Following the big success of the MiPhone M1 (3.52 Million sales volumes reported by Xiaomi), Xiaomi have just announced two new models - M2 and M1s. As a brand focusing on young consumers and enthusiasts, Xiaomi chose a very appropriate place, the 798 Factory in Beijing, which is the most famous art zone in China, to announce and introduce the new models. The choice could help Xiaomi to give consumers the association that MiPhone is artistic and design centric.

Xiaomi M2

Most famous for the outstanding user interface ‘MIUI’ and the best value for money in China, Xiaomi’s new models appear to maintain and consolidate these advantages. Compared to the M1, the new M1s comes with higher specs but at a lower price (1,499RMB), while the M2 comes with a new and fresh physical appearance, latest Jelly Bean based MIUI operating system and high specs while maintaining the same price (1,999RMB) of the original M1.

With the value for money reputation that has been built by M1 and the superior user experience brought by MIUI (see Smartphone Platform Benchmark: Meeting the Needs of Advanced Smartphone Users in China), Xiao has already gained a lot of consumers who aspired to buy a MiPhone. Xiaomi appears to have improved the product value of M2 by providing the latest operating system along with a quad core processor. The biggest pain points of the M1 were mostly reported as ‘lack of front camera’, ‘bad rear camera’, and ‘bad display’.  With its new models, Xiaomi has improved these features with a better camera lens and better display, which could persuade consumers who have concerns over these issues to consider the phone. Additionally, the M2 provides a larger battery capacity (2000mAh), and the option to choose an even larger battery capacity (3000mAh with 3mm thicker), which provides the opportunity for consumers to choose the trade-off between battery life and thickness themselves.

Many Chinese consumers complained about the hardware quality of the original MiPhone, and the changes that Xiaomi made for M2 and M1s should give users the feeling that they were actually heard – Xiaomi listened to their advice and made improvements accordingly. With the MIUI forum and the easy way to provide advice directly from the phone, current users will be pleased as they will feel they were involved in the development of the phone.

Strategy Analytics’ user research in China is available to Wireless Device Lab clients or for purchase here. Strategy Analytics’ China Handset Market Share report for Wireless Smartphone Strategies clients can be found here.

- Alvin Wu

Nokia has announced the first CDMA Windows Phone designed specifically for the Chinese market, the Nokia Lumia 800c. Our Wireless Smartphone Strategies colleagues believe that it remains to be seen how the device will help Nokia regain the ground it is losing in the Chinese smartphone market.

However, having recently included the Lumia 800 in a user experience benchmark with Chinese smartphone buyers, we observe that Nokia has unveiled a product that is well placed to meet the needs of the target audience in this market.

In our research, the Lumia 800 received positive feedback for its high-end industrial design and the uniqueness of the Windows Phone interface.  At the same time, we identified a number of areas where all of the major smartphone platforms – including Windows Phone – failed to meet the specific needs of Chinese consumers. These include:

• Lack of integration of Chinese internet services.  In our research, Chinese users were clear that deep integration of Facebook, Twitter etc. was of little relevance to them. They wanted the same level of integration of Chinese internet services from RenRen, Sina Weibo, QQ and Baidu. 
• Some China-specific use cases not supported.  Our research identified opportunities for apps that meet the specific needs and behaviors of Chinese consumers (such like group messaging, data management, phone number location, etc.) which are not currently supported by default by the main smartphone platforms.
• Insufficient offline implementations of experiences.  Chinese users prioritize applications and features that work entirely in offline mode.  Functions such as maps that can only operate in connected mode are likely to be considered as too costly.  In our latest research, Chinese smartphone owners reported that only 29% of music listened to on their device was streamed, compared to 42% of US smartphone owners. 

Based on the available information, the Lumia 800c appears to address these challenges, to at least some extent:

• The device will be optimized for local internet brands.  Nokia has announced that the Chinese version of the Lumia 800 will support all of the major Chinese internet services.  Of course, 'support' does not necessarily imply deep integration throughout the OS (as desired by our research participants), but the launch announcement touts a "compelling, locally relevant experience ... especially tailored for people in China".
• Bundling free music, games and Nokia Maps will be appealing to price sensitive Chinese consumers.  However, the extent to which services will be able to be used entirely offline (to avoid expensive data charges) will be critical to adoption.
• The launch of “BeTop”, an incentive program to encourage local developers to produce apps for the platform is a smart move.  To maximize the value of this investment, we believe that Nokia should prioritize the creation of apps that meet the specific needs and behaviors of Chinese consumers that we identified, and promote the best apps that plug these gaps to the user base.

We also note that, as a brand, Nokia remains stronger in China than in most regions.  Our latest brand loyalty research found that 66% of Chinese Nokia owners plan to remain loyal to the brand when they purchase their next device, compared to 50% of UK Nokia owners. 

As identified by our colleagues, price will be a key factor in determining the success of the Lumia 800c - especially as the product will be targeted towards younger Chinese users, who are particularly price sensitive.  However, if Nokia and China Telecom can offer a very competitive subsidized price, as the vendor achieved with the launch of its Lumia 900 device in the US earlier this week, this will make the product a very appealing offering.

Strategy Analytics’ user research in China is available to Wireless Device Lab clients or for purchase here. Strategy Analytics’ China Handset Market Share report for Wireless Smartphone Strategies clients can be found here.