October 7, 2014 by ...
‘Hunger marketing’ is a term to describe creating mad hype about a product and then limiting sales. This creates that one desire in humans that all businesses crave- envy based desire. By not being able to buy what others have we become envious. This leads us to overpay for that product which we cannot buy.
The fear of feeling envy, for example, may compel us to spend 72 hours camped out in front of a store waiting to buy the latest Apple device. By doing this, we know we will not miss out and thus avoid the treacherous sensation that envy brings.
Xiaomi has perfected the art of envy. By over-hyping and under-producing, they have succeeded in making a commodity a luxury or luxurizing it. Cell phones are essentially a commodity, especially in China. For over one decade cheap knockoff or ‘shanzhai’ units have been sold for practically nothing.
They are the ‘cement’ of the sexy world of consumer electronics world. Ugly, plain and cheap. The Chinese have benefitted from this cottage industry and now China is home to around 1,000,000,000 handheld units.
Chinese do not trust made-in-China goods
Unfortunately for most local PRC firms, Chinese have a bad case of ‘malinchismo’ or they disdain to buy made-in-China items.
Sure their nationalism flares when border disputes with Japan, India and other neighbors come about. And sure they get really really upset when one discusses Tibet and or Xinjiang with them, but in terms of buying local, the Chinese typically do not. Given the choice and monetary resources to do so, the Chinese opt for foreign faire.
They would probably love to buy local, but simply put, they don’t trust products made by Chinese companies. For example, over 70% of Chinese surveyed said they have serious questions about the quality of made-in-China goods. The fear is even more pronounced in products such as milk powder for babies, powdered milk in general, cooking oil and even meat served by restaurants.
Scandals such as poison mixed with baby milk, pork sold as beef, rat sold as pork and just flat out lying about where one’s products are made will jade consumers and all of those things happen in China on a routine basis. The Chinese have learned to curb their nationalsm, when buying goods at least.
Xiaomi, a reason to believe
Xiaomi has, in great part, turned that around somewhat. Due to hunger marketing and perception of exclusivity that goes with it, Xiaomi has managed to make their $300 phones a luxury. After all, sales are limited and even if all 1.4 billion Chinese wanted one, they simply could not buy it.
Aside from this, Xiaomi claims to source its products from the same companies as Apple. The hidden promise is that due to connections or guanxi within Chinese suppliers, Xiaomi gets Apple-quality components at a fraction of the cost. The translation for Xiaomi consumers is that they are getting faux Iphones on the cheap. This coupled with the ‘face’ associated with being the only kid on the block to own a Xiaomi, makes it a Chinese product that they:
1- are proud of owning
2- is not ‘quality challenged’
3- helps support China
And maybe most importantly,
4- does not make them look like ‘rubes’ for buying Chinese kit.
Xiaomi and national pride
An escalation in Chinese pride that coincided with hosting the Olympics spilled over into the cell phone space, at least as far as Xiaomi is concerned. The resultant need to support a national champ has gone a long way in furthering Xiaomi’s sales goals which have enabled global expansion. This lucrative mix was key to the Xiaomi way.
What other company brazenly dresses up its mascot like a communist soldier and whose founder is a card carrying member of the communist party who also sits on the National People’s Congress- a major governmental organ?
Lei Jun communist party member and government employee of the Chinese National People’s Congress.
Future of hunger marketing
The question is how big a part of Xiaomi’s success owes itself to hunger marketing. If it plays a great role in selling units, then how scalable is that strategy and is it enduring? If the answer to these questions is negative, that portends grief for Xiaomi in the future. Worse yet, if hunger markting is a dying breed in the break neck world of high tech, then does Xiaomi have stand a chance or is it destined to flounder like Chinese retailer Li-ning?
The excerpt below speaks to the fact that hunger marketing may be the T-rex of the marketing world. A dying breed soon to be relegated to center stage at some stuffy old museum exhibit that attracts the inquisitive but not repeat buyers nor the mainstream.
Do you think hunger marketing is dying and if so, what effect will it have on Xiaomi?
With the gap in the performance-price ratio of various smartphone brands gradually narrowing as the technology matures, the use of a limited supply to stimulate demand, a technique employed by many brands, may gradually lose its effectiveness, according to Guangzhou’s Southern Daily.
Apple has used the hunger marketing technique to great effect, stirring up a frenzy for new models among customers and enabling scalpers to reap hefty profits.
Chinese budget brand Xiaomi, a Chinese internet-oriented brand, is also a master of this technique, which helped spark demand among customers for the rollout of four generations of products so far. In 2014, other major Chinese brands, including Huawei and Coolpad, have all triggered demand far exceeding supply for new models, taking advantage of the strategy with claims of a high performance-price ratio.