Nokia its not over yet (1) CASE STUDY


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Nokia its not over yet (1) CASE STUDY

  1. 1. Case Study On “NOKIA: It’s not over yet” BY: Anuj Chaudhary: A19 1
  2. 2. ABSTRACT The usage of the smartphones has increased among masses in the recent times and the rapid growth and competition with android in the market made the difference for Nokia. The significance of this case study is that Nokia, after its acquisition trying to change the consumer perception and broaden the emotional appeal of their products. It is not over for them as the users, now days; keep on changing the devices after 2-3 years and people started moving towards Windows phone as well. They are going to follow different marketing and advertising strategies to differentiate their devices (such as Lumia 1020) to increase their value and customer loyalty. The study concludes that with the introduction of Lumia and Asha series, they have increased their customers as compared to last years and expecting to come better. Keywords: Nokia, Microsoft, Consumer Perception, Smartphones, Lumia, Windows Phone, Feature-phones. In today’s trend, there is heave of smartphones in the mobile handset market and Nokia is making efforts to compete in the space. There is close inequality between Nokia’s products and its targeted customers by looking at today’s consumer preferences. Either Nokia products are not reaching the proposed consumers or they are failing to meet customer satisfaction levels. A wide range of products are also not helping them to improve their market share. To regain its market share and customers, it becomes essential that the company recognizes the right customers and also realize adequate number of consumers for different segment, which acts as a basis point for 2
  3. 3. consumers to differentiate between consecutive product lines. It needs to concentrate towards the development of products and services that can be recognized by customer needs suiting their respective lifestyles. Now it’s the time to clearly differentiate its products from each other in order to add value to its numerous platforms. There has been rapid uptake of smartphones in the last two years. The market is being very competitive and products life cycle is reduced because of fast change in the technologies, the customer mostly using a smartphones for 2-3 years. Therefore a high level of innovativeness is required. Nokia’s comeback into the smartphone market has increased perception of the brand among its traditional consumer base – people who don’t even use a smartphone. The device manufacturer re-launched itself into the smartphone race in October 2011 with the Lumia range but it is people who use basic phones that have reported hearing more positive buzz about the brand. This could be good news for Nokia which is targeting Americans who have yet to purchase their first smartphone – currently around 50% of mobile users in US. The Lumia Windows Phone is positioning itself as a viable alternative to the likes of Apple and Android. Nokia handsets currently have a small share (3%) of the smartphone market and this could be because Nokia’s Windows devices are still relatively new and gaining ground. While Nokia has yet to make in-roads in the smartphone sector, the brand is used by one of ten feature phone users. The featured phones describe any non-smartphone mobile device – cell phones without the internet, emails and application capabilities of smartphones. The perception of Nokia among this group is higher than among smartphone users and among non-smartphone users is currently higher than Samsung’s Galaxy. If statistics to be considered, there is big downfall in the sales of Nokia and losing its grip over market share. 3
  4. 4. Rank Brand 2012units(in millions) Share (%) 2011units(in millions) Share (%) 2010units(in millions) Share (%) 1(2) 2(1) 3(3) 4(4) 5(8) 6(6) 7(5) 8(10) 9(7) 10(-) Samsung Apple Nokia RIM Huawei Sony HTC ZTE LG Lenovo Others Total 215 135.8 35 33.2 32 31.9 31.5 30 26.5 2.9 101.9 697.7 30.8 19.5 5.0 4.8 4.6 4.6 4.5 4.3 3.8 3.6 14.6 90.9 93.1 77.3 52.5 20 26.8 44.6 12 23.3 - - 486 18.7 19.1 15.9 10.8 4.1 5.5 9.2 2.5 4.8 - - 24 47.5 100.3 48 5 9.5 24.6 3.5 7 - - 297.8 8 15.9 33.7 16.1 1.5 3.2 8.3 1.2 2.4 - - Exhibit 1: Sales statistics of the smartphones. Source: TomiAhonen Almanac 2013 This shows that the smartphone market grew 44% in one year and among the major manufacturers, Samsung has overtaken Apple becoming for the first time the biggest smartphone maker of the world which is position held by Nokia for the first dozen years of the industry but Apple took over it briefly in year 2011. Samsung gained a leadership edge over others and now being the world’s largest handset provider. It has become so strong that won’t be dethroned any year soon. By pouncing very strongly when Nokia stumbled in the last two years, it has 4
  5. 5. effectively won the decade and guaranteed to have well above average profits in a very profitable industry. The Chinese vendors may become the long term rival to them. If Operating systems are considered, android has captured the market as a whole. Rank OS 2012units(in millions) Share (%) 2011units(in millions) Share (%) 2010units(in millions) Share (%) 1(1) 2(2) 3(4) 4(3) 5(5) 6(6) Android iOS Blackberry Symbian Bada Windows Phone Others Total 452 136 33 19 16 16 15 695 65 20 5 3 2 2 2 208 93 52 81 9 5 - 486 43 19 11 17 2 1 - 54 48 48 116 3 2 - 298 18 16 16 39 1 1 - Exhibit 2: Operating System Market Share. Source: TomiAhonen Almanac 2013 The smartphones sold in 2012 are powered almost by Android as two out of every three and iOS was in one out of five. The former giant Symbian crumples from third to fourth. Blackberry holding the third rank in 2012 but almost vanished in 2013. Nokia and Microsoft will now be mainly focusing on the Windows Phone and increasing the market share in the coming years. Recognizing that it has been all but absent from the smartphone market and it’s the time Nokia made waves in October 2011 with the launch of the Lumia 800 Windows Phone. The buzz for the brand increased after the launch from a score of 5.8 for the smartphone users and 5 for non-smartphone users on October 26, 2011 to the score of 9.6 and 7.1 respectively by January 23, 2012. Since then, the perception of Nokia has declined among smartphone users – even after the Lumia 900 hit US stores on March 30, 2012. In contrast this, the feature phone users who continue their upwards trend in perception that began with the Lumia 800 launch back 5
  6. 6. in October. Being there no guarantee feature phone users that will upgrade to a smartphone, but he is doing well to keep perception high among this potential consumer base. Nokia Consumers Nokia needs to spend heavily on consumer and retailer education to drive sales of its Lumia handsets, after the manufacturer posted some poor results. The Finnish manufacturer has put the Lumia series of smartphones which is the result of its partnership with Microsoft at the heart of its turnaround strategy but Nokia's problem is the current high-end Lumia devices cannot match the iPhone or high-spec Samsung devices. Pushing Lumia devices across operators' channels constitutes the biggest single challenge for Nokia and dedicating huge shelves to Lumia devices in the operator stores is not enough to create consumer demand. They definitely have to increase its marketing budget and help operators to educate their sales force to sell the Lumia devices and it desperately needed Microsoft to help with a massive marketing push to get the platform moving and compete effectively – unless it’s waiting for Windows 8.' The other Nokia's problem was one of consumer perception. 'There's little objectively wrong with many of the products competing with Apple, Samsung and Android that greater customer awareness and a big budget marketing drive could not cure and that's something European carriers need to do a great deal more to assist the underdogs with if they aren't to be the engineers of their own self-fulfilling prophecy of handing all power over their subscribers to the duopoly of Apple and Google. The perception of the people for Nokia varies across the world. There is still much to resolve if the acquisition is really to have some meaningful impact or not. While Microsoft and Nokia have jointly been increasing the money flow through the Windows Phone marketing faucet of late it will take mega bucks to take on Apple and Android head cheerleader Samsung for marketing volume and volume shipments. There are 1.3 billion people using a Nokia phone today and in some markets, the word 'Nokia' is synonymous with 'phone' and we aspire to live up to that brand as customers are welcomed of these products into the Microsoft family. 6
  7. 7. Nokia Corporation has been one of the big players in the market and while it has struggled in recent years it is still the second biggest globally. Now its mobile phone business is acquired by Microsoft so as to maintain its customers. If we go back five years, the brand was flying high. After its acquisition, now it’s the question whether they can improve under Microsoft? It might get true in long run but in short run its looking not possible, Samsung being leading the market at much higher level. Microsoft will be shoring up the desirable Windows Phone system and tossing money to help the Nokia Lumia sales either through marketing support paid to Nokia or as further marketing support paid to the carriers. The Lumia series has frightened away 4 out of 6 loyal Symbian smartphone customers. Nokia reported much higher losses to sell those Lumia phones and these losses were diminished by money-injection from Microsoft only. In recent Nokia Lumia phones generated even bigger losses and also not produced any satisfied customers. Now Microsoft need to continue subsidizing this undesirable small ecosystem and tries to figure out how to fix them. 2014 might not be the comeback year for them but they will try out to make some adjustments and corrections and achieve something with its new Lumia (Nokia) unit. Nokia has something valuable that Microsoft doesn’t is an understanding of how to design and market mobile devices that consumer wants and Nokia has been gathering data at a ground level globally about smartphone usage. They have a very good relationship with a long list of global carriers who value Nokia brand and the job their handsets do for them making them much closer to the needs of consumers in a mobile world. The big question is whether Microsoft will tap into this experience or if it will completely rebuild Nokia from the ground up in its own image and if the company takes the longer view and lets Nokia do what it does best? So what is the consumer perception that Nokia will come up with something new being with Microsoft. Microsoft has wasted no time in marketing its acquisition of Nokia by taking out a full-page print ad to highlight its enlarged product portfolio. The ad using the headline The Microsoft family will be getting bigger and smarter, to welcome the Nokia division and its range of smartphones including a picture of Nokia’s Lumia devices in a number of colors. Microsoft has also advertised the acquisition online on websites including the New York Times. 7
  8. 8. The deal for Microsoft’s £4.6bn purchase of Nokia strongly suggests the former company plans to phase out the latter’s branding on future smartphone releases, it can be a risky move if the business wants to make Windows Phone a true contender to Apple and Google. As part of its purchase, Microsoft will adopt the Asha and Lumia device name brand trademarks while Nokia will continue to own and manage the Nokia brand. The “Nokia” mark may only be used by Microsoft on “current Nokia mobile phone products”, according to the license agreement. It was explained by Matthew Sammon, the partner at patent and trademark attorneys Marks & Clerk LLP that if Microsoft was not planning to phase out the Nokia brand, then it would have acquired the trademark because the licensing agreement will have a time limit on how long Microsoft can use the Nokia brand name after the deal completes. He also adds that the Nokia brand has been licensed for now so Microsoft can advertise the tie-up between the two companies: Microsoft with the reputation for software and Nokia with the strong hardware aspect that gives them time to integrate. Microsoft’s challenge in numbers In recent times, the investors are having an advantage of loss-making Nokia’s downbeat performance; the move of Microsoft’s move to mobile range came as a shock. If Microsoft would like to go alone to take on the likes of Apple and Samsung in the smartphone market, the data suggests it faces an uphill struggle. At present, Windows Phone software represents just a 3.3% share of the global smartphone market whereas Apple’s iOS and Google’s android software make up more than 90%. In spite of Nokia’s current struggle to turnaround the losses and maintain its share in the smartphone device market, the consumer perception of the brand in the UK at least is more positive. At one point of time, the brands quality, value, satisfaction, recommendation, reputation and impression has consistently been higher in the eyes of consumer than that Windows Phone for some time but now it ranks second only to that of Samsung. It will be interesting when Microsoft might face a massive dilemma in deciding which brand will its integrated mobile hardware and software push going forward either Windows phone, the relative newcomer or Nokia which is manufacturing for decades. 8
  9. 9. The advertising of Lumia Windows Phone should be done by which brand name, its building a tension between the two. The awareness of Microsoft mobile products is not much as it is known for its software only and so marketing will also become a crucial factor for them. It needs to have a clear and defined message that must be backed by enormous amount of money to raise awareness of Windows phone as an alternative to both Apple and Samsung not just as an operating system. It has been under consideration that phasing out the Nokia brand would turn out to be risky and might also not make any sense in the near future. Especially outside the US as lower end phone business where the Asha brand is strong in emerging markets like India, Africa and countries in the Middle East and people go for Nokia phone as they are very careful with their money and also want a durable device. Nokia still has a high value to people. Nokia is the India’s largest consumer product company and Microsoft is smaller, reportedly more profitable but none of them discloses its revenue in India. For Nokia, India is the second most important market and in terms of smartphone, it’s third largest. The deal between the two will surely have an impact on low priced smartphones. It could significantly improve the prospects of Nokia in India. In the coming future, it’s all going to be a smartphones world and it is the sector where growth is happening too. They also launched a feature phone range known as Asha, invested a lot in this series in terms of developer platforms. As the market grows up to smartphones, the featured phones segment will phase out as Microsoft is going to focus that segment only but it will maintain them for some time till the capture on market. This deal might not have much impact on Microsoft’s operations in research and innovation but Nokia’s manufacturing unit may now see more smartphones manufacturing and innovation, where Asha range is usually found. This one is the global acquisition in which Indian balance sheet had a huge role to play just because Nokia is still a major player in telecom market and Microsoft, a largest partner for Windows 8 platform. Both of them have a strong presence in India and likely to move from 55 million smartphones to 250 million by 2016. By purchasing Nokia’s Business, Microsoft has shown its consumer strategies that will survive in this era. It can’t live by enterprise dollars alone. The courtship with consumers is still far from 9
  10. 10. over. Microsoft can use Nokia to really drive innovation on the platform as Google is doing with Motorola now sold to Lenovo. It also needs to keep other OEM’s such as Samsung and HTC in the windows phone ecosystem, they should use Nokia to set a standard toward which partner manufactures can aspire. It sounds good but it’s the same strategy Microsoft chosen for its underperforming surface tablets, which have little stimulated interest in Windows 8. Microsoft’s purchase is not going to turn the tide if Nokia has reported plan to launch a Windows RT 8.1 named as Sirius. It will be the device expected to boast competitive specs and components but core differentiation is still essentially the same as Surface RT’s. It’s hard to see consumers caring about these additions; they are not the only market for such a device. It is under consideration that it’s going to be a better device this time. An ultra-mobile device that supports MS Word and outlook might be attractive to schools and businesses too. Commercial customers have adopted Windows 8 and RT for their tablet-PC convergence, so the updates may attract the new customers which are expected. Microsoft won’t win consumers by holding features only but they have to deliver a product that people want to use and with Nokia’s resources now in the fold, Microsoft has shown willingness to gain these resources to do so and now it has to be executed. Nokia Marketing Strategies Nokia is set to increase the digital and retail spend as it looks to transform the marketing strategies to broaden the emotional appeal of their products. By looking to the final purchasing decisions of the customers, company will now be focusing on online, social media and experimental demonstrations that will showcase the unique capabilities of the devices in places where customers search for the information. They have also appointed JWT, a Global activation agency for its global advertising account but now it has been briefed to come up with creative ideas that embodies brand and appeals to consumer’s emotions. The company has also spent a considerable amount for marketing since the launch of its Lumia smartphone range. JWT will market the products in a manner that is bold, disruptive and mostly resonates with consumers. 10
  11. 11. The company has many attributes which appeals to the rational nature like quality, trust worthy, ethical and innovativeness- the company wants to evoke a stronger emotional response to the brand. Exhibit 4: Smartphone Users in the market. Nokia is going for the marketing push behind the launch of its 41-megapixel camera smartphone will help the Lumia 1020 device become a famous halo product for the rest of its range and can also boost the appeal for the Windows Phone operating system. It plans to position its marketing push around 1020’s ability to cut down the need for customers to carry multiple devices around with them. Now the campaign, currently being co-created with Microsoft’s marketing department, will feature heavily across digital, the outdoor and experiential to showcase the camera’s photo taking ability and also feature fun and cheeky creative focused around the strapline zoom reinvented. 1020 is a proud innovation statement from the company and that it is a marketer’s dream to work on a product where its specs alone will get the attention of both the tech leader audience as well as a wider pool of customers. The next chapter might begin with Lumia 920 device through to the low light photography messaging in its recent advertising campaign. Now both Nokia and Microsoft are forging ahead making Windows Phone the third ecosystem and also working hard to get noticeable absentee apps such as Instagram on to its marketplace. The marketing budget is considerably smaller than Apple and Samsung but they work on a mantra which is helping them to achieve cut through i.e. if you can’t outspend, 11
  12. 12. outsmart. But Microsoft will now definitely give a big share of voice that we would not have alone. Being comparative in the past 925, which is a real challenger brand behavior and if it’s known that product is better than competition than risks can be taken. For 1020 marketing, the message going to be is “if you want to feel like a photographer, it gives you the tools to do so”. Exhibit 3: Current Lumia Series Usage Nokia is trying to change its customer marketing approach so as to become more collaborative with retail and technology partners and managing all its programs more tightly to boost market share as it has unveiled its Windows Phone strategy. When first time Lumia was launched it gifted what was understood to be tens of thousands of free handsets to the developers, bloggers, retail staff and cultural influencers just to boost awareness of new ecosystem. They are selecting 150 champions from retail staff stores such as O2, Carphone Warehouse and Phones 4U who are going to join the advocacy programs designed to encourage the use Lumia for long-term instead of gifting them for short period of time. The champions who will receive regular newsletter content and will be invited to special events as Nokia looks to generate more support towards its devices over other rivals such as Apple and Samsung and promoting better customer service around Windows phone. It’s all about starting small to generate the right behavior to promote the 12
  13. 13. long term use and benefitting the customer experience. As they get it right, they will scale up further. Meanwhile, Nokia has also ventured on what it says a kind of collaborative marketing campaigns with Vodafone and Microsoft. It is seen that Vodafone heroing Lumia 920 and 820 to promote its 4G ready status ahead of its launch of the faster internet service. It appears in-store, outdoor, Vodafone’s customer magazine, even in training and internal events. They are looking to encourage more online conversation around the brand from its biggest fans and prioritize people more instead of platforms such as Facebook or Twitter within its digital strategy. People don’t buy on twitter, they follow there and it’s because they were recommended by a friend or someone else. Search is made either by device name or best camera phone. The industry first twitter app was launched and opening up its API for consumers to 3D print back covers for Nokia devices. The smartphone users could look forward to a sharp fall in prices post Microsoft’s acquisition of Nokia’s devices business, the larger scale could allow the combined company to reduce the prices of the entry level smart devices and help attract the cheaper feature-phone users. They may also relook at the future of feature-phones as part of the combined company’s product portfolio. Microsoft wants to convert more and more consumers from feature-phone to smartphones so that they are able to use the apps that company is offering on the Windows- powered devices. The replacement of operating system of the Asha series phone with Microsoft’s OS is under review. This series has been bread and butter for Nokia as it treated the crucial gap between the basic handsets and the smartphones. It is meeting the needs of a certain segment of people. As 3g networks are expanding more users will upgrade to smartphones. Now both the companies together will be working closely on developing the handsets, customer requirements and market strategies. Microsoft is trying to transform itself from a software company to the devices and services one. They are also working on strengthening their OS that gets adapted on PC as well as mobile phones hoping to deliver an uninterrupted experience to its users who could easily switch from one screen to other without any obstruction or time lag. Like as a user starts watching a game at home and leaves out somewhere then he/she can carry it along and keep on playing and as they are back to home, back to bigger screen. 13
  14. 14. The deal includes the services and smartphone and feature phone business as well, their marketing, sales and designs, operations, manufacturing, assembly facilities. Microsoft will license some Nokia’s patents for use across Microsoft products including the ability to use the mapping system but it will continue to be owned by Nokia only. The use of Nokia brand on current products is under a 10 year agreement while Nokia will retain ownership of the brand. Microsoft is also acquiring the Lumia and Asha brand names which are most recently in use. In addition to the innovation and strength in phones, Nokia also has the capability and talent in critical areas such as hardware design and engineering, supply chain, manufacturing management and hardware sales, marketing and distribution. The consumer demand for traditional PCs and Laptops has waned in recent years so Microsoft looks to seize this opportunity and accelerating the share and profit in mobile across its family of device and services under one integrated brand. The acquisition might propel themselves into a leadership division in the emerging markets. It offers from an advertising perspective is Nokia’s deep foothold in the market whereas Microsoft’s Advertising strategy is to promote “beautiful, useful and relevant” means it is unlikely to move into the selling advertising. The most exciting opportunity outside the fact that Nokia represents an 80% of Widows Phone sales is their position in emerging markets. The Nokia’s supply chain capabilities could help the company upsell other products beyond mobile such as Xbox. Conclusion: The consumers that are likely to purchase smartphones are the millennial, because they are becoming much familiar with smartphones and other high-technology products. The differentiation can be made between the student and the employed generation. Youngers perceive the brand as more important while making a smartphone purchase whereas older perceives the operating systems of great importance. Nokia trying to make consumers connected to their by adapting some new marketing strategies with Microsoft such as by creating advertisements through which consumers can evaluate 14
  15. 15. themselves. They will create a slick design and continue with building a lifestyle around their smartphones, strengthening the business segment as company is well positioned in consumer’s mind as reliable. Windows 8 could turn over as a high importance factor in emerging smartphone market. Consumers can be reached through word of mouth e.g. social media and reference groups. They are focusing on regaining brand equity that will lead to an increased value and customer loyalty. Questions: 1) Consumers’ perception of Nokia as a ‘2G’ Mobile phone manufacturer has an adverse effect on Nokia’s image. Is ‘Brand Perception’ a show spoiler for Nokia? Should Nokia be sub-branding its products to change consumer perception? 2) Identify and compare the challenges that the company is facing as it is trying to maintain their image and market share? 3) Do you think that it was a good time to collaborate for Nokia? If yes, then how it is going benefit them in future. 4) If you were purchasing a new phone, what factors might you consider when making your decision? Whether the marketing strategies by Nokia proof to be useful for you? References (n.d.). Retrieved from lumia-asha: 24/news/46562772_1_microsoft-india-lumia-asha (n.d.). Retrieved from road-still-ahead-in-microsoftnokia-deal-023379.php 15
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