A Strategic Approach to Marketing: The Case of Nokia

Nokia's strategic approach to marketing not only includes creating new markets and new customers, it also involves building lifetime relationships.

Today Nokia is the world's leading manufacturer of mobile devices, with estimated 38 percent share of the global device market in 2009. With net sales of EUR 41 billion in more than 160 countries, it produced mobile device volumes of 432 million units.

Like Intel and Microsoft, it seeks to stay at the cutting edge of the latest technologies worldwide; like Coca-Cola and Procter & Gamble, it also monitors closely the latest fashions and trends in the increasingly global markets.

Nokia offerings as fast-moving consumer goods

Nokians believe that it's very different to be in consumer durable brands than in disposable brands. ''The brown sugar water is very different from this consumer durable, multimedia computer,'' says Anssi Vanjoki. ''Cola-Cola is the same as it was more than a century ago when the so-called secret formula was born. The way you keep it alive is by creating stuff around it.''

In a fast-changing and technology-intensive environment, consumers expect progression and something new. In other words, the role of innovation is very different in disposable products and consumer durables.

The realization that the mobile handset should be viewed not as a simple durable good, but as a complex fast-moving consumer good, evolved in Nokia during the 1990s. During those growth years Nokians often put up slides showing the soaring penetration of the cell phone in different markets of the world, and how this penetration would surpass that of PCs.

As mobile penetration hit 100 percent in the most advanced markets, Nokia's marketers asked the next question: ''Now everybody has a cell phone in markets XYZ. How can we take advantage of this penetration while providing added value to the consumer?''

Soon the Nokians realized that they might be able to unleash the potential of mobile devices by exploring the business models of the most successful fast-moving consumer goods (FMCGs). For instance, Coca-Cola also measures penetration, but not penetration only. It has a more comprehensive measure called PITA, which stands for population, incidents, times, and amounts. When these four determinants are multiplied together, that is considered the basis of the revenue line.

The PITA approach, however, is predicated on intimate knowledge of user behavior. Only a few years ago it was hard to find Nokians who were tracking the user base. Today the task is pretty much a core part of Nokia's strategy and will continue to be so.

Three ways to grow the business

Nokia's strategic marketing is driven by its user base and the brand. With the user base, Nokia seeks to better understand well over one billion people who currently carry Nokia mobile phones. The idea is to expand and deepen the link between the user base and business strategy. There are at least three ways to do so:

  • Attract more users, say, two billion rather than ''only'' one billion.
  • Retain its one billion existing users, which is far less expensive than attracting new users.
  • Leverage business with the current one billion users.

Nowadays, Nokia seeks to attract new users, improve retention rate and lifetime relationship management, and leverage business in new areas. At the same time, Nokia is trying to leverage the meaning of its brand. With its user base and brand, Nokia tries to leverage consumer insights and consumer research.

In the 1990s Nokia's objective was to create a global brand as quickly as possible. Today the idea is to strengthen the link between brand strategy and consumer behavior. As exemplified by the success of Apple and Coke, the values of the business strategy and the brand strategy must be connected.

At the end of the day, the brand strategy is a summation of your consumer insights and what you're trying to do with your user base, consumers, and the meaning of the brand. Nokia's objective is to tighten its business and brand strategies by the early 2010s, when the two streams are expected to come tighter together.

Toward the next stage

As far as Nokia is concerned, success in its core business requires excellence with both devices and service. The magic formula is:

Devices + Services = Solutions

Nokia's services unit consists of operational subunits-music, social location, media, messaging-each of which is focused on the development of services in their respective areas.

Success in devices business depends increasingly on developing unique and winning services to complement the hardware and usability of the handset. Unlike most of its rivals, however, Nokia seeks to make the locational context the very foundation of its services.

Nokia sees a future in which, linked to the Internet and aware of the user's location and preferences, the mobile device constantly adapts to the user's surroundings. Take, for instance, Nokia Point & Find, a free service that lets you access relevant information and services simply by pointing the Nokia smartphone at real life objects.

From a marketer's standpoint, things get even more interesting with mobile comparison shopping. At the store, you can scan select barcodes to automatically see prices at other stores. You can also save products to a wish list for future reference.

As mobile device subscriptions pass the 4 billion mark, an increasing number of distributed and pervasive built-in sensors can capture, classify, and transmit many types of data. Increasing penetration, more sophisticated devices, and advanced services also enable the marketer to mobilize customer relationships.

Nokia is taking one-to-one marketing to the next level.

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About the Author: Dan Steinbock, Ph.D., is research director of international business at the India, China and America Institute and also serves as Senior Fellow in the Shanghai Institutes for International Studies. This essay is based on his new book, Winning Across Global Markets: How Nokia Creates Strategic Advantage in a Fast-Changing World (Jossey-Bass, April 2010), an independent account of Nokia's global strategy based on interviews with all of Nokia's senior executives in the past two decades.