Market Segmentation Strategy of Nokia Company - Essay Example

Market Segmentation Strategy of Nokia Company Contents Executive Summary 2 Introduction 3 Central Concepts Defining Market Segmentation 4 Description of Nokia’s Market Segments Based on Psychographic 9 The Segmentation of Nokia Conducted on the Basis of Price 10 Conclusion and Recommendations 11 Bibliography 12 Executive Summary The Nokia Company is one of the leading entities in the mobile phone industry. The company has exhibited a proper understanding of the dimension used in market segmentation. This is evident in the company’s efforts to identify numerous market segments and design products that suit the needs of these customers. The first section of the paper presents the central aspects defining market segmentation. The four types of market segmentation approaches, namely psychographic segmentation, geographic segmentation, demographic segmentation, and finally product benefit segmentation receive attention in this paper. The case study of the Nokia Company and its market segmentation strategies follow in the second section of the paper. The final section of the paper offers conclusions and recommendations that the Nokia Company can adopt in an effort to be more successful in the market. Introduction The Nokia Company has existed since the 19th century. Nokia Company, founded in 1865 in Finland, focused on the manufacturing of pulp and paper. After the Second World War, the company exhibited interests of expanding beyond Finland. Therefore, it made several acquisitions in 1966, which led to the formation of Nokia corporations. The company then expanded its industries to include electronics, cable operations, rubber footwear, and tires. In 1967, the company sets up a specific division focusing on data processing, communication systems, and industrial automation. This division would later expand into other subdivisions focusing on the manufacture of different items. One of the divisions formed during this time focused on the manufacturer of mobile phones (Bhutto 2005, p. 235). In the 1990s, the company made an impact in the mobile phone industry by releasing innovative products that led to its leading position in the market. Over the years, the company has remained highly competitive, and a leader in the phone industry until 2012 when Samsung took over the leading position. In 1998, the company became a global leader in the manufacture of mobile phones. One of the aspects that have propelled the Nokia Company to its recognizable success is proper market segmentation. Market segmentation is of critical importance for any company that intends to succeed in the industry. Modern business strategies have moved far beyond the old strategy of producing products targeting everybody in the market. The old marketing theme that “one size fits all” has proved ineffective compelling businesses to undertake a rigorous study of the market and identify a potential niche that they can satisfy effectively. Market segmentation has its basis on the fact that the entire market is comprised of numerous small segments whose needs and features are different. This paper will focus on describing market segmentation concepts and how the Nokia Company applied these concepts propelling itself to immense success (Hassan & Craft 2012, p. 344). Central Concepts Defining Market Segmentation Market segmentation is one of the approaches used by many business farms in the modern day to market their products. The concept of segmenting the market emerged to replace mass marketing, which viewed the market as a single unit with similar needs. Contrary to such an approach, market segmentation appreciates the fact that the entire market is comprised of smaller segments with each segment exhibiting different features. The focus of business farms is to identify one of these segments and understand its needs and expectations critically. After understanding the needs of the market segment, the company can then launch products that target the specific segment. Marketing strategies used to promote such products suit the identified market segments (Hassan, Craft, & Kortam 2003, p. 446). Successful market segmentation is comprised of numerous steps. The first step is the recognition that users of products and their unique needs define the market. After the recognition that the market has a diverse range of users, who have different needs, business firms focus on dividing the market into segments of the users. Usually, the division has its basis on the defining characteristics of the individuals in each group as well as their exhibited consumer behaviours. There is a salient need for rigorous research prior to effecting market segmentation. This is because business farms need to identify the consumer behaviour of different groups in the market as well as the factors affecting their buying behaviours. In the specific case of consumer markets, market segmentation relies on factors such as demographic factors, geographic locations, as well as the perception exhibited by the consumers concerning the benefits of the product (Karjalainen & Snelders 2010, p. 6). Demographic segmentation is one of the common types of approaches used in market segmentation. It relies on the demographic factors such as gender, race, age, education level, income, type of occupation, and finally the stage of life. Business firms group consumer markets based on any of these factors. For example, companies that manufacture cloths may rely on age to segment the market into several groups such as babies, young children, teenagers, and adults of different ages. Other companies may prefer to use gender in segmenting the market and creating two groups such as males and females. In addition to demographics, psychographic segmentation is of critical importance in modern marketing strategies. Psychographic defining this segmentation include attitudes, interest, and the opinions of consumers. These three aspects define the lifestyle of consumers (Kurtz & Young 2009, p. 76). Therefore, psychographic segmentation takes a keen interest in the lifestyle of consumers. After identifying different lifestyles among consumers, the business firm can then develop products suited for such lifestyle groups. Geographic segmentation is also an important aspect in market segmentation. Geographic factors denote places where people reside. Therefore, business firms categorise consumers depending on their neighbourhoods, world regions, countries, states, counties, or even cities. People in different geographical locations exhibit diverse needs. For example, people living in metropolitan cities exhibit diverse needs of those living in rural areas (Meleancă 2012, p. 848). These individuals may belong to the same age or gender, but their geographical location may alter their consumer behaviour. The fourth type of market segmentation has its basis on the product benefit. Usually, consumers perceive the value associated with different products differently. Each consumer associates certain products with different values. These values bring into concepts, aspects such as quality, remarkable performance, physical appearance, unique features, and other benefits of the product that may be of interest to the consumer. Business firms have focused on understanding how different consumers perceive different products and the factors that motivate them to consider products as adding value to their lives (Meleancă 2012, p. 851). Successful market segmentation seeks to understand the existing groups in the market based on different factors and identifying the group presenting the characteristics, and the needs that the business firm can satisfy. For example, a business will consider the demographics of a certain group, its geographic location as well its psychographic in an effort to identify valuable data that can determine specific interests and the needs of the target groups. Therefore, businesses consider the different bases prior to deciding upon the specific market segment that they will focus on. A close analysis of all the segmentation bases helps in the identification of potential market segments. Among these potential market segments, the business can choose one, which seem to be worth the efforts. This depends on the number of consumers in the market segments, their level of income, which determines the prices and the profitability to the company, the potential response of the consumers in the market segment, and finally the accessibility of the segment (Meleancă 2012, p. 854). Based on the company’s potential and product range, the business can identify one of the market segments to focus on. After identifying an appropriate market segment, the company develops a marketing plan for addressing the target market. There are numerous benefits of using the approach of segmenting markets and identifying a single segment, which can conform to an identified market mix. This approach ensures that a company’s product depends on the needs of the customers in the market. Moreover, marketing efforts only focus on a single group in the market and are likely to register outcomes that are more positive. Focusing on an identified target market ensures that a company has a competitive advantage in the market compared to its competitors. Some companies identify several segments in the market and profile their needs and lifestyles ('Mobile Phones Industry Profile: Global' 2011, p. 1). The company then designs products for each of the market segments, develops marketing, and develops the marketing plans for each specific segment. This is the case with the Nokia Company as will be highlighted in the section below. The Nokia Company has successfully segmented the market into several groups. One of the segmentations is on the geographic location, such as the Asian market, the American market, and other global regions. Moreover, it has considered the demographics of consumers in an effort to identify several segments. Some of the demographic factors considered include, age, gender, income, and occupation. In additions, the company also conducted a rigorous research in an effort to describe the psychographic of different consumer groups. The identification of psychographic segments has its basis on social classes and lifestyles. Behavioural patterns have also enabled, the Nokia Company to identify additional segments in the market. The company has different series of mobile phones targeting each of the market segments identified. Some of the series include Nokia 1000 series, Nokia 2000 series, Nokia 3000 series, Nokia 5000 series, Nokia 6000 series, Nokia 7000 series, Nokia 8000 series, the Nokia Communicator, C series, E series, N series, X series, Internets tablets, and N-Gage ('Nokia mobile phone marketing in China' 2012, p. 16). For each of the series described above, the Nokia company has identified a target market based on geographic factors, demographic factors, and psychographic. A combination of all these factors has enabled Nokia to segment the market based on the price of the products. The different series of phones have varied price ranges. A close analysis of the market factors helped Nokia group the market into different income groups depending on the prices of the phones. For example, the company has launched unique products for its Asian and Middle Eastern rural region in an effort to help them upgrade their lives by staying connected (Plunkett 2008, p. 47). The company has launched a diverse range of smartphones that can satisfy the needs of different heads categories. There are phones designed for children, university students, young managers, educated politicians, as well as people of different income categories. There are cheaper phones targeting the lower class, and providing them with an opportunity to communicate constantly, whereas other phones have medium prices, and target people from the middle class. The company also has products for the upper class in the society. In addition, the Nokia Company has products in different gender categories. For example, the Nokia Roxo is one of the unique phones designed for women and young girls. Product targeting men in senior places also have different designs and shapes. The company has also moved to the level of understanding the psychographics of different groups in the market. This explains why the company has launched products for casual labourers, working class individuals, chief executive officers, and educated politicians. Other phones have unique features targeting sports people because of their sporty lifestyle (Plunkett 2008, p. 60). For example, Nokia N79 targeted sports people and had a heart monitor as one of the outstanding features. Description of Nokia’s Market Segments Based on Psychographic The company has categorized the market into four unique segments based on lifestyles. The first groups comprise of achievers who have a focus on outstanding design and style. Achievers are more likely to follow emerging trends and fashion waves. The Nokia Lumia 1020 was one of the products specifically designed for these groups of consumers. The second group comprises of “strivers” who are individuals looking for user-friendly phones, but that have elegant looks. These individuals need to have connections throughout and are more likely to invest in the best available phones meeting their needs such as the Nokia 6110 Navigator. The third segment is comprised of survivors. These individuals have outstanding roles in the business world and need the smartest phones available in the market so that they can use them for both communication and work. The company designed products such as Nokia 111, Nokia 112, Nokia 100, Nokia 103, and Nokia 113 for these individuals. The fourth groups comprise of individuals who are willing to explore. They are fascinated about technology and are in need of phones that match their stylish lifestyles. Phones such as Nokia Lumia 520, N-Gage, Asha 305, and Asha 210 are some of the products designed for these groups (Plunkett 2008, p. 95). The Segmentation of Nokia Conducted on the Basis of Price The first category described comprises of workers and labourers who can afford phones in the first range of prices. Some of the phones in this range include Nokia 1200, 1650, 1208, 2610, 2626, and 1112. The above are some of the cheapest phones targeting labourers who spend most of their time at work, earn minimum wages, and need phones for communication. Most of these phones have FM radio as the main feature in an effort to satisfy the entertainment needs of this group. This group of consumers has big families and live in poor suburbs. Moreover, they do not have the time for entertainment and lack the finances for accessing other entertainment opportunities except the FM in their phone. The company identified all these aspects describing the group before manufacturing these phones. Other phones such as the Nokia 6000 series target middle managers in the society. This is because the phones have medium prices conforming to the salaries of the people in this group. Features of most of the phones used by this group have a camera, internet connection, expandable memory, FM radio, and audio video player. These individuals need the internet connection to be able to read work emails even at home. This group engages in management responsibilities in factories, parties and dinners organized by their family, friends, office parties, and the consumers prefer to stay at home for their vacations (Plunkett 2008, p. 88). The phones used by these groups have specific features that conform to the needs of many consumers in the group. The company also identified university students who form a unique market segment. This is because they prefer flashy phones with expandable memories, high-resolution cameras, and internet connection. Moreover, these individuals like music and love phones that have a high memory to allow continuous downloads. Their lifestyle centres on studies and having fun and sometimes internship programs. Most of them need to have phones that make a statement about their status. Therefore, they are willing to spend a remarkable amount to purchase a stylish phone. The Nokia Company designed phones such as Nokia 5200, Nokia 6111, Nokia 7610, and Nokia E 50 in an effort to satisfy their needs (Plunkett 2008, p. 64). Conclusion and Recommendations Without doubt, the Nokia Company has succeeded in segmenting the market into different groups and designing products for the specific groups as well as using the appropriate marketing approaches in the promotion of products to each segment. However, the increasing competition in the mobile phone industry requires the company to be much more competitive and innovative. Moreover, the company needs to understand the emerging needs and lifestyles of customers in an effort to categorize the emerging markets (Viardot 2004, p. 76). The company also needs to design products that suit the needs of the identified segments and use the right marketing approaches to appeal to the target market. If the company is to regain its leading position, it will have to register a higher level of understanding market segments. Bibliography Bhutto, A 2005, 'Managing interindustry differences through dynamic capabilities:: the case study of Nokia', International Journal of Innovation & Technology Management, 2, 3, p. 235, Publisher Provided Full Text Searching File, EBSCOhost, viewed 4 December 2014. 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