Case Study: Nokia Segmentation and Targeting Strategy

Nokia has built its success on its ability to target different niches for wireless
telephones. Segmentation is so crucial to Nokia that in 2002 it broke its $24 billion
mobile phone division into nine business units, each one focusing on different
parts of the market. Six months later, Nokia had its first results from the
reengineering among the 24 new products planned to be introduced in 2004:

• The Nokia 2100 proposes a functional photo insert cover, animated

screensavers, and SMS chats, well as user-changeable color covers. It is
the cheapest model at less than $100.
• The Nokia 3100 offers a glow-in-the-dark cover, new games, animated
screensavers, MMS, and Java technology.
• The Nokia 3300 features an MP3/AAC player, stereo FM radio and digital
recorder, stereo headset, hands-free listening experience, and easy drag-
and-drop music transfer from compatible PC.
• The Nokia 810 is a car phone with separate display, Navi wheel, Bluetooth,
RS232 connector, and high-speed data transfer.
• The Nokia 5100 comes protected against splashes, dust, and bumps, high-
resolution color display, MMS, flashlight, calorie counter, and thermometer.
• The Nokia 6220 introduces a digital camera, EDGE high-speed data
connectivity, presence-enhanced contacts, e-mail, and Java applications.
• The Nokia 7250i includes an XHTML browser, integrated digital camera,
advanced MMS features, portrait caller ID, designer looks, and innovative
keypad layout.
• The Nokia 8910i offers an elegant design, genuine titanium covers in
black, color display, Java technology, and MMS.
• The Nokia N-Gage introduces a new category of a game phone. It has a
mobile game deck with Bluetooth and GPRS capability, digital music
player, stereo FM radio, MMS, e-mail, and XHTML browser.

In mid-2002, Nokia launched a new subsidiary, Vertu Ltd., to offer handcrafted

cellular phones, made of silver or platinum with silver or gold headset, a service
concierge which locates tickets to the theatre or reserves a table at a top
restaurant, a palladium-trimmed case and a leather woven handle. The price for a
Vertu phone ranges from $5,000 to $20,000 and more.

Question 1: Who are the different groups of customers Nokia is trying to reach
with the nine different models presented here? You can go to
http://www.nokia.com and use the feature “Compare Phones,” which identifies the
various segmentation criteria used by Nokia.

Question 2: Which segment is targeted by the Vertu offer? Why has Nokia created
an independent subsidiary to market this offer?

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Comments from Nicolas Piette :

Question 1: Who are the different groups of customers Nokia is trying to reach with the
nine different models presented here? You can go to http://www.nokia.com and use the
feature “Compare Phones,” which identifies the various segmentation criteria used by
Nokia.

Nokia has built its success on its ability to target different niches for wireless telephones.
Segmentation is so crucial to Nokia that in 2002 it broke its $24 billion mobile phone
division into nine business units, each one focusing on different parts of the market. Six
months later, Nokia had its first results from the reengineering among the 24 new
products planned to be introduced in 2004:

The Nokia 2100

The Nokia 2100 proposes a functional photo insert cover, animated screensavers, and SMS
chats, well as user-changeable color covers. It is the cheapest model at less than $100.
The Nokia 2100 is one of the simplest phones of Nokia; it’s practical, sure, and elegant but
with a touch of fun. You can also add a picture of your choice in the back. This phone
seems to be made for mature women or mothers so that they can phone to their family
very easily and watch a picture of their husband or children.

The Nokia 3100

The Nokia 3100 offers a glow-in-the-dark cover, new games, animated screensavers,
MMS, and Java technology. The Nokia 3100 is a very fun phone. It’s phosphorescent, with
flickering lights when the phone rings and includes Java games. With this phone, Nokia is
targeting young people, teenagers who want a nice and fun phone with advanced games in
it.

The Nokia 3300

The nokia 3300 features an MP3/AAC player, stereo FM radio and digital recorder, stereo
headset, hands-free listening experience, and easy drag-and-drop music transfer from
compatible PC. The design was imagined for MP3 users and SMS users. So we can say that
this phone is dedicated to teenagers (because they are used to do SMS) and the people
who likes music: 16-25 years old class.

The Nokia 810

The nokia 810 is a car phone with separate display, Navi wheel, Bluetooth, RS232
connector, and high-speed data transfer. He was specially imagined for people who have
to often use their cars just like sales representative or truck driver....so it’s a car users
niche.

The Nokia 5100

The Nokia 5100 comes protected against splashes, dust, and bumps, high-resolution color
display, MMS, flashlight, calorie counter, and thermometer. This phone was imagined for
people who always broke their phones (teenagers, sports man...) and was designed for
young people and specially sports people: it’s a trendy phone with many colors, flashlight
and a calorie counter.

The Nokia 6220

The Nokia 6220 introduces a digital camera, EDGE high-speed data connectivity, presence-
enhanced contacts, e-mail, and Java applications. It’s an elegant and very professional
phone. It’s a business design model and a simple phone which is secured and connectable
to PC’s in order to transfer office’s data. It can also go on the web to reach data and send
mail very easily and efficiently.

The Nokia 7250i

The Nokia 7250i includes an XHTML browser, integrated digital camera, advanced MMS
features, portrait caller ID, designer looks, and innovative keypad layout. The Nokia 7250i
is an updated version of the 7250. This phone can take photos and are very comfortable to
use. Its design is very nice, simple and knack and the software inside is an improved one
for a more simple and sure use. This phone seems to be made for requiring clients from a
middle high range who want a very good level of reliability and facility. More simply, this
phone could be made for women with quite a high level of revenues.
The Nokia 8910i

The Nokia 8910i offers an elegant design; genuine titanium covers in black, color display,
Java technology, and MMS. The Nokia 8910i is a very luxurious phone, sober very noble
because it’s made with titanium. It includes sharp functionalities but with a high concern of
the detail that offers a lot of elegance, pleasure and a very high level of design. These very
luxurious phones are for the top-of-the-range, more for men with high revenues.

The Nokia N-Gage

The Nokia N-Gage introduces a new category of a game phone. It has a mobile game deck
with Bluetooth and GPRS capability, digital music player, stereo FM radio, MMS, e-mail,
and XHTML browser. The Nokia N -Gage represents the 3300’s evolution and represents a
serious competitor of the Nintendo Game Boy so the targeting is the same of the 3300. It
was constructed and designed for teenagers and the 16-25 years old class.

Question 2: Which segment is targeted by the Vertu offer? Why has Nokia created an
independent subsidiary to market this offer?

The question we are going to answer deals with the characteristics of the Vertu’s product.
In fact, the Vertu firm proposes a very high quality product which is only addressed to a
niche of consumers. Thanks to a Mix product study, we will analyse to whom is intended
for the Vertu range of products:

First point: Mix product:

This study will allow us to put on the intrinsic value of the mobile phone. The manufacturer
wants the product to be perceived as a high added-value product on the phone market in
comparison with the jewel, watch market.

Added value - The product can be assimilated as a customized product

Unique product
Precision engineering - The phone is a “Handmade” product created by the best in
craftsmanship
Best quality of components - The instrument's components have been specially crafted in
partnership with the world's most prestigious manufacturers
Evolutionary Technology - That allows the internal engine and product functionality to be
seamlessly upgraded to keep in line with advancing technology
Exceptional raw material - The mobile are available in a range of exclusive material options
including casings in platinum, 18 carat white gold, 18 carat yellow gold and stainless steel
Added services - A service concierge is in the offer. This service is an exclusivity of Vertu’s
products. It allows to book, to have access to a lot of information, to make reservations …

Second point: Mix price:

Vertu’s products are very expensive. Vertu sells their products in an upper market where
the clients are ready to pay for something different. For these persons, it’s never a
question of price; it’s a question of image. The ranges of Vertu’s mobile phones are sold
from $5,000 to $20,000 and more.

Third point: Mix place:

Vertu has an original distribution network for their mobile phones: They are available only
in luxury places like Prestigious Hotel, in fine jewellery and luxury watches hall, in Harrods,
Goldsmiths concession. Vertu also has their own stores to commercialise the phones in
Paris, Singapore, New York, Hong Kong, and London.

Fourth point: Mix promotion:

Vertu communicates in the way to Vertu’s products been assimilated as a luxury product.
Vertu wants to impose a standard in term of mobile phone intended to rich and fashion
people. They advertise only in very fashion magazines, Vertu Headquarters privileges the
mouth-to-mouth communication and the organization of events like parties, exhibitions or
shows where only VIP are invited. The way used by Vertu is in harmony with the target
that is more interested to be perceived as VIP! Moreover, they advertise the long time
period of the product.

From the point of view of the marketing mix of Vertu’s products, we can define the target
of the range:
These products are more a fashion object than a common mobile phone. The raw materials
used are the same than in jewellery (gold, sapphire, stainless steel platinum). Vertu
targets people with a high purchase power. But not only, Vertu’s products are especially
made to very fashion people who want to have a luxury product like mobile phone and not
just a mobile. Vertu wants to settle the mobile phone as a common luxury product like a
watch or a ring. Now a fashion person needs to have a luxury personal phone. The fact
that Vertu’s products are sold at a very high price is not a problem for the company. The
target cans pay for the product; it’s a rich population who used to pay for special products.
In the same way, the price will reassure the clients on the quality and they would be
satisfied to think that they are the only person who can get this special phone.

Why has Nokia created an independent subsidiary to market this offer?

- With its range of products, Vertu wants to answer to particular needs. So, Nokia has
created the Vertu firm, in order to:
The Vertu offer must be characterized as unique: When acquiring Vertu, you join an
exclusive community of people around the world. This offer has created a new marketing
segment in the communication mobile phone world

- Obtain a marketing credibility: Vertu must become an authentic luxurious brand, not only
the luxurious range of product of nokia. For example, Vertu wants to establish an specific
relationship with the customers

This decision illustrates the will for Nokia in a long-term view to build a veritable luxurious
Brand for a specific demand. That's why this offer should independent.

http://www.artechhouse.com/default.asp?frame=Static/05Case1A.html

http://www.nokia.com/NOKIA_COM_1/About_Nokia/Press/Press_Events/zz_New_
Potential/JuhaPinomaa-Moscow03.pdf
presentation format of nokia product
Connecting people!
Nokia, arguably the biggest player in the world, has divided the market into four segments:

• Hi-fliers: The biggest segment as far as Nokia is concerned consists of 'Hi-Fliers',

corporate executives who use a mobile phone to increase productivity at work. Aged
between 25-45, the segment looks for data transmission and other business-related
features. In most cases, the company sponsors the handset, hence price is not a
major consideration.
• Trendsetters: In any technology adoption cycle, the first segment to adopt an
emerging technology is dubbed as 'the early adopters'. For Nokia, these early
adopters are 'Trendsetters' who are most receptive to advanced models. This was the
segment at which WAP-enabled models were aimed.
• Social contact: The third segment for Nokia is the upwardly mobile, socially-
conscious segment that uses a mobile to stay in touch. Today's youth and affluent
housewives constitute two major chunks of the segment.
• Assured: The fourth and 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.

Intelligence everywhere!
Motorola has a segmentation model similar to Nokia.

• Accompli: Early adopters (trendsetters in Nokia) are referred to as Accompli and as

with Nokia, all advanced models are aimed at this segment.
• Timeport: The segment, similar to Nokia's hi-fliers, primarily uses the mobile phone
to enhance their productivity.
• Talkabout: The segment again is similar to Nokia's Social Contact segment, which
uses the mobile phone predominantly to keep in touch.
• V: Individuals who view their phones as an extension of their personality and
therefore would prefer a model that makes a statement define the V-segment.

Ericsson!
Compared to the above players, Ericsson seems to have a straightforward segmentation.

• A-Segment: Individuals who are using the mobile for the first time and prefer an
easy-to-use instrument are classified under A-segment. This is primarily the entry-
level segment.
• R-Segment: Similar to Nokia's Trendsetters and Motorola's Accompli, this segment
comprises of tech-savvy individuals who prefer their instruments to be feature-rich
and state-of-the-art.
• T-Segment: Finally, the T-segment is defined by individuals who require their
instruments to have some class and style. Similar to Motorola's V, users view the
handset as an extension of their personality.

The paradox!

While the segmentation has been precise, it has been noticed that a majority of handset sales
in India can be attributed to a very active 'Gray' market. The fact that Indian consumer is
highly price-sensitive further complicates the matter.
Today the prices of handsets have fallen sharply making them more accessible. Smaller
players are also making inroads in some segments. All these factors require companies to
have a re-look at their segmentation and follow them up with elaborate branding strategies.
No matter which company succeeds, the customer is not complaining.

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