AH Xiaomi 1.5

Can Hunger Marketing Give You Indigestion: Xiaomi’s Dilemma

September 1, 2014 - Written By David Steele

Just under a week ago, I penned an article about Xiaomi stopping sales of the Mi3 handset in India after just five weeks. I cover Xiaomi’s use of “hunger marketing” in this article, that is, the manufacturer sells their successful handsets in relatively small batches under the story that they are only a small company and are unable to afford to manufacture large quantities of smartphones as many of their competitors do. Hunger marketing is based on the premise that absence makes the heart grow fonder: keeping consumers waiting for a desirable product works well in the short term, but eventually people get fed up waiting and buy elsewhere. Xiaomi’s pre-registration process involves signing up onto a waiting list to have a chance of picking up a handset when Xiaomi release a batch, usually with no warning. Xiaomi are playing the dangerous game of massaging the natural order of supply and demand, by restricting supply to keep demand artificially high. However, anybody who has studied economics will tell you that anything kept artificially high is only a temporary measure. I prefer a simpler explanation: the higher it is, the harder the fall. I suspect that the truth will be somewhere between the two!

Compare and contrast with Asus, who have a more traditional approach to selling handsets. Asus manufacture their devices in large numbers and if they were to ever sell out of a particular product, it would be because they are unable to manufacturer it fast enough to keep up with demand. Recent Asus’ sales figures have been higher than Xiaomi – Asus sold 40,000 Zenphone devices in four days through their exclusive online partner, Flipkart, compared with Xiaomi’s sales of 20,000 in three days. Now these headline statistics may be misleading because Xiaomi sold out of their handsets whereas Asus have kept quiet (and perhaps have another 40,000 sitting in a warehouse somewhere). Is selling 100% of your stock, but a lower number, better than selling 50% of your stock but a higher number of boxes? That’s a complicated question and there’s not much benefit in going into the economics of it. In short, “maybe” is the correct answer!

Holding flash sales of limited quantities of handsets isn’t just a feature of the developing smartphone markets. Apple almost certainly have bought the necessary manufacturing capacity to keep stores supplied with their new iPhone models but choose to restrict demand for a few weeks. Google managed to restrict the supply of most of their launched products. In some cases the reason is because of unexpected high demand – here’s looking at the original Nexus 7. In other cases, it might be because of failures in the ordering system (glancing at my much loved Nexus 4), but I’m sure that most manufacturers won’t pass up on the opportunity to create extra interest in their highly desirable product that’s difficult to get hold of, even if only for the short term.

Let me ask the question to our readers. What do you think? How long will you hold out for a product or device that’s hard to get hold of? A fortnight, a month or longer? To what lengths might you go to pick up that next device?