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  • Writer's pictureAjay Sharma

Aspirational Customers Skip Price As Key Factor

The price specification game may get over sooner than later. It has to!


I have been observing the different ways the brands are playing on the Indian turf and the way forward for them keeping the age old adage “Change is the only constant.” in mind. On one hand we have brands like #Xiaomi and #Realme leveraging the price specification ratio. On the other, brands like #Oppo and #Vivo are driving sales through marketing and channel spends. Samsung has had a more balanced approach. The launch of #SamsungGalaxyM series has witnessed the brand take an extreme position to take on Xiaomi on prices in the online space.

Just read an article in The Economic Times (ET) - “Offline retailers begin to hang-up on low-margin Realme.”

If one has to analyse the Indian smartphone market for the last 7-8 years, it has had its own upheavals. Initially, it was #Micromax that turned the heat on Samsung (large screen devices) in the price specification war and became the No.1 brand for a short period. Later, it was Xiaomi that brought a twist to it in 2014, using a mix of the burgeoning online market with the flash sales model and the price specification ratio to not only outdo the Indian brands but also Samsung by end 2017. Samsung had, in fact, just recovered from the Micromax attack.

Let me share with you my strong beliefs:

1. Customers who will come to you for a price will leave you for a price. Realme is trying to take away Xiaomi customers using this theory. Though tardily, I would say. If they can do it, so can anyone else. So this price specification game is not something that will last for long for any brand. History also proves it as mentioned in the first paragraph.

2. Brands playing this game will find it difficult to position themselves higher. One can see it from the lukewarm response to the #Poco phones despite the fact that Xiaomi did offer fully-loaded phones, gave them a very aggressive price tag and even changed the series name to Poco not using their well-established brand name – Xiaomi.

3. The ASPs are growing and moving towards the mid-price segment with 51% of the market expected to be between the Rs.10k and Rs. 25k bracket in 2019 (TechArc Study). My personal belief is that as the ASPs move up, the customers will become more and more discerning with the price specification ratio not being the only parameter while deciding a phone. They would become more aspirational looking at the brand positioning, quality, service etc. To quote from an article in #Forbes - “After a certain amount of eating, people get full. But they will happily pay top dollar to eat at a gourmet restaurant (Note: Where dishes are much smaller).”

So one could expect a Xiaomi or a Realme taking a hit sooner than later and from what I see, and it has already started. More so for Realme - being a new entrant with the brand not so well established in the customer mind set as compared to Xiaomi and their offline channel not established at all.

Samsung would be a gainer with an aspirational value attached to them. The launch of the M series will lead to gains in the online channel which was their weak area. Offline, of course, is their forte coupled with possibly the strongest service back up, they should gain.

#Oppo and #Vivo, have to some extent, been able to build an aspirational value with their high decibel marketing and product quality. However they have some issues to address. Let’s look at Oppo globally. They did a 5% YoY growth in smartphone shipments moving up to the No. 4 position. However, among the top four Chinese brands, Oppo is the only one which showed an annual decline. It created a sub brand which is now independent called Realme. They did well online in Q3 and Q4 but are struggling offline in Q1. Their own K series for online, as per reports, has had mixed results globally. They do need a strategy and direction from the top to balance off Oppo offline, Realme both online and offline and now the K series online. As per reports the K series has supposedly cannibalised the #OppoR17 series to some extent. Their market share has been flat in 2018 as compared to 2017. In fact, as per #Counterpoint, except for Xiaomi, the market shares in India were flat for all top 5 brands. They do have scope to build the aspirational part now to move upwards in the price ladder if they can use their brand ambassadors and properties properly which they have been unable to do so far.

Vivo relatively grew globally in Q4 becoming the No. 5 brand by volume. It is showing good momentum in the offline channel in India as well. They have launched a brand #IQOO in China. Let’s hope they don’t mess it up the way Oppo has done in India in terms of their strategy for offline and online or a sub brand cannibalising the parent brand Vivo itself.

Vivo as per me should remain a single brand rather than introduce a new brand at least in India. After all most aspirational brands are single brands.

Going back to point No. 3, I got a similar feedback of price specification not being the only deciding factor from the consumer electronics businesses from my friends in the Industry. In the case of mobile phones, the feelings against the price specifications ratio should only increase in 2019, as I believe the importance the millennials give to their mobile phones – being a very personal item – will only increase. It may get the same importance as the clothes they wear, or the car they drive. Just to share a takeaway from the car industry as per an article in The ET. The Millennials are no more looking at buying a Suzuki Alto even as their first car. The small, entry level no frills hatchback that drove sales for India’s automobile industry for many years isn’t what the aspirational Indian customer wants today. He or she is willing to spend a couple of lacs more to buy a large hatchback, a compact sedan or even an SUV. In 2018, sales of entry level cars dropped by double digits. A car has become a status thing. Mobile phones will follow.

Today’s aspirational customer may not be able to buy the top end brands, but given a reasonable price difference, is willing to pay that delta to meet his or her aspiration. Of course one cannot get it wrong the way Apple has done by stretching the pricing to a level which is beyond the reach of the customers taking a huge hit on sales.

So when people ask me if there is scope for new brands, I say yes. A firm, affirmative yes! “That” aspirational value created through the right messaging which could be matched by stretching the pricing to “that” an extent with the other hygiene requirements on the product, channel and service could do the trick.

Why did Samsung create so much of hype around their folding phone months back? Simple - Build Aspiration!

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