November 21, 2014 by ...
The data below tracks China’s smart phone users versus monthly income. Over eighty percent of these people earn the equivalent of $800 per month. This demographic is far from poor, however, as this wage equates to the average gross salary in China.
What is more germane for the Xiaomi discussion, is that from the chart we can see that roughly 54% of Chinese smart phone users actually earn less than RMB 3000 or U$500 per month.
This is important because that is near the cutoff for Xiaomi’s most expensive phone which runs RMB 2,499 fully loaded. By digging even farther into the data we see that Xiaomi’s pricing model is obvious. It targets one months’ wages for each demographic.
Xiaomi sells baseline models at RMB:
What is more interesting is to compare the chart above to the one below which compares cell phone sales versus average salary. In so doing, we see that the two data sets track one another. For each group there is a corresponding number of cell phones as a percentage of the total. For example, approx 71% of smart phone users earn RMB 3,999 or less and account for 72% of the purchases. The remainder are purchased by those earning more.
Xiaomi is well aware of how much each customer will spend and is essentially targeting the lower 50% of the market. Xiaomi follows the Chinese pricing strategy of charging buyers roughly one months’ wages for every handset.