Nokia’s pricing strategy

Nokia is one brand name that inspires all those who are into the mobile culture. Of all the brand that touches our lives, Nokia stand s out significantly. It has taken mobility a step forward by creating products with continuous innovations in this industry has made it imperative that every player keeps pace with changes. Nokia has been one step ahead in anticipating future market moves and strategizing accordingly.

Interestingly the company prices its products so competitively that it not only ensures that its margins are covered but also assures revenue maximization. Let us see how Nokia leveraged it segmentation strategies, appealed to various segments with uniquely designed messages and differentiated between its products at every level to communicate and connect effectively with the intended target audience. When Nokia positions
its product to the top end segment, it does it as a classy product. To the middle segment customers it is in the form of the best alternative. To the lower end segment, the carrot is that Nokia gives real value, as a high tech product, at low affordable price. The pricing strategy of Nokia can be better understood when the juxtaposed with the skimming strategy and further interposed on Philip Kotler’s nine price/quality strategies model.

With a vast family of brand that caters to every segment, one can clearly see how Nokia, yielding to the pressure due to the competitive and innovative mobile handset market, slides each brand down the segments, one at a time by reducing its prices carefully and consistently) Here are some live examples of Nokia’s skimming pricing strategy:
 

Classic Nokia 8250
Nokia phone model 8250which was available with the vendors during the year 2000 was price at Rs. 18000. It was without modern features like camera and MMS. The telecommunications infrastructure of the country was in its initial stages and so were the service provider’s fares. Hence only the premium segment could have afforded the phone. However with the easing of the government regulations and increased competition, market dynamics changed, and during 2004, the price of the model took a nosedive and was made available for Rs. 8000-10000. Now the model has been completely phased out. Only second hand products are available. Here was one product which despite market forces maintains its price distinction and continued to carry a premium connotation to it.
 

Neo Classic Nokia 6600 This model from Nokia was made available in 2003, complete with a color screen, integrated camera and other contemporary features. In the beginning the product was prices in the range of Rs. 21000-22000. By November 2004, it was available in much lower, 15000-16000 range. The model is currently available for price of Rs. 9000-10000 only.
 

Modern Nokia 9500 communicator This is known as the snazziest model ever launched by Nokia in India. The Nokia 9500 communicator comes with office features and a large screen, coupled with increase and Bluetooth technology. Available in the market since 2005, it was initially priced at 42,000, but currently can be bought for just 26,000. All the above models were produced in quick succession and Nokia’s strategy was to deliberately allow them to eat into each other’s market share. At the same time, Nokia proliferated the market with as many models as possible by 2006, at virtually every price point. Each one of Nokia’s model played a role in catapulting Nokia to the top of the heap, in the Indian mobile handset market.

It would be apt to map Nokia’s pricing strategy on the line of the premium, high value, and super value strategy, especially on the price-quality model. On the flip side, consistent price cuts in rapid succession have the potential of smearing the brand image. But, in the buoyant telecom sector, where change is name of the game, the consumer is discerning enough to have a rational outlook towards a particular brand and its attributes, irrespective of the pricing strategy.

After all, skimming or no skimming, customer benefit is almost always guaranteed in the
price sensitive competitive market.
 

Questions

1. Discuss the segmentation strategy of Nokia and comment on its efficacy.
2. Explain how Nokia used the skimming pricing strategy for its products. Give your
comments on the strategy.
3. What would have happened if Nokia had used the penetration pricing strategy
instead of skimming?