Google Nexus Pricing and Product Strategy

PRICING AND PRODUCT STRATEGY

FOR GOOGLE NEXUS

Team Members:

• Vaneet Chaudhary

• Siddhant Sharma

• Jason D’souza

• Pranjul Misra

NEXUS

• Nexus, developed by Google, Inc. in 2010 is a line

of smartphones and tablets that run the Android

operating system.

• It is the first physical initiative of Google to enter the

smartphone market.

• Nexus phones have had a brand image of being

pure, fast and affordable.

MORE ABOUT NEXUS

• Google, Inc. issues a tender/contract to one out of

multiple companies vying for it annually.

• The chosen partner Original Equipment

Manufacturer (OEM) designs and produces the

phone under Google's guidelines.

• Google itself indulges in developing and marketing

of the product.

PARTNER OEMS

Nexus One, Nexus 9: HTC

Nexus S, Galaxy Nexus, Nexus 10 : Samsung

Nexus 4 and Nexus 5: LG

Nexus 7: ASUS

Nexus 6: Motorola

BRAND EXTENSION

Line Extension

Brand Extension

Multi Brands

New Brands

Existing E

xis

ting

NewN

ew

BR

AN

D N

AM

EPRODUCT CATEGORY

ENDORSING BRAND STRATEGY EXECUTED BY GOOGLE

Google

Google Search

Source: Strebinger, A. (2004). Strategic Brand Concept and Brand Architecture Strategy–

A Proposed Model. [online] www.acrwebsite.org. Available at:

http://www.acrwebsite.org/volumes/v31/acr_vol31_181.pdf

3 LEVEL ARCHITECTURE

Google phone uses 3 level brand architecture

3 names involved: Google, Nexus, Partnering OEM

This strategy practiced by Google to survive in the

phone industry

NEXUS ONE

Partner OEM: HTC Corporation

Launch: January, 2010

Price: Contract - $179 (T-mobile)

Full Retail - $529

Source: Barranger, K. (2014). History of Nexus Phone Pricing – Why the High Price for the Nexus 6? | Droid Life. [online] Droid-life.com. Available at: http://www.droid-life.com/2014/10/16/nexus-6-price/

0

0.2

0.4

0.6

0.8

1

1.2

Droid iPhone Nexus One

Launch Sales Comparison through day 47

Launch SalesComparison through day47

$ (

Mill

ion)

Farago, P. (2014). Day 74 Sales: Apple iPhone vs. Google Nexus One vs. Motorola Droid.

[online] Flurry.com. Available at: http://www.flurry.com/bid/31410/Day-74-Sales-Apple-

iPhone-vs-Google-Nexus-One-vs-Motorola-Droid#.VO2sSfmUdqU

http://www.flurry.com/bid/31410/Day-74-Sales-Apple-iPhone-vs-Google-Nexus-One-vs-Motorola-Droid#.VO2sSfmUdqU

Nexus One My Touch Droid iPhone 3Gs

Launch Date Jan 5, 2010 Aug 5, 2009 Nov 5, 2009 June 16, 2009

Countries 1 1 1 8

Generation 1st 1st 1st 3rd

Installed Base 0 0 0 27 million

Week 1 Sales 20,000 60,000 250,000 1,600,000

Source: Farago, P. (2014). Flurry Special Report: Google Nexus One Launch Week Sales.

[online] Flurry.com. Available at: http://www.flurry.com/bid/29658/Flurry-Special-Report-Google-

Nexus-One-Launch-Week-Sales#.VIiHxzGUdqU

HTC

Motorola

SonyEricsson

Samsung

Others

HTC

Motorola

Samsung

LG

SonyEricsson

Others

20102009

Android Market Share by OEM

Source: Farago, P. (2014). Android Special Report: Is Samdroid the new Wintel?. [online]

Flurry.com. Available at: http://www.flurry.com/bid/54035/Android-Special-Report-Is-

Samdroid-the-new-Wintel#.VO2s5PmUdqU

http://www.flurry.com/bid/54035/Android-Special-Report-Is-Samdroid-the-new-Wintel#.VO2s5PmUdqU

NEXUS S

Partner OEM: Samsung Electronics

Launch: December, 2010

Price: Contract - $199 (T-Mobile, Sprint)

Full Retail - $529(3G), $555(4G)


SWOT FOR NEXUS S

Strengths

• New and improved representative of

Google’s own Android series

• Sudden growth in the android

industry

• No bloatware

• Samsung increased it’s market share

Opportunities

• Samsung was continuing to grow

it’s market share

• The smartphone industry had

started to grow

Weakness

• Did not satisfy consumer’s demands

• Highly priced

• Lack of marketing lead to lack of

awareness

Threats

• Apple recently launched an improved

version of the iPhone 3

GALAXY NEXUS

Partner OEM: Samsung Electronics

Launch: November, 2011

Price: Contract - $199.99(LTE; Sprint)

Full Retail - $399(GSM), $699(LTE)

Google Play - $399(GSM)


Top 10 Android Devices (Global)

Samsung Galaxy S3

Samsung Galaxy S2

Xiaomi Mi 1S

Samsung Galaxy Note

Samsung Galaxy Note 2

Samsung Galaxy Tab 2

Nexus 7

Htc One X

Galaxy Nexus

Sony Xperia S

Others

Source: Steineman, K. (2014). Android Market Share – Leaning towards Galaxy S III and

Nexus 7. [online] Mobile Minute. Available at: http://mobileminute.info/android-market-share-

leaning-towards-galaxy-s-iii-and-nexus-7/

Source: Steineman, K. (2014). Android Market Share – Leaning towards Galaxy S III and

Nexus 7. [online] Mobile Minute. Available at: http://mobileminute.info/android-market-share-

leaning-towards-galaxy-s-iii-and-nexus-7/

NEXUS 4

Partner OEM: LG Corporation


Prices: Contract - $199 (T-Mobile)

Full Retail - $499 (T-Mobile)

Google Play - $299 (8GB), $349 (16GB)


PENETRATIVE PRICING STRATEGY

0

100

200

300

400

500

600

700

iPhone 5 SamsungGalaxy S3

Google Nexus4

Production Cost ($)

Launch Price ($)

These are approximate

Smith, C. (2014). Awesome interactive chart shows the cost of building every iPhone and

Galaxy phone. [online] BGR. Available at: http://bgr.com/2014/12/05/iphone-6-vs-galaxy-

s5-price/

http://bgr.com/2014/12/05/iphone-6-vs-galaxy-s5-price/

NEXUS 5

Partner OEM: LG Corporation

Launch: October, 2013

Price: Contract - $149 (Sprint)

Full Retail - $449 (T-mobile, Sprint)

Google Play - $349 (16GB), $399 (32GB)


PRICING & PRODUCT STRATEGY: IMPACT OF NEXUS 5

Penetrative pricing strategy - a winner

Considered as the highest commercial point of the Nexus series

"Nexus 5 has been a very strong performer for Google" - Patrick Pichette, CFO, Google, Inc.

Noticeably strong contributor to Google's Q4 2013 revenue of $16.86 billion as compared to $14.4 billion in Q4 2012

Although a success for LG Corp. as well, the Nexus 5 failed to prevent them from posting a loss of $59.1 million in Q4 2013, completely reversing the previous year's profit of $205.8 million

Source: Cheng, R. (2014). LG swings to Q4 loss, but G2 and Nexus 5 drive phone sales - CNET.

[online] CNET. Available at: http://www.cnet.com/news/lg-swings-to-q4-loss-but-g2-and-nexus-5-

drive-phone-sales/

NEXUS 6

Partner OEM: Motorola Mobility


Price: Contract - $0-299 (All major US carriers)

Full Retail - $649 (32GB), $699 (64GB)

Google Play - $649 (32GB), $699 (64GB)


WHY DID NEXUS GO PREMIUM?

May, 2012 - Google, Inc. purchases Motorola

Mobility for $12.5 billion

October, 2014 - Google, Inc. sells Motorola Mobility

to Lenovo Group Ltd. for $2.91 billion

November, 2014 - Nexus 6 is released for $649

(32GB)

Google incurred a loss of $1.245 billion in the fiscal

year of 2013 alone caused by Motorola

Google acquired most of Motorola Mobility's patents

before its sale to Lenovo Group Ltd.

Since Nexus 6 was the last Google phone

manufactured by Motorola, no option other than

changing their strategies and policies was left at

Google's disposalSources:

• Investor.google.com, (2014). Google to Acquire Motorola Mobility – Investor Relations –

Google. [online] Available at: http://investor.google.com/releases/2011/0815.html

• News.lenovo.com, (2014). Lenovo Newsroom | Lenovo to Acquire Motorola Mobility from

Google. [online] Available at: http://news.lenovo.com/article_display.cfm?article_id=1768

http://investor.google.com/releases/2011/0815.html

http://news.lenovo.com/article_display.cfm?article_id=1768

PRODUCT & PRICING STRATEGY: DYNAMIC

CHANGE

Nexus 6 - First Nexus phone available through all 5

major US carriers, besides being sold unlocked

Decision to reap in more profits from the get go

Premium price for a premium phone

Adopted the 'Price Skimming' strategy

Manufacturer pressure

Change in marketing - going traditionalCarrier

concessions

Source: Devine, R. (2014). Nexus 6 set for all the major U.S. carriers. [online] Android Central.

Available at: http://www.androidcentral.com/nexus-6-set-all-major-us-carriers


CONCLUSION

The Nexus smartphone line saw a switch from price

skimming to penetration pricing, which then

switched back to skimming with a product justifying

that move

Segmentation Stages: Android Aficionados-->Wide

Consumer Base-->Lower Segment Consumers--

>Premium Segment Consumers

The Nexus series has witnessed relatively less

success than Samsung and Apple's flagship

smartphones, but has proven to be a great brand

representative for Android and Google

REFERENCES: BOOKS

Hoang, P. (2007). Business & management. [Melton, Vic.]: IBID Press.

Kapferer, J. (1994). Strategic brand management. New York: Free Press.

Kotler, P. (1980). Marketing management. Englewood Cliffs, N.J.: Prentice-Hall.

Kotler, P. and Armstrong, G. (1991). Principles of marketing. Englewood Cliffs, N.J.: Prentice Hall.

Woyke, E. (n.d.). The smartphone.

JOURNALS

Aaker, D. (1996). Misconceptions about brands. J Brand Manag, 3(4), pp.212-214.

Bansal, R. and A., Y. (n.d.). The Asset Pricing-Macro Nexus and Return-Cash Flow Predictability.SSRN Journal.

Barazza, S. (2012). Apple v Samsung: a preliminary injunction against the Galaxy Nexus smartphone.Journal of Intellectual Property Law & Practice, 8(1), pp.6-8.

Hecht, J. (2014). All smart, no phone. IEEE Spectr., 51(10), pp.36-41.

The Teardown: 4G Samsung Galaxy Attain. (2012). Engineering & Technology, 7(10), pp.94-95.

WEBSITES

Barranger, K. (2014). History of Nexus Phone Pricing – Why the High Price for the Nexus 6? | Droid Life. [online] Droid-life.com. Available at: http://www.droid-life.com/2014/10/16/nexus-6-price/

Cheng, R. (2013). Here's why T-Mobile's Nexus 5 is $100 more than at Google Play - CNET. [online] CNET. Available at: http://www.cnet.com/news/heres-why-t-mobiles-nexus-5-is-100-more-than-at-google-play/

Cheng, R. (2014). Google's Android VP on why a pricier Nexus 6 may lead to higher sales - CNET. [online] CNET. Available at: http://www.cnet.com/news/googles-android-vp-on-why-a-pricier-nexus-6-may-lead-to-higher-sales/

Cheng, R. (2014). LG swings to Q4 loss, but G2 and Nexus 5 drive phone sales - CNET. [online] CNET. Available at: http://www.cnet.com/news/lg-swings-to-q4-loss-but-g2-and-nexus-5-drive-phone-sales/

http://www.droid-life.com/2014/10/16/nexus-6-price/

http://www.cnet.com/news/heres-why-t-mobiles-nexus-5-is-100-more-than-at-google-play/

http://www.cnet.com/news/googles-android-vp-on-why-a-pricier-nexus-6-may-lead-to-higher-sales/

http://www.cnet.com/news/lg-swings-to-q4-loss-but-g2-and-nexus-5-drive-phone-sales/

Farago, P. (2014). Flurry Special Report: Google Nexus One

Launch Week Sales. [online] Flurry.com. Available at:

http://www.flurry.com/bid/29658/Flurry-Special-Report-Google-

Nexus-One-Launch-Week-Sales#.VIiHxzGUdqU

Goldstein, P. (2014). Report: Google to expand Nexus device

program to multiple OEMs. [online] FierceWireless. Available at:

http://www.fiercewireless.com/story/report-google-expand-nexus-

device-program-multiple-oems/2012-05-16

Graham, F. (2010). Google Nexus One review - CNET. [online]

CNET. Available at: http://www.cnet.com/uk/products/google-

nexus-one/

Welch, C. (2012). Official: T-Mobile to sell Nexus 4 for $499 off-

contract, available in 'select' stores. [online] The Verge. Available

at: http://www.theverge.com/2012/11/13/3642382/t-mobile-nexus-

4-to-cost-499-unsubsidized

http://www.flurry.com/bid/29658/Flurry-Special-Report-Google-Nexus-One-Launch-Week-Sales#.VIiHxzGUdqU

http://www.fiercewireless.com/story/report-google-expand-nexus-device-program-multiple-oems/2012-05-16

http://www.cnet.com/uk/products/google-nexus-one/

http://www.theverge.com/2012/11/13/3642382/t-mobile-nexus-4-to-cost-499-unsubsidized