TAKING ON

CARL PEI, ONEPLUS

THE MOBILE
GIANTS
Smartphone maker OnePlus is taking on Apple with
its high-end, low-price products and unique word-of
-mouth marketing strategy. In the first of a series
looking at successful marketing on a shoestring,
co-founder Carl Pei explains how he is shaking up an
industry of giant brands with almost no budget

By Jonathan Bacon making high-end phones that sell

C
arl Pei, at just 26 years old,
revels in the role of the
outsider. The co-founder
of startup smartphone
manufacturer OnePlus, shares
a market with some of the world’s
biggest brands, but as he meets
Marketing Week at Mobile World
Congress in Barcelona, the
contrast between them is stark.
“There are so many
inefficiencies at Mobile World
Congress,” says Pei. “You can see
the world’s largest [product]
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.”
At OnePlus’s headquarters in
Shenzhen, China, a bobblehead
figurine of Apple co-founder
Steve Jobs stands on Pei’s desk,
signifying the level of greatness to
which he aspires. Two-year-old
OnePlus is minuscule in
comparison to the iPhone giant,
but the brand is causing a stir by
at a significantly lower price to
those of Apple or Samsung. In
parts of the blogosphere, the label
‘like an iPhone but cheaper’ is used
to refer to OnePlus’s positioning.
For example, a 64GB version
of the OnePlus 2, the company’s
current flagship model that was
released last autumn, retails for
£249 without a network contract
whereas a 64GB iPhone 6 costs
£539. OnePlus keeps costs low
by selling its stock direct to the
consumer online, rather than using
intermediary retail partners. At
present, it ships to 34 countries.
Word-of-mouth marketing
OnePlus’s most notable marketing
tactic was to begin by only selling
its phones to customers who
received an invite from the
company, granting them
permission to buy. Invites are
handed out through various
promotions and competitions,
while OnePlus owners can also
share invites with their friends.
The brand has reached a sales
volume where it can phase out
the invite-only model, but this
word-of-mouth 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. OnePlus sold 1.5 million
phones globally in its first year of
trading – a result that, while tiny in
industry terms, greatly exceeded
the expectations of Pei and the
fellow Chinese tech workers with
whom he founded the business.
Pei explains that the viral
impact of the invite system was
an unintended – but happy –
consequence of the company’s
desire to grow slowly in order to
focus on product development. By
carefully controlling the demand
for its phones, the company is able
to keep track of its inventory levels
and avoid over-investing in
products that it cannot later sell.
This, Pei argues, 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,”
he says. “It’s getting easier and
easier to make an eight-out-of-10
product, but it’s hard to make up
the extra that takes it to a nine-
out-of-10. 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.”

18 3 MARCH 2016 ∞ MARKETING WEEK


Attracting trendsetters
Pei believes several consumer
trends are combining to attract
more customers to OnePlus,
such as the rise of online-only
businesses and the desire among
young people “to show they are
unique and find brands that they
identify with”. OnePlus’s largest
country market is India at present,
but Europe also accounts for a
significant portion of its sales,
followed by the US and China.
“Younger people are open to
new brands that stand for
something and are open to
purchasing things online,” notes
Pei. “In the US, we’re seeing a lot
of new brands, like Warby Parker
for selling glasses online, or Harry’s
for shaving materials. It’s the new
business model of going direct.”
OnePlus is tapping into this
behaviour in several ways,
including a recent decision to
offer free shipping on all online
purchases over £60. In January,
the company also partnered with
delivery app Henchman for a
promotion in central London
where customers had the chance
to receive a free phone if their
“Young people
are open to
new brands
that stand for
something and
to purchasing
things online.
It’s the new
business model
of going direct”
Carl Pei, OnePlus
order was not delivered to them
within 60 minutes of purchase.
“Everyone got their order on time
– the fastest delivery was about
17 minutes,” says Pei.
This use of digital channels
to drive awareness and sales is
ty
typical of OnePlus’s marketing so
fa
far (see Spreading the word, page
2
20), but the company has also
e
encountered criticism for its use
o
of social media promotions –
n
notably following its ‘Ladies First’
c
campaign in August 2014.
In an effort to attract more
fe
female customers to the brand,
th
the promotion asked women
to upload photos of themselves
fo
for a chance to get an invite to
p
purchase. The campaign provoked
o
outcry among some social media
u
users, who called it degrading
to
towards women, and it was
p
promptly taken down after a
fe
few hours.
Pei attributes this episode to
a lapse in judgement in the
c
company. “Our marketing work
a
at that time wasn’t very mature,”
h
he admits. “The idea of including
w
women more in technology was
a good one, but the execution
ONEPLUS PHONES WERE w
was way off. No one [senior]
INITIALLY SOLD THROUGH
INVITES, BUT THE
approved it, so as soon as we
BRAND HAS REACHED saw it we pulled it.”
SUFFICIENT SALES VOLUME OnePlus’s future growth
TO PHASE THIS OUT
strategy depends on its ability to
build brand trust and affinity, so
the company is keeping a closer
check on its marketing output. It
is also focusing on a particularly
‘ethical’ approach to its dealings
MARKETING WEEK ∞ 3 MARCH 2016 19
CARL PEI, ONEPLUS
with customers, as exemplified
by the comparatively low price of
its phones and by its decision to
retroactively refund eligible
customers, following its free
shipping announcement.
“Some companies have a returns
window where you have to ask to
be refunded,” says Pei. “Instead,
we just refunded everyone and
sent an email saying ‘we did this
and here’s your difference back’.
In the short term that might seem
stupid but if you’re in it for the
long run, I think that trust and
goodwill builds over time. In the
end, because of our low marketing
spend, we need our users and fans
to spread the word.”
Pei was born in China but grew
up in Sweden after his parents
emigrated. He moved back to China
to begin his tech career, undertaking
a marketing internship at Nokia’s
Beijing office in 2010. He later
had stints at Chinese electronics
groups Meizu and Oppo, before
SPREADING THE WORD: ONEPLUS’S INVITE-ONLY SALES MODEL
Social media promotions
are one of OnePlus’s main
tools for raising brand
awareness. The company
has employed an unusual
‘invite policy’ that requires
people to receive an invite
– either from a OnePlus
employee or an existing
phone owner – in order to
buy the product. The key
aim is to allow OnePlus to
match its inventory levels
to demand, but it has also
20 3 MARCH 2016 ∞ MARKETING WEEK
starting OnePlus with some of his
PHOTO: MIQUEL GONZALEZ
“Someone said Oppo colleagues.
He names his main ambition
they would get for this year as being to grow
a OnePlus tattoo OnePlus “in a sustainable way”.
The company increased
if we gave them headcount from 250 to 700 in
an invite [to buy 2015 and now has offices in
a phone]“ New York, London, Bangalore and
Taipei, in addition to its China HQ
and manufacturing base. Pei also
states that the firm broke even
within its first year of operations
– an achievement he credits to its
patient approach of matching
inventory with demand. “A lot of
companies lose money for the
first four of five years,” he says.
However, OnePlus has also
progressively removed the invite
requirement for its phone models
in recent months, thereby opening
up sales to the mass market. “The
invite-only [system] is decreasing,
so our risk appetite is getting
higher and higher and production
is ramping up,” confirms Pei. This
rising confidence within the
business looks set to continue
with the launch of the OnePlus 3
this summer.
given the business an once. They were all asking get an invite. Pei explains “A lot of companies face tough
ability to execute digital ‘do you have an invite?’. that such campaigns help choices when they go from early
marketing campaigns as Someone said they would OnePlus to grow its adopters to the ‘early majority’
tech enthusiasts scramble get a OnePlus tattoo if we community of owners and market,” he muses. “Early majority
to get invites. gave them an invite.” fans – and to differentiate
users are more concerned with
“It was crazy when we OnePlus has continued it from the bigger rivals.
the reputation of the company –
first released the OnePlus to tap into this viral effect “I heard that LG is
One,” remembers Pei. with subsequent spending [around] $200m the trust, reliability and ease of
“Every person who was campaigns, including a year just in the US on use. After more than two years [of
[registered as] a OnePlus social media promotion buying media,” says Pei. operation], there’s no excuse to
employee on Facebook ‘Smash the past’ that asked “We have nowhere near not grow up.”
got contacted by their old people to upload videos of that; if we used the same Pei reveals that OnePlus is
friends – even random themselves smashing their strategies as the big guys,
now in a position to invest in
people that they’d met old phones for a chance to we would drown.”
advertising, though he insists it
will continue to focus on building
its community through word of
mouth. In particular, he is
conscious of the need to retain
the OnePlus brand difference in
a hugely competitive smartphone
market. “It’s risky because people
liked you because you were
different and an outsider,” he adds.
“When you start to employ
more of the same strategies as the
big guys, why are you different?
That’s something we’re trying to
deal with. In essence, we are
trying to boil down the few core
reasons why people are attracted
to our brand, and then
amplify those reasons.”
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