Nokia its not over yet (1) CASE STUDY

Case Study
On
“NOKIA: It’s not over yet”
BY: Anuj Chaudhary: A19
1

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
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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.
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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
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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
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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.
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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.
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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.
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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
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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

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

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
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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

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

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?
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road-still-ahead-in-microsoftnokia-deal-023379.php
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Nokia its not over yet (1) CASE STUDY

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