I am sure that many of you have already heard of the brand OnePlus. If not, then you will probably get to know it in a couple of years, you might even own their product by then. OnePlus is a Chinese smartphone manufacturer which was founded by Pete Lau and Carl Pei in December 2013. They released their first smartphone on 23 April 2014, called OnePlus One “Flagship Killer“. OnePlus One had comparable, and in some ways better, specifications to other flagship phones of the year, while being sold at a significantly lower price at $299. “Like an iPhone but cheaper” is used to refer to OnePlus’s positioning.
OnePlus as a company is only 4 years old but has already challenged “The Giants” Samsung and Apple. Apple and Samsung both own a huge part of the Worldwide Smartphone Sales. Their combined market share is 34,4% of the entire smartphone market (Samsung 20,7% & Apple 13,7%. 1Q2017). Both of these “Giants” have lost market share in the first quarter of the year as Chinese brands have continued to increase their sales. In 1Q2016, Samsung’s market share was 23,3% and Apple’s was 14,8%.
So how can a young company challenge the old giants? It is simple. Make the best product. Concentrate on the essentials. Give consumers the best they can have for a price what they can pay.
“You can see the world’s largest booths, but the Android manufacturers are more concerned with marketing than making the best product. We’re not spending that much on marketing or on our channel costs because in the end, consumers have to foot the bill”, says Carl Pei at Mobile World Congress in Barcelona 2nd of March 2016.
How did OnePlus build their brand so fast? There are many reasons like for example price or specs but I think that biggest reason for their brand growth was “Word-of-mouth marketing”. Their most notable marketing tactic was to begin only selling its smartphones to customers who received an invite from the company, granting them permission to buy. Invites were handed out through various promotions and competitions. OnePlus owners also could share invites to their friends. This strategy has earned OnePlus a cachet among tech enthusiasts, enabling it to build a community of committed customers that generate online excitement about the brand and its products. (AIDA-model) OnePlus sold 1,5 million smartphones globally in its first year.
An invite-only system builds exclusivity and demand.
By limiting the demand for smartphones, the company is able to keep track of its inventory levels and avoid over-investing in products that it cannot later sell. This sets OnePlus apart from many of the big smartphone makers that invest millions in marketing to compensate for mediocre, mass-produced products.
“Marketing amplifies the product, but it cannot be the substitute for an inferior product”, says Pei. “Everyone can make a good product, but a lot of brands are stuck in their old business models. Our small scale and relatively young age is an advantage that allows us to focus on our core business model”.
OnePlus’s business model is:
1. Low made in China unit costs
2. Aggressive, invite based, just in time manufacturing
3. Minimised working capital, notably inventory dollars and inventory risk
4. Asset turns focused financial model
5. Direct sales and distribution
6. Higher margin accessory and app bundling
7. Viral marketingAttract attention by picking up a fight with an established competitor
“Fame and profits alone seldom equal respect. Respect comes from doing right things the right way and building something that matters. We are dreamers who always reach for the most ambitious goals. We are enthusiasts who love what we do. Most importantly, we Never Settle“, OnePlus
I think that in 5 to 10 years, there will be only Apple, Samsung and OnePlus competing in smartphone industry. What do you think? Do they prevail or come crashing down? Share your thoughts in comment section.