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OnePlus Case Analysis 800 words After you read the article(I have posted the article), answer these questions in a Word Document. Please double-space

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OnePlus Case Analysis 800 words
After you read the article(I have posted the article), answer these questions in a Word Document. Please double-space your text and use Times New Roman 12 point font. This should be 3-4 pages. If you cite the book, simply put (Lamb, Hair, & McDaniel, pg. XX) after the quote/paraphrase, and you don’t need a source cited page. Please do include a source cited page for any other sources you use.

What were the main factors accounting for the early success of OnePlus? Will these factors still be relevant as OnePlus moves into the mainstream/mass market?
Which persona(s) from Exhibit 8 do you think form the most likely segment(s) to target for OnePlus expansion?
Given your choice of target persona(s), what positioning would you recommend? What should Never Settle stand for in the future for this target persona(s)/segment(s)?
For distribution channels and partners, should OnePlus stay online only or expand through physical retailers?
Assume you have a marketing communications budget of $5 million. Looking at Exhibit 11, recommend a communications plan. Which media channels should OnePlus emphasize?

December 9, 2016

2016 by the Kellogg School of Management at Northwestern University. This case was prepared by Professor
Mohanbir Sawhney and Pallavi Goodman. Cases are developed solely as the basis for class discussion. Cases are not
intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
To order copies or request permission to reproduce materials, call 800-545-7685 (or 617-783-7600 outside the United
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in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical,
photocopying, recording, or otherwisewithout the permission of Kellogg Case Publishing.


OnePlus: Crossing the Chasm in
the Smartphone Market

In February 2016, OnePlus co-founders Pete Lau and Carl Pei were considering how the firm
could build on its early success to become a mainstream player in the global smartphone market.
During the three years it had been operating, OnePlus had grown rapidly in the U.S., European,
and Indian markets. Its beautifully designed and aggressively priced phones had been embraced
by technology-savvy customers. The company now needed to broaden its appeal to mainstream
customers to grow and scale its business.

Lau and Pei knew that OnePlus faced a difficult task in finding a way to the mainstream
customers heartand wallet. Specifically, they needed to address three challenges facing their
company: First, how could OnePlus sustain competitive differentiation as its advantage on price
and performance narrowed over time? Second, how could OnePlus cross the chasm1 that
separated its technology-savvy early adopters from more mainstream customers? Third, how
could OnePlus transition from its social-media intensive guerrilla marketing strategy to a more
mainstream marketing strategy, given its limited financial resources? Forming a growth strategy
that met these three challenges would be essential for the continued success of OnePlus in the
brutally competitive smartphone market.

1 The metaphor of crossing the chasm comes from Geoffrey Moores influential book Crossing the Chasm: Marketing and
Selling High-Tech Products to Mainstream Customers (New York: HarperBusiness, 1991). Moore argued that there is a
chasm between the early adopters of a technology product (the technology enthusiasts and visionaries) and the early
majority (the pragmatists) because these two groups have very different expectations. To grow beyond early adopters,
technology companies need to adapt their product and marketing strategy.

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Company Background
OnePlus, based in Shenzhen, China, was founded in December 2013 by Pete Lau and Carl Pei.

Lau had previously worked as vice president at Oppo Mobile, which shared common investors
with OnePlus. Even though the smartphone market was crowded, the founders saw an opportunity
for a new entrant. They believed most smartphones had flaws, including bloatware, cheap plastic
hardware, unattractive designs, and high prices. According to co-founder Carl Pei, Available
devices were just not good enough. People are only focused on adding features, not making good

From the outset, the company was clear about its intentions: making high-end, user-friendly
devices that delivered a better experience at a lower price than any other device in the market.
According to Lau, We wanted to produce a phone that has good build, nice software, and
trustworthy qualitya phone that never settles.3 At Oppo, Lau had been working on a Blu-ray
DVD for the global market but realized it was a niche product. Smartphones, on the other hand,
were a good entry point, especially with the rapid development of the Internet and e-commerce. It
was with such an idea and opportunity that we founded OnePlus.4

OnePlus launched its first smartphone, called OnePlus One, in April 2014 and quickly found
success in India, Europe, and the United States. (The OnePlus One was released in India in
December 2014 exclusively though Amazon.) By October 2014, the OnePlus One was available in
34 countries worldwide, and the company had recorded revenues of $300 million.

From the beginning, OnePluss approach to the market was different from that of other
homegrown Chinese smartphone companies. It projected itself as a multicultural company with a
goal to build a global brand with a global team. OnePlus did not want to be known as another low-
cost Chinese manufacturer selling to emerging markets. Instead, it wanted to become known for its
sleek design and high-quality specs, selling directly to customers worldwide. In sharp contrast to
other Chinese smartphone manufacturers, 85 percent of OnePluss sales came from outside China.

The Global Smartphone Industry in 2015
In the fourth quarter of 2015, sales of smartphones to end users around the world totaled 403

million units, a 9.7 percent increase over the same period in 2014, according to Gartner. Inc.5 Unit
sales reached 1.4 billion units in 2015, an increase of about 10 percent from 2014 (see Exhibit 1).
Sales were expected to remain almost flat in 2016, however, signaling the maturation of the
worldwide smartphone market. The most influential players in the market were Apple, Samsung,
and Google. Googles Android operating system dominated the smartphone market with 80 percent
market share, while Apples iOS captured 17 percent of the market at the end of 2015.6 Windows

2 Carl Pei, in interview with the authors, February 2016.
3 Pete Lau, in interview with the authors, February 2016.
4 Ibid.
5 Gartner Says Worldwide Smartphone Sales Grew 9.7% in Fourth Quarter of 2015, Solid State Technology,
(accessed June 9, 2016).

6 Joe Rossignol, iOS and Android Capture Combined 98.4% Share of Smartphone Market, MacRumors, February 18,

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Phone saw a decline in share, and BlackBerry continued its global decline. Samsung was the global
volume leader in smartphones but Apple continued to dominate the premium smartphone market
with its flagship devices, the iPhone 6 and 6S.

Emerging economies saw rapid growth in the market for affordable smartphones, with volume
growth of 18 percent, compared to 8.2 percent in established markets. In emerging economies, the
smartphone industry was moving rapidly to e-commerce through online marketplaces such as
Flipkart and Snapdeal in India, in addition to direct sales by smartphone manufacturers in China.
With the cooling of the previously explosive Chinese market, Chinese manufacturers such as
Xiaomi and Huawei were sharpening their focus on international markets. India had emerged as
the market with the most growth potential, as smartphone penetration in India was still low, at
about 26 percent, at the end of 2015, compared with 51 percent in China.7

The smartphone market in 2015 was characterized by the following trends:

Bigger screens. Sales of smartphones with big screens (larger than 5 inches) grew by over
180 percent in 2014 and the trend continued into 2015. The share of these larger devices
grew from one-third of the global smartphone market to almost half by the first quarter of
2015.8 This trend was particularly pronounced in the Chinese market.

The rise of 4G. The rapid decline in the price of 4G smartphones and the widespread launch
of 4G networks led to the rapid growth of 4G-enabled devices. This trend was expected to
accelerate in 2016, with the impending launch of Reliance Jio Infocomms nationwide 4G
network in India and similar developments in Indonesia.

Cheaper handsets. Chinese smartphone manufacturers were leading the charge for cheaper
handsets. As a way to grab early market share, these manufacturers lowered the price of
their smartphones without making significant compromises in performance specifications,
undercutting established brands Apple and Samsung. By mid-2016, experts predicted, a
good-quality 4G smartphone handset would be available for 4,000 (about $60).

OnePlus Product Portfolio

OnePlus One
OnePlus unveiled its first product, the OnePlus One, in April 2014 and released it internationally

in June 2014 (Exhibit 2). The OnePlus One came pre-installed with a modified version of the Android
operating system called Cyanogen. The phone featured a high-quality build, a fast processor, an
excellent display, and a very attractive price. Promoted as a flagship killer, it was priced at $299
for the 16GB version and $349 for the 64GB version. Those prices were significantly lower than
Googles Nexus 5 and about half of comparable phones, such as the Samsung Galaxy S6.

7 Mobile Phone Penetration in Asia-Pacific from 2010 to 2015,
mobile-phone-penetration-in-asia-pacific (accessed June 27, 2016).

8 GfK Trends and Forecasting, Four Key Trends in the Global Smartphone Market, September 2015,

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The OnePlus One was sold exclusively on the OnePlus website, marking a departure from the
typical industry practice of selling through wireless carriers. Further, prospective customers had to
obtain an invitation to purchase the phone. These invites were distributed through online contests
and referrals from existing OnePlus customers. The invite system created tremendous buzzand
some controversybecause customers who wanted to buy the phone could not simply go online
and purchase one. They had to get an invite from someone they knew, or even buy an invite in the
secondary market, on eBay. OnePlus used the invite system for two reasons. First, the company
had a limited supply of phones, so the invite system allowed it to control supply and demand
for the phones. Second, the system created the perception of exclusivity and fueled publicity for
the fledgling startup with a fantastic phone that was hard to get your hands on. Some potential
customers and reviewers bitterly complained about the by-invitation-only tactic. Critics called
the system everything from maddening and the best smartphone you cant buy9 to odd.10
Wired magazine said it redefined frustration with an arcane, invite-based ordering system.11

OnePlus 2 and OnePlus X
Emboldened by the success of the OnePlus One, the company introduced its second-

generation smartphone, the OnePlus 2, in July 2015 (Exhibit 3). The company set expectations
high by continuing its provocative flagship killer label. The phone was priced at $389 (for the
64GB version), almost half the price of rival phones like Apples iPhone 6 and Samsungs Galaxy
S6. The OnePlus 2 continued its predecessors industry-leading specifications in several aspects,
including design, hardware, battery life, and user interface. However, it fell short on a few aspects,
including the display resolution and the lack of both NFC (near-field communication) and quick-
charge capability.

Although the OnePlus 2 was seen as a very capable smartphone, most analysts felt that it
fell short of being a true flagship killer. A side-by-side comparison of the Galaxy S6 with the
OnePlus 2 revealed that although the OnePlus 2 had excellent performance and was aggressively
priced, the Galaxy S6 had a slimmer form, a better camera, and more storage, which made its
higher price more palatable. See Exhibit 4 for a comparison of the OnePlus phones against key

Responding to the criticisms leveled against OnePluss products and distribution strategy,
Pei said, We misjudged what our main market was and went mainstream too prematurely. We
should have stayed loyal to our core users.12 Still, he believed the criticism was unduly harsh. If
you want to make a great meal, you dont throw every ingredient into it. You balance it and curate
it, he said in response to criticism that the OnePlus 2 lacked an NFC chip. We grew the business
quite well despite initial problems, but we need to find the correct positioning for our phones.13

9 Brandon Russell, OnePlus One Review: The Best Smartphone You Cant Buy, TechnoBuffalo, July 18, 2014,

10 Aloysius Low, OnePlus One Review: A High-End Smartphone for Android Experts, CNET, May 27, 2014,

11 Brian Barrett, The OnePlus X Is a StealAnd Thats Why Its So Hard to Buy, Wired, October 30, 2015,

12 Carl Pei, in interview with the authors, February 2016.
13 Ibid.

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In October 2015, OnePlus launched its third phone, the OnePlus X (Exhibit 5). The OnePlus
X featured an elegant design and high-quality hardware, but it sacrificed performance to achieve
the very affordable price of $249. The OnePlus X came with a smooth glass back that gave it a
sophisticated look reminiscent of the iPhone. The performance trade-offs came in the form of a
smaller battery, lack of fingerprint sensor (which had been standard with the OnePlus 2), and
swappable back covers (which allowed users to change the look of their phones but could damage
the non-removable battery it was supposed to protect). The OnePlus X also lacked the newer
USB Type-C connector and instead came with the older micro USB port. The OnePlus X, like the
OnePlus 2, did not feature NFC, a gripe that critics were quick to remark upon.

OnePlus released a stylish variety of back covers for the OnePlus X, including rosewood,
bamboo, and Kevlar. The phone also came in a limited edition ceramic-back version priced at 369
(US$413) and sold only in Europe and India. According to OnePlus, producing the ceramic back
involved a laborious 25-day manufacturing process, the first of its kind for a smartphone. The
OnePlus X came preloaded with OnePluss Oxygen OS built on the Android Lollipop OS, 16GB
storage, and was powered by Qualcomms Snapdragon 801 quad-core processor.

As with other phones OnePlus had released, buyers needed an invite to purchase the phone.
Despite criticism of this system, OnePlus insisted that it was necessary for it to control costs,
manage inventory, and avoid issues related to oversupply and surplus phones.

After releasing the OnePlus One, the company conducted a comprehensive customer survey

in January 2015 to understand its competition. This survey revealed that most OnePlus customers
(84 percent) considered another Android device before purchasing a OnePlus phone. Their brand
choices were mostly Google Nexus, Samsung, HTC, and LG, although 16 percent of customers
also expressed interest in the Apple iPhone. Only a small number of customers were interested in
a device from other Chinese manufacturers, such as Xiaomi (3 percent) and Huawei (1 percent),
which was unsurprising to OnePlus; the Chinese manufacturers were focused largely on the
domestic market, whereas OnePlus customers were mostly non-Chinese.

Google was a multinational technology company, headquartered in Mountain View, California.

Google dominated service in search, cloud computing, and software but also had diversified into
consumer electronic products such as personal computers (Chromebooks), tablet computers, and
smartphones (Nexus). In the OnePlus survey, 29 percent of OnePluss customers reported that
they considered the Google Nexus 5 phone. However, the Nexus 5 was both more expensive and
less capable than the aggressively priced OnePlus One. The Nexus 5 ran on the Snapdragon 800
processor, which was less powerful than the Snapdragon 801 that ran the OnePlus One. In addition,
the Nexus 5s 8MP camera was decidedly inferior to the OnePlus Ones 13MP camera. All in all, the
OnePlus One was a superior phone to the Nexus 5 on almost every specification, except perhaps
for the more advanced version of the Android operating system in the Nexus 5.

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Apple continued to stand apart from the competition with its sleekly designed, premium-

priced, and proprietary iPhone products. Its latest flagship products, the iPhone 6 and iPhone 6S,
were priced well above competing phones and inspired fierce loyalty among customers for their
ease of use and excellent user experience. Apples obsessive focus on design, attention to detail,
and outstanding customer service made it the standard bearer in design and user experience. In
the eyes of OnePluss founders, Apple was the smartphone company to emulate, as they felt Apple
was the only smartphone maker that was truly passionate about design.14

Samsung was a multinational conglomerate with a long history of manufacturing in

semiconductors, chips, hard drives, and lithium-ion batteries. In recent years, Samsung had
ventured into the device business and had found great success with its Galaxy line of smartphones
and tablet computers. Fueled largely by the popularity of these devices, Samsung had become the
largest manufacturer of mobile phones by volume. Recently, however, Samsung had stumbled
with its Galaxy S5, which featured a plastic body and poor build quality. Samsung had regained
some of its lost market share with the Galaxy S6 and the Galaxy S6 Edge, its latest generation of
flagship phones that won praise for much improved build quality, camera performance, and an
all-metal body.

Xiaomi was a Beijing-based Chinese consumer electronics company that was founded in

2010. It designed and sold smartphones, mobile apps, and other consumer electronics products. It
disclosed revenues of $12 billion in 2014. Its flagship phone was the Mi5, released in February 2016.
Like the OnePlus, the Mi5 offered flagship features at a very low price. It boasted the Snapdragon
820 processor from Qualcomm, a 16MP camera, a 4MP selfie cam, and a 3,000 mAh battery. Like
the OnePlus 2, the Mi5 came with a glass back; the 128GB Mi5 Pro came with a ceramic back.
All versions of the Mi5 featured NFC support and a fingerprint sensor that doubled as the home
button. These features came at low prices of $305 (32GB), $352 (64GB), and $413 (128GB). Xiaomi
was not a core competitor for OnePlus in the United States and Europe, but it did compete with
OnePlus in India.

Oppo Electronics
Oppo Electronics Corp. was a Chinese manufacturer founded in 2004 whose major products

included Blu-ray players, smartphones, and other electronic devices, such as headphones and
amplifiers. The company became well-known as the builder of the worlds thinnest smartphones,
including the Finder and the R5, which was launched in November 2014. It went on to launch the
R7 and the R7 Plus in 2015 and outsold Apple in China during the third and fourth quarters of that
year. In February 2016, at the Mobile World Congress in Barcelona, the company showed off its

14 Ibid.

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impressive Super VOOC Flash Charge, quick-charging battery technology that could fully charge
an empty 2,500 mAh battery in 15 minutes. It was a proprietary technology that Oppo intended to
put in commercial products in the near future. Like Xiaomi, Oppo mostly competed with OnePlus
in Asia, not in the United States or Europe.

Huawei, a Chinese telecommunications company, was founded in 1987 by a former engineer as

a manufacturer of phone switches. Like OnePlus, it was based in Shenzhen. Over the course of two
decades, Huawei had become a multinational conglomerate employing more than 170,000 people
in several countries. It manufactured smartphones, tablet PCs, and smartwatches, in addition to a
number of other products such as wireless modems and routers, wireless gateways, set-top boxes,
and video products. In April 2015, Huawei launched two Android smartphones, the P8 and P8
Max. Huawei also co-developed, with Google, the Nexus 6P, which was manufactured by Huawei
and marketed by Google. Huawei was at the forefront in the rise of Chinese smartphone brands in
2015, shipping a total of 100 million units.

OnePluss Early Strategy
The OnePlus phones appealed to technology-savvy customers who loved the companys

elegant, high-quality products and the edginess of its promotional tactics. Customers were willing
to overlook the limited availability and eccentric marketing for the beauty of the hardware and the
inspiring slogan of Never Settle. OnePlus believed it could build a global brand by relying on
customers to serve as brand advocates. What set the company apart was its determination to place
customers at the center of its decisions and activities, from product design to product marketing. As
Lau said, Whats most important to us is our customersit is customers comments, and listening
to them, making the phone easier to use and improving ourselves through customer interaction.15

OnePlus aimed to stand out in a crowd of smartphones by branding itself as a user-focused
company. Lau and Pei told staff that they wanted users to grow with them, to share experiences
and to be a part of the company. The company adopted the slogan We create together, and with
it found a way into the global customers heart. Even though it was based in Shenzhen, OnePlus
clearly wanted to build an international brand. With employees from 19 different countries, the
company prided itself on its open culture and the desire not to be labeled by any specific country.

The company relied heavily on social media to generate awareness and to drive demand. The
companys social media strategy focused on Facebook, Twitter, and Reddit, all of which redirected
traffic to OnePluss website. Traffic directed from OnePluss social media handily surpassed that
of its nearest competitors. The social media activity resulted in the OnePlus website receiving
25.6 million16 visits in December 2014 from a worldwide audience, just a year after the website
was launched. OnePlus followed up the social media marketing with an advertising campaign

15 David Rowan, OnePlus CEO: How To Take an Invite-Only Chinese Brand Global, Wired, August 2015,

16 Ariel Rosenstein, How the OnePlus Marketing Strategy Made It the Most Desirable Phone in the World, The Next
Web, March 17, 2015,

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that poked fun at its competitors (Exhibit 6). Tech-oriented sites also helped sustain the buzz by
directing their audience to the companys website. By 2016, OnePluss online community had more
than 828,000 members who had posted more than 14 million messages since the community was

OnePlus employed some unconventional tactics to garner awareness. For example, it followed
up its bold statements about the OnePlus One being a flagship killer with a provocative first
campaign called Smash the Past in which fans were asked to destroy their smartphones from
competitors for a chance to win the OnePlus One phone. OnePlus was looking to give away
100 phones for $1 each but reportedly received 140,000 entries within a week.17 The campaign was
controversial but OnePlus came away having generated the desired publicity with the campaign
drawing attention from fans and critics alike.

Another controversial campaign, dubbed Ladies First, also drew negative reaction. Women
were asked to draw the OnePlus logo on their bodies and submit pictures online. Pei told Advertising
Age magazine in an interview that the campaign was originally envisioned as a way to get more
women involved in tech but backfired. Many fans called it degrading and OnePlus pulled it
within four hours of its launch.18

OnePlus ran contests and giveaways for which the prize was an invitation to purchase the
OnePlus One phone. In the spring of 2014, the company ran three consecutive giveaways within
12 days. The giveaways attracted more than one million entries, more than 40,000 new Facebook
fans and Twitter followers, more than 400,000 unique website visits, and 31,000 forum comments.

For the OnePlus 2, the company hosted pop-up stands in nine cities globally to display the
phones; the New York pop-up drew a queue of several hundred people, a phenomenon usually
reserved for Apple product launches. By the time the company neared the launch of the OnePlus 2,
customer anticipation had reached a fever pitch. Some 1.6 million people had requested invites
to buy the phone. By October 2015, that number had grown to 5 million sign-ups.19 At an event
in New Yorks Times Square prior to the phones launch, 600 people queued up just to catch a
glimpse of the phone. Normally, such fervor was reserved for an Apple launch, not for a small
startup from China that had only launched one other device in its history.

Growth and ScalingStrategic Challenges
OnePlus knew that the flagship killer positioning was not sustainable because it would be

difficult to keep creating breakthrough product features. So the company had to think hard about
possible ways in which it could create sustainable differentiation. Further, the company needed
to broaden its appeal and reach more customers. Pei noted, We are trying to reach a broader
audience, maybe not the mass market, but maybe people who care more about the design of a

17 Angela Doland, OnePlus: The Startup That Actually Convinced People To Smash Their iPhones, Advertising Age,
August 10, 2015,

18 Ibid.
19 Rob Triggs, OnePlus 2 Reservation List To Close As Invites Ramp Up, Android Authority, October 16, 2015,
20 Barrett, The OnePlus X Is a Steal.

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The strategic approach to broaden the market opportunity for OnePlus would require
addressing three questions:

1. What customer segments should OnePlus address beyond its current customer base?

2. How should OnePlus adapt its value proposition and positioning strategy to appeal to the
broader market?

3. How should the company go to market in terms of distribution and marketing

Target Audience and Persona
In its early days, OnePluss core target was technology enthusiasts from two age groups:

customers ages 14 to 25 years (teenage to early adults) and those ages 26 to 35 years (adults). The
first group used the phone to socialize with friends, listen to music, and engage in social media
activities (Facebook, Twitter, and Instagram). The second group comprised the larger portion of
OnePluss target market and had a greater ability to buy the phone and maximize its potential. This
group of customers used the phone for everyday activities such as phone calls, Internet access, GPS,
and photography and video. In a survey conducted by OnePlus in 2015, half of the respondents said
they purchased the OnePlus One because of its impressive features (see Exhibit 7). Other factors
influencing their decision were an attractive price (33 percent) and design (6 percent). Accessories
were not drawing customers in, though; more than half (58 percent) did not purchase any from
the OnePlus website. OnePlus users felt that the brand stood for quality and excitement and an
innovative and impactful spirit but that it fell somewhat short of being trustworthy, transparent,
and customer-centric.

OnePluss customer research revealed that the majority of its customers were male (90 percent)
and highly educated, with 76 percent holding a college degree or higher. They had grown up
around computers, smartphones, and the Internet and were mostly interested in technology,
movies and TV, music, and gaming. They were regular online shoppers, with 87 percent making an
online purchase at least monthly. Most of them were students or worked in white-collar positions
in business, engineering, or technology/science/math-related fields and enjoyed talking about and
playing with new hardware. Significantly, they read about phones all the time, not just when it was
time to get a new one, and were picky about what they wanted. They had a good understanding
of smartphone features, gathered from sites such as Android Authority, Gizmodo, The Verge, and
Reddit. They wanted the latest technology and good service, but were price sensitive and compared
vendors before making their purchase decisions. They were willing to sacrifice elegant design in
favor of better specifications (e.g., thicker/bigger phone for bigger battery and protruding camera
for better photos). However, even though they read many technology blogs and online magazines,
they didnt always understand true engineering. Their perceptions were deeply influenced by
expert opinions and reviews.

OnePlus now faced the task of identifying adjacent customer segments that would find its
smartphones attractive and would allow it to broaden its appeal. The company believed that
traditional methods of segmenting customers by demographics (age, gender, region, etc.) were
outdated. Rather, it felt that customers should be segmented by behaviors and motivations.
OnePlus believed that its ideal customer persona w


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