brands were still in the early stages of development. Now, however, the smartphone market in China has become one of the most innovative of the world, where both old and new brands compete with each other for the largest market in the world by consumer base. In February 2016 , Xiaomi released its new smartphone model called the “Mi5” under the tagline “Fast as light”. In March of the same year,  OPPO brought its “R9” model into the world with a specialization in selfie  (brought on by innovative technology in its front-facing camera). In April 2016, Huawei joined with Leica to officially launch its groundbreaking dual-lens “P9” product in London. In May, Xiaomi released Xiaomi Max with the biggest screen in its history. These examples demonstrate how dynamic and innovative the Chinese smartphones market is and continues to be.

Clearly, smartphone brands are taking no prisoners in an effort to stand out against the competition. While some brands are becoming gradually obsolete due to their failure to position themselves correctly and to attract customers, other brands have established a powerful brand image through strategic brand positioning and communication. The mobile search ranking in the first quarter of 2016 reported by Baidu shows that local smartphone brands in China take up two-thirds of the seats in the top 20, and that they have made noticeable progress compared to the data collected in June 2013.


Mobile search ranking in the first quarter of 2016, as reported by Baidu

From this search engine ranking, we can imply that Chinese smartphone brands are gradually taking over the market. Other data supports this as well. According to an IDC report, the shipment of Chinese smartphones in the first quarter of 2016 has year-on-year growth of 2.1%. Huawei is ranked number one, accounting for 16.2% of the market. OPPO and Vivo, two sister brands from BBK, take up the second and third seats with respective shares of 15.4% and 13.3%. All three brands have surpassed that of Apple, which accounts for 12.8%. However, Xiaomi, whose market share is a mere 9%, is ranked fifth with a decrease of 32%. In the meantime, Sina Weibo published a smartphone report concerning the second half of 2015 based on the behavioral data of smartphone users on the social media platform Weibo. The report demonstrates that the former "big-four" “ZHCL” (ZTE, Huawei, Coolpad and Lenovo) that has historically dominated the Chinese smartphone market has been replaced by the “New four” – Huawei, Xiaomi, OPPO and vivo. In the high-end market, Huawei has successfully stolen market share from Apple and Samsung, while in middle and low-end markets, the “New four” continue to duke it out. Now we’ll discuss and analyze the rise of the “New four” and how they carry out their brand positioning and communication strategies in the Chinese market, leveraging the brand perception map and the brand equity pillars. 


Brand positioning of leading smartphone brands in the Chinese market

The Rise of the “New Four” Smartphone Brands

Xiaomi: “Identity Crisis” under Fast Development

As the brand that pioneered the digital and social approach of selling smartphones, Xiaomi has always chosen a different route than traditional brands. During its development, Xiaomi precisely identified a unique segmentation of the target market – “phone enthusiasts” – in order to solidify a unique positioning. With its cost-effective products and the customized MIUI system tailored for domestic customers, Xiaomi has grown from start-up to a well-known brand that has an estimated value of 45 billion RMB at the end of 2014.

However, Xiaomi seems to be losing its magic. Due to its overly extended communication on low pricing, Xiaomi cannot escape from the “low-priced” and “cheap” brand association, which has hampered the cultivation of brand esteem. Moreover, traditional mobile manufacturers are far more mature than Xiaomi in fields such as supply chain management and R&D capabilities. Xiaomi’s innovative technique of utilizing digital channels for marketing and sales at a lower cost has also been copied by other smartphone brands. As a result, Xiaomi has begun to lose its edge.

Does Xiaomi truly embody its desired value proposition to create products for “enthusiastic smartphone users”? In recent years, Xiaomi’s efforts have been focused on developing the Mi ecosystem to re-orient its activities towards new fields – such as film, television, smarthome, and Internet finance. However,  the brand has failed to focus on its flagship product: mobile phones. Its original co-creational approach that connects the brand with its consumers has been tremendously weakened. Xiaomi seems to have stopped caring about its “enthusiastic” fans. 

Fortunately, Xiaomi seems to have become aware of this issue. At the global launch of Mi 5 in February,  Xiaomi brought forward again its original brand positioning with a new theme – “Explore the ‘Dark’ Technology”. How Xiaomi will put into effect the “dark technology" (unconventional technology) remains undefined. Now, as the mobile phone market becomes saturated, the biggest challenge for Xiaomi is to maintain its original value proposition, based on collaboration and enthusiasm.

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Huawei: Brand Differentiation through Premium Business Positioning

In the past year, Huawei has achieved a year-on-year market share increase of 47.6%, reaching the number one seat at 16.2%. As a company specializing in communication technology, Huawei has established powerful brand knowledge and esteem both inside and outside of China. It has also successfully extended its outstanding brand equity to its smartphone products to create the one and only China-based high-end mobile phone brand. Huawei identifies a key segment of people working in business as its main target consumer group, emphasizing performance, durability and the quality of its hardware. Meanwhile, when choosing brand ambassadors, Huawei has spared no cost, signing international stars such as Lionel Messi, Henry Cavill and Scarlett Johansson to further stress its high-end and international image.

With a “devoted” brand culture, Huawei has successfully extended its brand equity from the B2B sector to B2C. With its solid technological expertise, continuous commitment in R&D as well as an attitude that constantly seeks for perfection, Huawei has obtained the recognition and respect of the Chinese consumers and has maintained steady growth in the global market.

OPPO & vivo: Young and fashionable sister brands

OPPO and vivo are two independent mobile phone brands which are both founded by BBK’s top management team. From the statistics referenced earlier, we can see that the two brands are developing at a particularly fast pace, with their market shares increasing by 173.1% and 121.7%, respectively versus the previous year. Compared with Huawei and Xiaomi, OPPO and Vivo identify themselves as young and fashionable mid-end brands and focus on their products' design, as well as features such as music and photography. They choose young and glamourous pop idols as spokesmen, and sponsor reality programs to appeal to their young target audiences.


OPPO R9

The thriving success of OPPO and vivo and their ability to establish a distinctive brand identity has a lot to do with their precise and consistent brand positioning. It is key to note that throughout the years OPPO and vivo have committed to a consistent communication strategy to convey this brand positioning. This is especially commendable in a market that is easily swayed by fads and hypes.

How Did “ZCL” Become Obsolete?

Once upon a time, ZTE, Huawei, Coolpad and Lenovo – dubbed “ZHCL” – were recognized as the face of China’s smartphone industry. However, under the rapid change of the industry and market, all of them besides Huawei have lost their lead. This is in part because they haven’t identified a unique differentiating positioning, and instead merely focused on price skimming – an inherently unsustainable market strategy. A low price point does not even appeal to the Chinese consumer anymore as they become increasingly sophisticated.

Take Coolpad for example. The Chinese mobile phone brand lacks innovation and differentiation. Throughout the years, its strategy to open up the market has been focused on a low price and wide product variety. With other more distinctive brands such as Xiaomi, Meizu and OnePlus releasing high quality products that are priced competitively, and more sophisticated customers placing more importance on technology, brand value and culture, brands like Coolpad will have a hard time finding their footing in the market.


Coolpad Fengshang Max

In 2016, Coolpad announced that it would reduce its portfolio by 30% and start to reposition to the mid to high-end market. However, without identifying its own differentiated positioning, it will be difficult for Coolpad to find its place in among the “New four” who have cultivated an increasingly strong level of brand equity.

Brand to Watch: OnePlus

Founded in 2013, OnePlus was created by a former senior executive of OPPO. In April 2014, the first OnePlus flagship was sold out on the first day. The positive market feedback had a lot to do with the brand’s clearly defined positioning. With the tagline is “Never Settle”, OnePlus places great emphasis on producing high-quality products with unique design and excellent engineering, while keeping the price in a competitive range. On the other hand, OnePlus not only encourages users to install third party ROMs, but also develops its own H2OS operating system. Despite the fact that custom OS’s are not rare in the Chinese smartphone industry, OnePlus has taken the extra step to create a unique UX that is not conformed to the vanilla Android framework. This undoubtedly demonstrated OnePlus’s strong commitment to innovation and differentiation.

More interestingly, OnePlus has been targeting global markets since the very beginning, and has now successfully made its way to many main markets in the world such as the US, the UK, France and India. Its next goal is to reach South Korea to directly challenge Samsung and LG. How will OnePlus will balance its global and domestic strategies in the coming years?

Conclusion

As we can see, with rise of domestic consumption, the popularization of smartphones, and the sophistication of people’s consumption priorities, the role of branding is increasingly significant in China. This is all the more true in the case of the smartphones industry, where the products themselves can be highly similar; thus a precise and differentiated positioning is key. At this time, Chinese consumers' brand loyalty remains fairly low and the choices are abundant. For industry leaders, how to continuously boost brand esteem and knowledge in order to cultivate a loyal consumer base and maintain leadership is the main 

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