St.

Anthonys College
San Jose De Buenavista, Antique

Nokias Pricing Strategy Case Study

In Partial Fulfillment
Of The Requirements In
Management 104 Principles of Marketing

Presented To:
Miss CLYDIE JOY ALFONGA
Faculty, Business Education Department
St. Anthonys College, San Jose De Buenavista, Antique

Submitted By:
ALCOZERO, Mary Therese
ANDRES, Marconni B.
AWACAY, Precious Pearl
ATIENZA, Flaviano Raphael
BANGCAYA, Lovely Anne
GUZAREM, Katherine R.
OKADA, Zenna Megumi P.
NAVALLASCA, Ana Marie
MAGTUPA, John Robert

Bachelor of Science in Accountancy Second Year

March 9, 2017
Questions and Answers:

1. Discuss the segmentation strategy of Nokia and comment on its efficacy.

The first of these segments is Live. This segment comprises first time users whose basic need is to stay
in touch, with voice as the main driver. This segment would be served handsets which would be low on
features and price. These will be functional phones and the target group for these phones range from SEC
C (low socioeconomic class) to SEC A1+ (very high socioeconomic class) markets.

The second segment Connect comprises more evolved users who look for more functionality, features
and connectivity. Accordingly, phones in this segment would have GPRS, camera and music capabilities.

The next two segments, Achieve and Explore, consist of high-end users who would be offered Nokias
top-end handsets. For example, Achieve segment comprises company executives who need to have
business functionalities in their phones. Nokias E-series (Enterprise Series) is aimed at this segment with
handsets having a QWERTY keyboard and full internet capabilities.

Explore would be the most prominent segment for the company in the coming years. This segment
comprises high lifestyle users. This segment would see the most vibrant growth in the coming years. The
phones aimed at this segment will focus on five different functionalities: applications, imaging, mobile
TV, music and gaming.

2. Explain how Nokia used the skimming pricing strategy for its products. Give your comments on
the strategy.

The Nokia 8250 was, at the time of its release in 2000, the smallest, lightest Nokia mobile phone on the
market, thus its selling point was based on its design and customization, with removable covers. Due to
underdeveloped infrastructure base only the premium segment was targeted with the then price being
18,000. In 2004, after easing of government regulations, increased competition, the product was made
available at 8,000 10,000.

The Nokia 6600 is a mobile phone launched in Q2 2003, costing 21,000 22,000. In November 2004, the
price was 15,000 16,000. Later in 2005, the price is 9,000 10,000. It was Nokias high-end model of
the Business Series of mobile phones. At the time of release, it was the most advanced product ever
launched by Nokia, and it runs on the Symbian OS-based Nokia Series 60 platform. It also featured a
VGA camera, extended storage by memory card, music player and video player, and Bluetooth.

The Nokia 9500 Communicator is a smartphone produced by Nokia, introduced in 2004. It runs on
Symbian-based Series 90 platform. Connectivity features of the 9500 include: Bluetooth, infrared, USB,
Wi-Fi, and GPRS. Built-in software includes a word processor, spreadsheet, and presentation program,
which are compatible with the Microsoft Office Suite equivalents; also featured is an MP3 player. It
makes full use of the unusually large and wide screen, so that many existing Java games will run, but only
use the top left hand corner of the screen. It supports storage on Multimedia Card (MMC) of up to 2 GB.

The aforementioned examples highlight how Nokia effectively used the market-skimming strategy for its
products. The practice of price skimming involves charging a relatively high price for a short time where
a new, innovative, or much-improved product is launched onto a market. This strategy was used at the
right time and in right order of models released. Market skimming is an apt strategy especially for high-
end products. As a high price, it would mean high quality in the minds of customers. For every new
release of a snazziest model of Nokia successfully skimmed the market. After the early adopters, the
company decreased price to target the late adopters. Its pricing strategy for many of its products was
successful in propelling Nokia to be the global as well as the Indian Market leader. When products
reached the maturity stage, the series or the variant was discontinued from the market.

3. What would have happened if Nokia had used the penetration pricing instead of skimming?

Penetration pricing strategy is followed by companies with the intention to maximize their market share.
They believe that a higher sales volume will lead to lower unit costs and higher long-run profit. It is
setting a relatively low initial entry price, usually lower than the intended established price, to attract new
customers. Penetration pricing would have been ineffective on several grounds: 1) Difficult recovery on R
& D costs, 2) Smearing brand image, 3) Not much effective for premium segment, 4) Penalized entry of
competitors, and 5) Limited scope for product differentiation.
 Nokias Pricing Strategy
MARKETING CASE STUDY

I. Time Context
The case happened on year 2000-2006

II. Viewpoint
Jorma Jaakko Ollila, President and CEO of Nokia

III. Statement of the Problem

How relevant is the skimming pricing strategy in Nokias product line models?

IV. Statement of the Objectives

To know how Nokia used the skimming pricing strategy for some of its product line models.
To remain in the mobile phone industry for a longer time.
To retain the leading position in the entire mobile phone industry.

V. Areas of Consideration (S.W.O.T. Analysis)

STRENGTHS
The biggest strength of the company is their brand name. Many consumers often opt for Nokia
more than any other brand because of the reliability, durability, and creativity their phones
provide.
Many of Nokias products are easy to use and are usually coupled with a variety of handy
accessories.
Most of Nokias highly qualified personnel have teamed up with Microsofts experts as a part of
the acquisition deal.
The phones provided by Nokia have a much higher re-sale value compared to other mobile phone
brands.
Products offered by the company are available in all price ranges.
Product / Service Quality & Service Position: The products as offered by Nokia are user
friendly by nature and it also enjoyed the leading position in the entire mobile phone industry.
Marketing Capability: The Company has huge reputation as a mobile leading company and it
has wide range of network all across the world.
Human Resources: Nokia has the largest distributor network in the entire mobile phone industry
and it also accounts for high qualified and experienced personnel at the top management
responsible for taking strategic decisions.

WEAKNESSES
In respect to weaknesses of Nokia are concerned, it has the major weakness in terms of lack of
appropriate innovation ability to change its strategies as per the changing external environment
requirements.
Another major weakness is that Nokia did not have access the latest software system i.e. Android
for longer period of time which has been the buzzword among mobile phone users. This has
significantly affected the market share of the company because of its inability to introduce newer
products and services.

OPPORTUNITIES
Improve the technology that they are using to make their phones and use in their products.
 Using innovation to reinvent their products, change, and develop to offers something non of the
competitors have.
Research and Development Capability: The recent performance of the mobile phone industry
indicated that the smart phones have covered up the expectation levels of majority of the
customers, and there has been significant rise in the demands for smart phones among the users.
Thus, a mobile phone company offering innovative smart phones that offer advanced
technological features has good potential to serve large customer groups and thereby it can
achieve higher growth rates. The opportunity to Nokia is that it can recoup its declined market
share by offering innovative mobile phones (Brown and Lambert, 2012).

THREATS
Strong competition from other smartphone companies will make it hard for Nokia to maintain
and expand their market share.
Low-cost threats by other mobile companies can cause big problems.

VI. Alternative Courses of Action (ACA)

ACA No. 1 Apply skimming pricing strategy to all of Nokias product line models.
Pros:
It will capture consumer surplus because theoretically, no consumer will pay less for the
product than the maximum they are willing to pay.
It will allow large revenue by the time all new product line models would have been released
for the first time.
Consumers will be able to afford the first released product when its price gets lower as a new
product is released in the market.
Cons:
In practice, it is impossible to capture this entire surplus.
Nokia might gradually reduce their revenue altogether in all their products at the same time.

ACA No. 2 Use of other pricing strategy in the mobile phone industry other than price skimming,
specifically penetration pricing strategy.
Pros:
Nokia will encourage a lot of potential customers to switch to the new product because of the
lower price.
Profits may be maximized.
Cons:
The low initial price can create expectation of permanently low prices amongst customers
who switch.
It is always harder to increase prices than to lower them.

ACA No. 3 Maintain the skimming pricing strategy to some of Nokias product line models.
Pros:
Nokia will be able to maximize profits to some product line models that have been newly
released at the moment.
Consumers who cannot afford to buy product line models in which the skimming pricing
strategy is applied may afford to buy other handsets which other pricing strategy is used by
Nokia.
Cons:
 Nokia may find it hard to choose the product line models to apply skimming pricing strategy
at.

VII. Conclusion and Recommendation

Based from the facts of the case, Nokia stands out significantly as it has taken mobility a step
forward by creating products with continuous innovations to keep pace with changes. It has been
one step ahead in anticipating future market moves and strategizing accordingly. The company
prices its products so competitively that it not only ensures that its margins are covered but also
assures revenue maximization.

Since Nokia slides each brand down the segment one at a time by reducing its prices carefully
and consistently, it is recommended the adoption of Alternative Course of Action No. 3 (ACA No.
3) maintain the skimming pricing strategy to some of Nokias product line models. Products
offered by the company are available in all price ranges which the customer can freely choose
from.

Criteria ACA No. 1 ACA No. 2 ACA No. 3

Timeliness 1 2 3
Market Share 1 3 2
Profits 3 1 2
TOTAL 5 6 7

VIII. Action Plan and Implementation

Marketing Activity Department Schedule Budget

Select proper product line models to which the First Quarter of
R&D 1.138 Billion
skimming pricing strategy may be applied. 2006 March 31
Maintenance of pricing strategy will be done by Second Quarter
R&D 1.234 Billion
highly qualified and experienced personnel. of 2006 June 30
Promote companys products in the market through Third Quarter of 5% of overall
Marketing
advertisements. 2006 Sept. 30 revenue
Monitor the sales of released product line models Third Quarter of 5% of overall
Marketing
where skimming pricing strategy is used. 2006 Sept. 30 revenue
Analyze consumers discerning outlook towards a Third Quarter of 5% of overall
Marketing
particular product whether to innovate or not. 2006 Sept. 30 revenue