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University of Westminster

Westminster Business School

Module title: Principles of International Marketing Module code: BMKT507

Assignment 1: One Plus

Seminar leader: Unvan Atas

Word count: 3293 words Students’ Names: Taylor Jourdan W15292838

Gökay Karabulut W14307128

Katherine Weed W1530225

Haley Dresser W15302944

Date: 6th March 2015

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Table of Contents

Title Page i

Table of Contents ii

Executive Summary iii

1. Opportunities 1

1a. Consumer Disposable Income 1

1b. Increasing Market Growth and Penetration 1

1c. Industry Competition 2

1d. Customer Favourability 2

2. Risk Analysis 3

2a. Customer Behaviour 3

2b. Market Entry Strategy 3

2c. E-commerce Resistance 4

3. Segmentation 5

3a. Targeting Strategy 6

3b. Consumer Analysis 6

4. Promotional Mix 7

4a. Budget 7

4b. Positioning Strategy 8

4c. U. S. Consumer Market 8

5. Future Recommendations 9

6. Conclusion 9

7. References 9

8. Appendices 14

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Executive Summary The brand new Chinese company, OnePlus broke way into the smartphone market just

one year ago with a “flagship killer” smartphone. The company managed to sell over 500,000

smartphones within the first year of its operation, with potential to grow considerably more. Now

adjusted and equipped to the smartphone market, OnePlus aims at targeting their latest

smartphone device, the OnePlus 2 to the U.S. smartphone consumer. After careful research and

deliberation it has been suggested that OnePlus do so by upscale from indirect exporting to

forming a strategic alliance with a U.S. company to yield the highest success in expanding

business westward. The U.S. provides numerous opportunities for OnePlus to capitalize on. Such

opportunities include a large consumer base with above average disposable incomes, a rapidly

growing market with high potential, and consumer favourability in an Android operating system

as well as functionality over design.

Forming a strategic alliance with the U.S. telecommunications company, AT&T will also

prove to be an opportunity for OnePlus, yet comes with a set of risks and challenges as well.

However, a strategic alliance will come with a heavy price tag, and distribution matters will have

to be revamped. Further risks stem from the level of the consumer. OnePlus must be prepared to

compensate for relying solely on e-commerce in selling their product. E-commerce limits the

amount of customer interaction opportunities the company could greatly benefit from. It also

reduces the level of satisfaction and loyalty the consumer will have towards the product.

It is predicted that the OnePlus 2 will catch the eye and satisfy the needs of many

different consumers. Therefore, we believe OnePlus should market the OnePlus 2 through a

heterogeneous targeting strategy. Reaching these consumers should happen through a

combination of modern and traditional marketing methods. The marketing strategy is slightly

restricted due to low marketing costs and a limited amount of resources. As a result, OnePlus’

promotional strategy will have a focus on digital/viral marketing including social media, mobile-

friendly advertisements, and word-of-mouth communication. OnePlus is advised to continue

utilizing their invite-only selling method to help control inventory levels, keep the brand

exclusive, and allow the company to keep utilizing campaigns as a large component of their

marketing strategy.

This report concludes with further recommendations OnePlus should consider in entering

the U.S. market. Data taken from the 2012 U.S. Census Bureau indicates 1 in 6 Americans as

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being Hispanic. This Hispanic population has a demanding presence in the smartphone market,

and is therefore suggested as being considered an individual segment to market towards. We

further believe that OnePlus could be very successful in a B2B venture in which they would

target businesses where employees frequently use their mobile devices in their line of work or

travel internationally for business.

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OnePlus Two in the U.S Market

1. Opportunities of the U.S Smartphone Market

The United States smartphone market is one of, if not the most lucrative smartphone

markets in the world today. It is a promising market that provides a vast number of smartphone

users and an increasing shift towards mobile trends combined with one of the highest, ever-

increasing disposable income figures in the world. The U.S. smartphone market provides

numerous opportunities for OnePlus to capitalize on; such as a large consumer base with above

average disposable incomes, a rapidly growing market with high potential, and consumer

favourability in an Android operating system as well as functionality over design.

1a. Consumer Disposable Income

The U.S. boasts having one of the highest disposable income per capita figures in the

world. As of 2014, Statistics from Organisation for Economic Development (OECD)’s stats and

Better Life Index, which compares 34 OECD countries in numerous financial and social

criterions, show an average of $39,531 per capita in the U.S., the highest among the OECD

countries (OECD StatExtracts, 2015). The high disposable income figure is complemented with

an employment figure of 67%, ranging between ages of 15-64, slightly above the average figure

of the OECD countries of 65% (OECD Better Life Index, 2015). These figures not only indicate

the high capacity to pay of the potential U.S. customers, it also signifies the wide age range that

possess this high capacity, meaning wide age-range of possible customers and also a high

willingness to pay.

1b. Increasing Market Growth and Penetration

The U.S. smartphone market has experienced tremendous penetration since the beginning

of the smartphone era. With Apple’s launch of the first iPhone in 2007 contributing to the rise,

the smartphone penetration in the U.S. has reached 20.2% in 2010 and forecasted to reach 55.4%

in 2015 and 63.5% in of the entire U.S population by 2017 (Statista, 2015) (Appendix 1). These

figures mean a very large customer base with 173 million smartphone users in 2014, which

accounts for the 71.8% of mobile phone users in the respective year (comScore, 2014).

Furthermore, not only is the U.S market forecasted to hold 182.6 million addressable smartphone

users by the end of 2015 and 220 million by the end of 2018, it also holds a promising adoption

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rate for smartphones (Statista, 2015). The addition of 152.4 million expected customers between

2010 (62.6 million) and 2018 (forecasted 220 million) means a 17.77% annual increase in

penetration of smartphone market in average between the same time period (Statista, 2015). This

average increase shows the high adoption rate of the U.S smartphone users maintaining a

profitable market for the smartphone manufacturers.

1c. Industry Competition

In analysing the domestic competition, Apple is currently the leading manufacturer with a

41.7% market share as of September 2014, followed by Samsung’s 29%, LG’s 6.9%, Motorola’s

5.4% and HTC’s 4.4%. The market is led primarily by Apple followed by Samsung and it is

quite challenging for the rest and the new entrants to obtain foothold in the market (comScore,

2014). However, upon analysis of the market share by operating system, Apple does not seem to

be dominating the U.S. market. Between 2013 and 2014, Android has seen a 6% rise from 48.8%

to 56.8% overtaking iOS in January 2013, whereas iOS has seen a decline from 46.6% to 38.9%

in the same period. Until October 2014, Android has managed to maintain its leadership in the

market, however, possibly with the launch of the new iPhone 6 and 6 Plus and holiday sales, iOS

has tipped balance towards its side, holding a 47.7% market share, higher than Android’s 47.6%

as of December 2014 (Milanesi, 2015) (Rogers and Levitin, 2015). Even though iOS has the

upper hand with a slim 0.1% margin, the large share still held by Android is vitally beneficial for

the launch of OnePlus Two as its possible customers are accustomed to and possess knowledge

about the operating system as it is widely used in the market.

1d. Customer Favourability

In evaluating the elements that drive the purchase of smartphones, customers in the U.S.

seem to favour functionality over design. A report by Kantar WorldPanel that analyses the

smartphone purchasing preferences in the U.S. in the first quarter of 2014 has determined that

hardware aspects, such as availability of 4G/LTE, durability, camera quality, battery life, screen

resolution and speed of processor, are the key elements that influenced the purchases of U.S.

smartphone users (Milanesi, 2014) (Appendix 2). As OnePlus differentiates itself by

exemplifying competitive advantage in excelling in such technical factors compared to even the

best flagship smartphones of Apple and Samsung, the company would surely benefit from

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customers that are well-aware of the technical aspects of their smartphones and prefer

performance more over all.

2. Risk Analysis

Despite the potential opportunities that could make the OnePlus 2 a major success in the

U.S. market, there are critical challenges and disadvantages to consider both on the consumer

level and as a result of market entry.

2a. Customer Behaviour

Customer loyalty and satisfaction are two key aspects in determining OnePlus’ overall

success in the U.S. market. In the analysis of customer loyalty levels in the U.S. smartphone

market, Apple benefits from the loyalty of its customers more than its competitors. Data gathered

from Morgan Stanley’s AlphaWise survey system states that Apple had the highest brand

retention figure in March 2014 with 90%, followed by 77% of its main competitor Samsung,

58% of Nokia and 41% of LG (Richter, 2014) (Appendix 3). Furthermore, Apple smartphones,

have scored between 77 and 83 in the ‘Smartphone Customer Satisfaction Survey’ carried out by

American Customer Satisfaction Index (ACSI) in May 2014 (The American Customer

Satisfaction Index, 2014). Apple’s high figures of customer satisfaction and brand loyalty signify

the difficulty for OnePlus to obtain market share especially from Apple. Due to aforementioned

figures and factors, OnePlus may obtain market share from the other competitors, such as

Samsung, Nokia, LG and ZTE, easier, due to the fact that these companies have lower figures of

customer satisfaction and loyalty than Apple and the smartphones of these companies also use

the Android operating system.

2b. Market Entry Strategy

These consumer-based challenges speak directly to the challenges OnePlus can expect to

face upon entering the U.S. market. The current entry strategy One Plus uses to market its

“flagship killer” smartphone, the OnePlus One, is indirect exporting. This strategy coincides with

OnePlus’s ‘invite only’ selling technique, and involves a relatively high level of involvement.

Upon launching their newest smartphone, the OnePlus 2 in the U.S. market, OnePlus should plan

to upscale from indirect exporting to a market entry strategy that will be best received in the

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market. The market entry strategy chosen for this foreign venture should further be determined

with the goal of balancing perceived risks and returns inherent to be considered in that foreign

target market.

It is suggested that OnePlus continue to operate using its current ‘invite-only’ selling

strategy. The downfall of this is that the OnePlus 2 will not be directly distributed in the U.S.,

which depletes efficiency. Although a set of distribution centres and physical selling centres with

a trained sales staff would undoubtedly result in higher return, this plan is restrained due to

OnePlus’s limited resources. The alternative is as follows: a strategic alliance formation with the

American telecommunications company AT&T. Forming this alliance with AT&T will eliminate

many potential challenges OnePlus should expect to face upon entering the market through

indirect exporting. These challenges include integrating into the contract system that currently

dominates the smartphone market as well as relying solely on e-commerce to sell the product.

The U.S. smartphone market operates under wireless carriers and contracts. Without

some kind of partnership between OnePlus and a U.S. wireless carrier, the consumer is the one

who suffers. Lack of partnership will result in the consumer having to separately buy the

smartphone from OnePlus in addition to a contract or alternative wireless service from a carrier

in their region. When initial development of this market entry came about, AT&T was the only

one of the top three U.S. wireless carriers that OnePlus determined they would only partner with

(Forums.oneplus.net, 2015). What makes AT&T so attractive to OnePlus is the new contactless

policy the telecommunications company launched last year. Therefore, a strategic alliance

between AT&T and OnePlus would allow OnePlus to easily integrate its current non-contract

strategy, which is sees as a strong differentiation, into a new market.

2c. E-Commerce Resistance

Additionally, refraining from a completely e-commerce selling strategy through a

strategic alliance will also minimize the risk OnePlus will encounter in entering this market. For

example, consumers often have trust issues regarding international ecommerce, and will

therefore be resistant to a new product they can only find online from a foreign source. A

strategic alliance with AT&T would allow for the OnePlus 2 to be presented to the consumer in a

physical location allowing consumer interaction with the product as well as a sales staff. The

smartphone is not available for sale in the store, however those with a granted invite can pick

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their device up in-store. The purpose of in-store pickup via invite is to increase efficiency and

convenience while keeping the phone and the overall brand exclusive. The other reasoning

behind continuing using invites as means of purchase is to control inventory and spending levels.

Many studies have been conducted that highlight consumer trust issues in ecommerce. One

source states that “firms who consider e-commerce initiatives as their only business appendage

are less likely to be successful than those who integrate it into their current business model” (Teo

and Liu, 2007).

In addition to trust issues, consumers also often resist e-commerce due to the lack of

interaction it allows. Another ‘consumer trust in ecommerce’ study conducted in Singapore in

2007 stresses that “the intensity of consumer interaction in the first two stages of the new product

development process yields significant effects on new product success” (Teo and Liu, 2007).

Consumers are constantly demanding a higher level of knowledge and involvement especially

when referring to new products (Gruner and Homburg, 2000). This is where a strategic alliance

would prove beneficial despite upfront investments. To give the consumer a means to look,

touch, and interact with a product before buying is huge. This is because Brick and Mortar stores

are still considered a key aspect in selling smartphones. An insight report conducted by Kantar

Worldpanel ComTech exclaims that “most U.S. consumes (64%) purchase their (smartphone)

devices in-store while only 24% buy online. The report further explains the immense amount of

opportunity and influence lost online. The availability of a working model and good promotion

were the two most memorable things consumers recalled about in-store experiences, 39% and

28% respectively (Milanesi, 2014).

3. Segmentation

Based on the above opportunities and challenges along with an analysis of OnePlus’

retail environment, we have identified a target segment that OnePlus should focus their initial

advertising efforts on upon its U.S. release. Before OnePlus decides to enter into the U.S.

market, they should consider how much money they are willing to spend on marketing,

especially because the company is not only a relatively new, but they have also spent little on

marketing targeted to a specific audience in the past. OnePlus also needs to consider if they

would like to target more than one segment in the United States.

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3a. Targeting Strategy

We believe that OnePlus should have a heterogeneous targeting strategy because their

product will satisfy different needs for different consumers. Some people will purchase OnePlus

phones for their superior cameras. Others want to have the option to customize their operating

system and like the freedom OnePlus gives them to make the phone their own. Customers may

also like OnePlus phones for the ability to have a more flexible phone plan. Regardless of

personal reason, the main characteristic shared by all of OnePlus’ target market is that they have

a passion for, and knowledge of, technology.

Our main target segment for OnePlus technology will therefore be individuals of all

genders between the ages of 20-60 who consider themselves tech-savvy, want to own the latest

in technology, and who are intrigued by the idea of a revolutionary new cell phone company and

concept. The OnePlus customer already owns a smartphone, but likes to know the mechanics of

how their cell phone works and understands more about their phone and its operating system

than a typical smartphone user would. The price of OnePlus’ products is also in the range of this

market, for the ideal OnePlus customer is willing to spend more on a quality product they can to

customize.

OnePlus should focus their advertising around the top technology-focused cities in the

United States, such as the San Francisco Bay Area (also known as Silicon Valley), Boston,

Seattle, and Washington D.C. (Travel Channel, 2014). Even though all of these cities are very

diverse in their demographic make-ups, what they have in common is a focus on innovation and

technology. The majority of smartphone users are between the ages of 25-34 (81%) and 35-44

(76%), which is the median age range we believe that OnePlus should aim for (Blodget, 2012).

Individuals in this age range are less likely to use social networking websites than their younger

counterparts (89% vs. 82%), and are more likely to use their smartphones for other reasons

besides social media (78% vs. 90%) (Pew Research Center, 2014).

3b. Consumer Analysis

Typical smartphone users, or “always on consumers” as they are called, are divided into

seven different segments: prodigies, tribals, personals, pragmatists, browsers, occasionals, and

talkers. We believe that OnePlus should target three of these seven segments; the prodigies,

personals, and pragmatists. Prodigies are constantly connected and more likely than the average

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smartphone user to forego traditional iOS operating systems and use a less mainstream operating

system (such as Firefox OS) in order to customize their phone to their preferences. Personals

value their phone and place a high emphasis on staying in contact with friends and loved ones,

but are less likely to purchase products seen on social media. Pragmatists are also constantly

connected and prefer to use their phone for a variety of tasks, ranging for leisure activities to

business transactions. While these three groups seem very different initially, they all maintain a

strong digital presence and view their phone as an extension of themselves and together they

make up 38% of the smartphone market (Experian Marketing Services, 2014).

In order to target these individuals, we believe that OnePlus should focus their

advertising on a combination of modern and traditional methods. Individuals in these groups are

more likely to respond to advertisements viewed on their smartphones, as well as social media

promotions in the case of prodigies. But, individuals in this group are also less likely to use other

forms of technology, such as a home computer, television, etc., focusing on their smartphone as

their main source of internet usage. If OnePlus uses mobile-focused promotions, in combination

with either traditional billboards or advertisements on public transportation (depending on how

much they are willing and able to spend), we believe they will be able to capture the attention of

their target segment. Individuals, now more than ever, rely on word-of-mouth communication

from friends and family, with 25% saying it was their main form of pre-purchase research

(Milanesi, 2014).

4. Promotional Mix

OnePlus has been clear about their target market from the beginning and label their target

audience as ‘Android smartphone enthusiasts (experts on every aspects of smartphone)’

(Oneplus.net, 2014). They made sure their knowledge of their target market would be used to

develop the best strategic marketing tool to hit them. With this they used social media and word

of mouth to reach their audience as well as hit their budget (The Chartered Institute of

Marketing, 2009),

4a. Budget

OnePlus has targeted its audience with a low budget marketing campaign of just $300

(Kleinman, 2014). As marketers we understand that OnePlus will have to continue this budget

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marketing as it enters the United States due to its limited resources of funding. They have been

highly successful with social media, and we believe it is vital to have it continue as their main

marketing strategy (Oneplus.net, 2014)

4b. Positioning Strategy

Due to the low marketing cost it is important that OnePlus continues marketing its

product through its social media campaigns (Kleinman, 2014). In the past OnePlus has received

high volumes of interaction on social media. With a good PR social media team specializing in

Facebook and Twitter they can continue the buzz about their company. For example, entering the

U.S. market with a similar promotion as before called “Insanity Week”. This would get the word

of OnePlus throughout the U.S. and specifically to their target market. This has previously had

an extremely positive response with 65,000 shares on Facebook and over 20,000 retweets

(Forums.oneplusnet, 2014). The CEO of OnePlus explains that, ‘The fact that we, an unknown

smartphone start-up without an exorbitant marketing budget, made it this far is proof that even

the smallest marketing team can achieve anything’ (Beavis, 2014).

However, with forming a strategic alliance with AT&T, this allows OnePlus to interact

with customers directly. Giving the customers the opportunity to go in store to touch, and

interact with their product prior to purchasing. By allowing the customers the comfort of a brick

and mortar store and using it not only for distribution but as a marketing component, OnePlus

has the opportunity to reach their target customer more efficiently. OnePlus must develop and

easy guide for AT&T employees to understand their product and talk specifications with its

customers (Milanesi, 2014)

4c. U.S. Consumer Market

It is important to highlight the different cultures and languages that make up a large

segment of the United States. Although English is the primary language of the U.S. there is a

large Hispanic population. According to the U.S. Census Bureau, March 22nd, 2012 there are

currently 50 million U.S. Hispanics which translates to 1 out of 6 Americans being Hispanic. As

marketers it seems naive to not apply our marketing strategies directed at this specific segment.

However, our research showed only 51% of Hispanic adults prefer to see ads in Spanish, thus our

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marketing and online advertisements will stay strictly in English when entering the U.S. market.

(U.S. Census Bureau, 2012) (Packaged Facts, 2011).

5. Future Recommendations

If OnePlus has a successful first couple of years in the market, we believe they also have

the opportunity to target businesses where employees frequently use their mobile devices in their

line of work or travel cross-continent for business. Since OnePlus has a flexible phone plan that

is not tied down to a country-specific contract (something that is very different than compared to

many U.S. smartphone providers), it is a possible option for many high-profile businesses who

give employees company phones for use in frequent travel. If OnePlus is willing to spend the

extra money on a campaign to target high profile, global businesses on both the West and East

coast of the United States, they could tap into a market that has not been heavily targeted by

other smartphone giants.

6. Conclusion In summary, the OnePlus One had an extremely successful entrance into the marketplace,

but if OnePlus wants to continue their success story by launching the OnePlus Two into the

United States smartphone market, they need to modify their strategy. The United States

smartphone market is a rapidly expanding, constantly evolving marketplace where OnePlus has

the potential to succeed, despite the various challenges that arise from their small budget, limited

manufacturing and distribution ability, and high competition in the marketplace. By segmenting

their market and placing a focus on digital marketing, we believe OnePlus will have a successful

future in the United States smartphone market.

7. References

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Blodget, H. (2012). Actually, The US Smartphone Revolution Has Entered The Late Innings.

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Richter, F. (2014). Infographic: Apple Beats Competitors In Smartphone Brand Loyalty. [online]

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[Accessed 22 Feb. 2015].

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U.S Census Bureau, (2012). Census Bureau Releases New Race and Ethnic Demographic

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[Accessed 4 Mar. 2015].

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Appendices

Appendix 1 – Smartphone penetration in the U.S from 2010 to 2017

Source: Statista

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Appendix 2 – Functionality smartphone drivers in the U.S smartphone market in 1Q14, U.S.

Source: Kantar WorldPanel Comtech

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Appendix 3 – Brand retention figures in the U.S smartphone industry by percentage of customers

Source: Statista

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Appendix 4 - Presentation Slides

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