Marketing Strategy Assignment - Nokia Lumia

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The Warwick MBA

Assignment Cover Sheet

Submitted by: DL10CW

Date Sent: 4/15/2013

Module Title: Strategic Marketing

Module Code: IB9S40

Date/Year of Module: Mar/2013

Submission Deadline: Apr/2012

Word Count: 3000

Number of Pages:

Situation Analysis:

To survive in the competitive business environment, it is essential for a company to conductextensive market research and develop a strong brand image. When an effective marketingstrategy is developed it ensures success in the global competitive market where major playersuch as Apple, Samsung and Google have a significant impact upon Nokias strategies.

Nokia held the pole position as the premier mobile vendor for well over a decade, but thatgrasp on the mobile market has been slipping very fast and has threatened its very survivalby market leaders such as Samsung and Apple. Many industry experts had predicted thisshift in power since the advent of smartphones a few yearsback.

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Nokia was ponderously slow at adapting to the market even though it had been a pioneer inthe smartphone market, literally introducing consumers to the smartphone with its initialSymbian Series 60 devices in 2002. For the next five years, Symbian phones had little trouble

maintaining a leadership position in the smartphone pack. But in 2007, Apple leapfrogged theNokia through the technical advances of its iPhone. With full touchscreen and app-basedoperating system, the iPhone changed the very definition of what a smartphone should be. Itreinforced the fact that the smartphone market was hyper-competitive and success can befleeting if companies do not focus on innovation and changing customer needs.

The consumer transition from traditional mobile phones to smartphones was dramatic, andcaught Nokia off-guard as the business had become too product-led rather than customer-ledwhich was considered by many as a missed opportunity. However Nokia has recognized thistrend and through a partnership with Microsoft finally arrived with vigor to the smartphoneparty. Nokia released new models through its Lumia series in 2012 and launched anaggressive marketing campaign to regain its market position which has started showing signsof revival.

Despite the lessons being learnt and progress being made with the Lumia range, many Nokialoyalists still find it difficult to enthuse about their latest flagship products as we look at thereasons for their skepticism and avenues for Nokias improvement.

Background

Nokia Corporation is a Finnish multinational communications and information technologycorporation headquartered in Keilaniemi, Espoo, Finland. Its principal products are mobiletelephones and portable IT devices.

Nokia has around 122,000 employees across 120 countries, sales in more than 150 countriesand annual revenues of around 38 billion. As of Q4,2012 it is the world's second-largestmobile phone maker by unit sales (after Samsung), with a global market share of 22.5%.Nokia had pioneered the first mobile phone in 1984 through its Mobira talkman, the Finnishconglomerate had turned itself into the worlds leading mobile phone company in the 1990s. Itcontinued to build on its success and gained market dominance between 2002 through 2012through its range of mobile products.

Last year, not only did Samsung break Nokias 14-year record of being the worlds largesthandset maker by overtaking it in terms of unit shipments in the January-March quarter,according to a report in April 2012 by research firm Strategy Analytics, it is also threatening toupstage Nokia in the overall mobile phone market. It has already toppled Nokia in theemerging smartphone segment.

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Source: IDC Worldwide Mobile Phone Tracker, January 24, 2013

Nokia formed a strategic partnership with Microsoft in 2010 to build a global mobileecosystem based on highly complementary assets. With Windows Phone as its primarysmartphone platform, Nokia would help drive the future of the platform by leveraging itsexpertise on hardware optimization, software customization, language support and scale.Nokia and Microsoft would also combine services assets to drive innovation and gain marketshare in the world mobile OS market. This led to the launch of the NokiaLumia series in2012 through the Lumia 900 and 800 series in the US market.

Since launch, Nokia is estimated to have sold 810k units ofLumia 900 series in the NorthAmerican market.

Smartphone Market size:-

The smartphone market has entered a maturity phase where the market growth has beenstabilizing. US markets alone account for 40% of the all smartphone sales worldwide and isconsidered as the bellwether of the smartphone industry.

The US Smartphone revenues is estimated to cross the 300 Million units mark with estimatedrevenue to exceed $190 Billion in 2012. Hence it is a crucial battleground for Nokia dominated

by Apple and Samsung to regain the lost ground in this important market. Nokia through its

Q4 2012 Mobile Phones Market Share

1. Samsung

2. Nokia

3. Apple

4. ZTE

5. Huawei

Others

Q4 2012 Smartphone Market Share

1. Samsung

2. Apple

3. Nokia

4. HTC

5. Research In Motion

Others

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launch of the additional products in its Lumia series is positioning itself to make inroads inthis market.

Nokia Segmentation Strategy:

Nokia has understood that to be successful in the US markets they needed to have a

differentiated offering for the everyday consumers and business. In having these different

options they would be able to appeal to the demographics who would be most likely to switch

to the Lumia phones.

The Segmentation criteria for the Lumia series is given below :-

Geographic

World region North America

Country US

Cities Reach out maximum places

Demographic

Age 18 - 50

Gender Male, Female

Income All income groups

Occupation Every sector

Psychographic

Social class Middle

Lifestyles Urban

Behavioral

First time smartphone buyer Cost

Switchers Innovation & features

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Segmenting and targeting by purchase behavior: Target Market for the Nokia Lumia

phones is between 20-50 years. As the smartphone penetration has already reached 60%

Nokia has differentiated its offering to the first time smartphone buyer through Lumia 620,820

series and mature users through the innovative Lumia 920 series.

Generation Y and Generation Z: This is the age group between 12 32 who are embarking

on a professional career and unified by the fact that they are technology driven, fashion

conscious and price sensitive Lumia 620

Social contact: The second segment for Nokia is the upwardly mobile, socially-conscious

segment that uses a mobile to stay in touch. Today's young women and affluent housewives

constitute two major chunks of the segment and Nokia has targeted them by launching a pink

smartphone Lumia 820.

Assured: The last segment as defined by Nokia comprises of CEOs, high-profile celebrities,

industrialists and other high "net worth" individuals. The fact that the segment cannot do without

a mobile phone makes it the 'assured' segment. Recently a few snaps from the presidents

office of Thailand showed that the president used a white Nokia Lumia 920.

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The model that has grabbed the attention of consumers on an international scale is theLumia 920, the top end model in the range. A 4.5 inch display and powerful 1.5 GHz dualcore processor are teamed with a range of great features to enable this model to competewell against leading devices currently available. Nokia has adopted a market penetrationpricing to capture this market from Apple.

Lumia 820 still offers some great specification but is geared for a more mid-range market andtherefore is a good option for people not wanting to spend premium money on the 920handset. Nokia has successfully leveraged the segmented pricing strategy againstSamsung and HTC.

Lumia 620 is below these two models in the range and be a great first smartphone while theattractive price point will also see the model strike a chord with a teenage market. Nokia hasused the value pricing model to increase the adoption among the first time smartphonebuyers switching over from the feature phones.

Branding & Marketing:-

In order to do this, Nokia has moved away from its traditional marketing strategy in launchingthe Lumia series. Instead of relying solely on the traditional marketing channels likeadvertising it has shifted towards advertisements through social media, TV and digitalcampaigns. This has allowed Nokia to place a greater emphasis on collaborating with its

partners such as Microsoft and AT&T to develop an integrated marketing plan. It hasleveraged its AT&T partnership to market the Lumia phones in North America. Nokia hadpreviously eschewed this approach which limited its penetration in the region. However it hasused the Push strategy to spur demand for its Lumia products.

It is leveraging Microsofts business/enterprise sales channels to appeal to corporatecustomers in the region, offering value-added services in a play for the enterprise sector.Such moves have positioned Nokia to compete with Research In Motion Ltd., whoseBlackberry phones are popular among corporate users.

The Integrated advertising budget for the Lumia promotion is given below which has helped itto create an integrated marketing plan:-

1) Nokia Budget: $50 million

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2) Microsoft Budget:$50 million

3) AT&T Budget :$150 million

Secondly, Nokia launched the device only through its AT&T partnership rather than launchingwith multiple carriers. This was one of the key adjustments Nokia made from the launch ofLumia 800across multiple carriers.The CEO of Nokia, Stephen Elop, recently commentedthat they prefer a less is more approach when it comes to selecting network providers fortheir range of phones including the Nokia Lumia 920. This entails that the company opt torelease premium models on a limited number of networks rather than flood the market byusing every provider available.

One of the things we had learned with the first launch was being very narrow would yieldbetter results for us said Mr. Elop. By carefully selecting network providers this also allowsNokia to encourage the selected companies to promote the handset in question as flagshipphones and gain the company even more carefully selecting valuable marketing.

Nokia has pushed this further through experiential marketing using celebrities such as GwenStephanie and Jessica Alba to promote the brand as bold, fun, and youthful. This can be seenthrough the smoked by windows campaign launched by Microsoft in which Ben Rudolfconvinces a reality star to swap her Samsung for Nokia Lumia 920.

Positioning: - The Strategic Positioning of Nokia is based on Personality, Self-Expressive

benefits and quality product. They has been reinforced through product placement in music

videos alongside celebrities such as Nicki Minaj and Gwen Stefani as well as youth icons such as

Jessica Alba. This market position is key for Nokia as it battles against Apple and Samsung in the

smartphone market.At launch Nokia has tried to promote the brand as something better. Better

camera, better charging, better maps, better screen, etc. and promoted it through the Twitter

#switchtolumia hashtag.

This positioning is critical for Lumia due to its late entry in the smartphone market as the good

enough position has been held by Android overall while the better position has been held by

iPhone. Hence to differentiate itself Lumia has positioned itself as a better product with good price

to gain the market share from both Apple and Samsung.

Nokias smartphone is different from other mobile devices due to its well-known durability and

quality with lower price, which is economical device for our target market. Moreover, the integration

of Windows 8 OS with the Microsoft office applications would benefit the Enterprise as well as the

student market. Nokia can defend its position in the teenager market by using this position at the

low-end market and low price, with its durable device and better performance compared to its

competitors due to their extensive experience in producing long-lasting mobile devices.

Critical Analysis of Nokia Lumias Marketing Strategy:

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The initial market response to the introduction of Lumia series gave a bump to the sales of Nokia

smartphones in the North American markets. On the upside, sales of the Lumia handsets were

still growing, selling two million of the series in the last three months of Q2 2012.

However, "competitive industry dynamics" and the cost of transition into a modern

smartphone player meant the numbers weren't too pleasing. The figures meant that the company

will make a loss of around three percent below "break even. Meanwhile Samsung also entered

the Windows Phone market with OMNIA 7 thus posing a threat to Nokias 85% share in the

windows phone market.

The Launch of 4 additional Lumia products on Windows 8 platform gave an additional boost in Q4

as Nokia announced 4.4 million Lumia smartphones were shipped. This number brings the

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cumulative total to 14 million since the Lumia line was launched a year earlier which is much below

The forecast figure of 15 Million units. Despite its strong performance Q4 2012, Nokia still expectsQ1 2013 to be a bit bumpy, forecasting that the operating margin of its Devices & Services arm to

be around negative two percent. This begs a question as to whether Nokia will be able to sustain

this momentum given the heavy competition faced in the smartphone market.

The key challenges being faced by Nokia based on its market performance and competition can be

summarized below :-

1. The pricing: The pricing for Nokia Lumia seems to be high, compared with the IPhone and top

range Android devices due to the price cuts by the vendors. The value proposition offered by Nokia

Lumia based on value pricing does not match with the expectation of the target group and thus

leading to mismatch between the value proposition provided by Nokia and the customer

expectations.

.

2. Features of Nokia Lumia: Nokia and Windows 8 aims to provide exceptional user experience

with the feature rich product offering such as high resolution camera and Web browsing

capabilities. These features are not however considered disruptive technologies to leapfrog the

technical features offered by the competing Apple and Samsung devices. As a result Lumia has

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been struggling to differentiate itself in the smartphone industry dominated by lifestyle brands like

Apple and Samsung.

3. Branding: - The Nokia brand is identified more as a feature phone and low end smartphone

provider needs to rebuild its brand in the premier smartphone segment. This has beencompounded by Nokias marketing myopia and inability to produce products to meet the market

demands. It is been hard to dissect the value proposition for the Nokia Lumia phones based on its

advertisements.

4. Ecosystem: - Nokia has chosen the Microsoft Windows platform exclusively for developing its

smartphone devices, however Microsoft has partnered with Huawei for producing windows phone

for the African market which will compete directly with Nokia. This raises a concern that Nokia

needs to look at alternate strategies for expanding its growth through the development of its own

OS or developing an Android based phone. The discontinued support for Windows 7 phone and

release of Windows 8 OS already has lighted the risks for Nokia.

5. Distribution: - When it comes to a product launch, Scarcity is a good thing, if a) you are the

incumbent leader, and therefore in greatest demand, and b) you are not the competitor starting

from near-zero traction (in the smartphone market) attempting to drive a displacement strategy.

In the latter case, you must market on your differentiation, not scarcity. You must flood the market

with availability, an ultimate user experience, and blanket every channel.

This is a huge miss for the marketing team to think that replicating the Apples strategy, when you

are the challenger has any chance of succeeding. The strategy to model is the Google Phone

strategy, where you flood the market with products and attached services that work, making it an

easy decision trythe Lumia out. This is no time for a Lumia 900 marketing strategy based on, or

appearing to be based on scarcity.

Way forward for Nokia Lumia:

Despite having made some marketing mistakes with the Nokia Lumia launch, it has managed to

garner a 90% share of the windows OS market. Nokia has also moved towards profitability during

this period and is slowly stabilizing. While Nokia has made progress with its shift from feature

phones based on its Symbian OS to smartphone using Microsoft OS, it still is in danger of missing

the trend of the convergence of smartphones and tablet devices. As the computing landscape

changes in the next couple of years, it will be vital for Nokia to release a windows tablet device

which is an extension of its Lumia flagship and continue the road to recovery. The early interest in

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the launch of Lumia 720 and partnerships with AT&T and T-Mobile bodes well for Nokia and set it

up for a long term future in the US markets.

This is to certify that the work I am submitting is my own. All external

references and sources are clearly acknowledged and identified within the

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contents. I am aware of the University of Warwick regulation concerning

plagiarism and collusion.

No substantial part(s) of the work submitted here has also been submited by me

in other assessments for accredited courses of study, and I acknowledge that if

this has been done an appropriate reduction in the mark I might otherwise have

received will be made.

References :-

http://www.email-marketing-reports.com/wireless-mobile/smartphone-statistics.htm

http://blogs.strategyanalytics.com/WSS/post/2012/01/10/Lumia-900-%E2%80%93-A-Nokia-

LTE-Superphone-to-Target-the-US-Market.aspx

httpsteinvox.com/blog/windows-nokia-lumia-900-marketing-strategy-base-it-on-

abundance-not-scarcity/

Lesson Notes. Warwick Business School. University of Warwick.

http://communities-dominate.blogs.com/brands/2013/02/final-q4-numbers-and-full-

year-2012-stats-for-smartphone-market-shares-top-10-manufacturers-top-os-p.html

www.Nokia.com

www.asymco.com

http://blog.adduplex.com/2013/03/windows-phone-device-stats-for-march.html