Q&A: How to Build a Smartphone Fan Base in China

Jan 20, 2014

Q&A: How to Build a Smartphone Fan Base in China

JURO OSAWA

Now that the iPhone is available through China Mobile, AppleAAPL -2.45%’s sales may get a boost in China. But Chinese smartphone makers are trying to fight back by ramping up grassroots marketing on domestic social networks such as Sina’s Twitter-like Weibo microblog and Tencent Holdings’  WeChat mobile messaging service. One example of such efforts is Nubia, a smartphone brand launched by major Chinese handset maker ZTE in 2012. Nubia, a wholly owned unit of ZTE, sells its phones through online channels such as Chinese e-commerce site JD.com. In December, ZTE said that Nubia had received 2.5 million orders on JD.com for its Z5S and Z5S Mini smartphones, after their November launch. ZTE says the Nubia business is profitable, but it doesn’t disclose the unit’s earnings figures.Nubia’s marketing strategy is centered on the Internet and social media. It has used some of the feedback from consumers online to design the software and user interface for its latest smartphones.

For the past year, ZTE, whose other main business is supplying telecom networking gear to carriers, has struggled to compete in China’s crowded smartphone market. While it is trying to reach younger customers with the Nubia brand, its business faces many challenges not only from Apple and Samsung Electronics005930.SE +1.86%, but powerful domestic players like Lenovo Group0992.HK +1.39% and Huawei Technologies, which have also been strengthening their marketing campaigns.

In many ways, Nubia is learning from the earlier success of Chinese smartphone startupXiaomi, which has built a loyal fan base among China’s young consumers through social media and online forums.

In a recent interview, Ni Fei, head of the Nubia unit, talked about what the brand is doing to expand its user base. Edited excerpts:

WSJ: Why did ZTE launch the Nubia brand?

Ni: Traditionally, ZTE had been selling handsets through telecom carriers and we have done well in that area. But we also see promising opportunities in selling handsets through open market channels. With the growth of e-commerce, more consumers are buying phones on the Internet. We launched Nubia to try out new business models, like online channels that work well with younger consumers.

We sell our phones on the Internet and use social networks to deliver information to consumers and collect feedback from users. It takes time to build a brand. But in the age of social networks, the time it takes to build a brand may be getting shorter than before. In China, there are customers who trust what their friends say online more than what they see on TV commercials.

WSJ: What makes Nubia unique? Was it inspired by Xiaomi’s success?

Ni: I think Xiaomi has started a phenomenon in the Chinese market, and we have studied Xiaomi’s business model. But I don’t think Xiaomi’s model can fit all vendors, and we have our own strength.

At Nubia, we develop our phones based on what we hear directly from users. Today, with mobile Internet access and social media like Sina Weibo and WeChat, it’s easy to get feedback from many users. This wasn’t possible in the past.

One of the selling points in our latest phones is a camera feature that allows users to easily adjust exposure while they decide on the focal point before taking a photo. This software feature was developed based on consumer feedback on social media. This is a way to allow users to participate in the early stage of the development of a new product, so they can feel that it is a phone they have designed themselves.

When we launched our very first Nubia smartphones in 2012, we used Internet media like technology blogs and social networks to spread the news. Personally, I have more than one million followers on Sina Weibo, and I use it every day to talk to Nubia users.

WSJ: How will Apple’s iPhone deal with China Mobile affect your business in China?

Ni: I can’t comment specifically on Apple, but we still see big opportunities. We recently had a meeting with China Mobile, and the carrier’s CEO was there. They shared their plans for their faster fourth-generation mobile network in 2014, and told us that they wanted to buy a total of at least 100 million 4G smartphones from all their handset partners. That’s a really big cake, and Apple surely won’t eat all of it. There will be big pieces for major Chinese vendors like ZTE.

Among Chinese vendors we have an advantage in 4G handsets in part because we provide the technology for 4G networks, and we have a very good long-term relationship with China Mobile. I think we are well-positioned to supply many 4G handsets to China Mobile.

WSJ: How is the Nubia unit different from the rest of ZTE’s smartphone business?

Ni:  We have promoted many young ZTE employees to work at Nubia. Younger people who grew up with the Internet have a very different way of thinking. For example, our product launch strategies are headed by a 25-year-old employee who just graduated from college a few years ago. Our young employees know how to get young users to understand our brand. The average age of Nubia employees is below 30.

If I see employees with good ideas, I put them in higher positions regardless of their age, because we have to be more like an Internet company that can move fast and change directions quickly.