I was somewhat amused to read an announcement from stodgy domestic smartphone maker ZTE (HKEx: 763; Shenzhen: 000063) trumpeting the success of a “cool” new online campaign for its high-end brand of nubia smartphones. But after giving the matter some thought, I do have to compliment ZTE on its new approach to creating some buzz around its smartphones, which enjoy a reputation as dependable but also quite dull low-end products.
Most Chinese refer to phones from domestic names like ZTE, Huawei and Lenovo (HKEx: 992) as guochan, literally meaning “made in China,” which carries the distinctively negative overtones of inferior quality and lack of imagination. ZTE is clearly trying to cast off that image for its nubia line with this new China-based campaign.
While the domestic names are mostly perceived as uncool in their home market, one brand that has managed to escape the guochan stigma is Xiaomi, the up-and-coming smartphone maker that likes to think of itself as the Apple (Nasdaq: AAPL) of China.
Xiaomi is a domestic brand like all the others, but has managed to cultivate a distinctively cool image through a highly successful series of campaigns that includes creating buzz before its product launches, hunger marketing and using online channels favored by younger buyers for most of its sales.
ZTE looks like it’s trying to steal a page from Xiaomi’s cool playbook with a campaign to sell its nubia smartphones online. ZTE launched the nubia brand a year ago with a bit of fanfare but we haven’t heard much about its progress since then. At the time I said that such a move was necessary for ZTE if it wanted to become a serious player in the fiercely competitive smartphone space, since it would be difficult to survive by only offering its more mainstream low-cost phones that can sell for as little as US$100 or less.
Now ZTE is boasting of the success of its online nubia promotion in China, saying it logged orders for a record-breaking 2.5 million handsets in the campaign over the website of JD.com, China’s second-largest e-commerce company. Not surprisingly, ZTE even invokes the Xiaomi name in the announcement, saying the previous record was held by its much smaller rival.
ZTE’s two nubia models were selling for 1,499 yuan and 1,999 yuan (US$250 and US$330), roughly in line with prices for Xiaomi’s main models but quite a bit higher than Xiaomi’s new low-end Hongmi handset that sells for just 799 yuan. In the announcement, ZTE is quite direct about wanting to imitate Xiaomi’s online sales model, saying it wants nubia to become a true “internet phone” brand.
So, what do I think of this new campaign and the brand strategy for nubia? I have to admit that the campaign looks quite smart, though it’s certainly not very original. JD.com is one of China’s leading e-commerce companies, and certainly has a strong user base among the young, web-savvy consumers that ZTE wants to target for nubia. The nubia name is also relatively unknown to Chinese consumers, meaning it hasn’t yet been stigmatized with the guochan moniker.
I’ll be watching closely to see how nubia develops in China, and whether it attracts the kinds of young, trendy customers it will need to succeed. I do have one word of advice for ZTE, which is to maintain as much distance as possible between its core ZTE brand and this newer nubia name. If at all possible, the company should try to keep the ZTE name out of any news articles or other marketing materials about nubia. Any association between the two might quickly become the kiss of death for the nubia name, which could instantly find itself shackled with the guochan label.
Bottom line: ZTE’s plan to develop its nubia phones as a higher-end brand aimed at tech-savvy younger consumers looks smart, as long as it distances the new name from its core ZTE phones.