Monday, April 30, 2012

Has Nokia lost the battle for Smart Phones?



I have been a loyal user of Nokia phones for last 10+ years, until I recently changed to Apple iPhone and it is not just me. A lot of my friends and colleagues too have moved from Nokia E series smart phones to iPhone or Android. Few of them moved from Blackberry to iPhone.  Till now, I have not seen any of my friends and colleagues moving to a Nokia Lumia Smart Phones and worse still I have not seen anyone who is planning to buy Nokia Lumia phones.

Last year, in late October, I was passing through Heathrow Airport terminal 5 - where Nokia had a major marketing campaign for Lumia 800. I saw the advertisements and as soon as I landed in India, I walked into a local branch of Univercell - a leading chain of cell phone retailer to see if I can see a demo of Lumia. But the local store did not have any thing to show. I checked again after 2 months and the story was the same. The three local stores had no demo models, they even did not have a new boxed phone of Lumia 800 in-stock, and the salesman could not even tell me when I can visit again to see a demo.

What struck me was that all the retail associates across the city were not selling Lumia. Despite having big banners & advertisements of Lumia phones, the retail salesmen were not excited about Lumia. Even the store manager did not have a Nokia Phone, He had a Samsung!

The cell phone store salesmen were eager to sell/promote Samsung in the Smart Phone category, they had full functional demo units. At one store, there was a dedicated sales counter for Samsung products - with full range of models on display and live demonstration. Unfortunately, Android is not a supported platform at my office for emails. So, I decided against Android phones.

Next, I checked out iPhone at the local Apple store. The retail experience was completely different. Adding to the fact, was that I needed no introduction to IOS platform - as I own an iPad. The salesman had several demo units and that closed the deal. I had made the decision to change to an iPhone from a Nokia E71.

Now, I am just taking my example and generalizing it. But the signs of Nokia's defeat is everywhere. If the retail associates are not eager to sell Lumia, then it is a clear sign that the front line troops (i.e., salesmen)  have given up the fight. And the results reflect that: In the last quarter, Nokia sold only ~2Million Lumia phones Vs 34Million iPhones and ~50+Million Android phones.

Nokia's Q1 2012 results in a glance

Revenue in Q1 2012 - $9.65 Billion - down from $10.4 Billion in Q1 2011
Sales of Smart Phones: Q1 2012: 12 Million - down from 24.2 Million in Q1 2011
Of which Lumia phones accounted for only 2 Million!

Indian revenue numbers show a different story:

FY 2011 revenue: Rs.12,929 crore - a growth from Rs.12,900 crore, while Samsung's revenue was Rs.5,720 crore. Nokia is the market leader with ~39% market share. In short all the numbers paint a rosy picture.
These numbers just indicate that Nokia is not finished yet, and can still recover its old glory, only if Nokia can execute. Any business transformation will be painful, and Nokia is currently going through that painful transition.

Disjointed Marketing Effort?

Nokia's marketing in India and the world seems to be totally disjointed.

While the marketing on the Internet is concentrated on Lumia 900 - their flagship product, the www.Nokia.in website is promoting Lumia 710 - the lower end product in the main homepage. Worst of all, www.Nokia.in website does not even show Lumia 900!

The banners and posters at retail shops advertise Lumia 800 - while the salesman does not have a demo unit for Lumia 800.

I checked on the pricing of Lumia 800 today on several Internet sites and found that prices vary from Rs24,000 to Rs 23,500. This implies that Nokia has already started discounting the price from the initial launch price of Rs 33,000. This sends out a wrong message to the potential buyer - who now has an incentive to wait further for the prices to come down. In short the pricing model does not encourage customer to buy the phone today and people would rather wait for prices to comedown even further.

Pull Sales strategy is not working

Nokia has tried several new marketing strategy to promote Lumia: Flash Mobs, Facebook, Lumia Challenge campaign etc. While all this marketing efforts created the buzz for the product, the retail sales channel did not have phones to show!

From the customer point of view, the customer would like to see, touch & feel the product before buying. So all the marketing efforts have come to a naught!

When a potential customer walks into to a retail store and not having phones to sell is not a good strategy.

Its the Ecosystem that sells Smart Phones

When it comes to Smart Phone Ecosystem, Nokia has two major disadvantages:

1. Not many Apps that run on Windows Phones.
2. Many Enterprises do not support Windows Phones.

Apps is the number one reason why users are choosing Smart phones. In this area, Nokia or rather Microsoft will have to get really aggressive. Right now, Windows platform is not popular for the Apps. App environment on Windows is improving - but it still a laggard. So Lumia customers feel dejected when their friends show off a cool iPone/Android App - which is not available on Lumia.

Even in my organization, the first mobile platform we target is IOS for iPhone/iPad and then develop the Android version of it and stop. We do not develop the apps on Windows or Blackberry.

Another big challenge is the enterprise customers. Most of the corporate enterprises today limit the number of smart phone platforms they support. My organization does not support Android phones and when it comes to Windows, the support is limited to emails only. No business Apps such as Live meeting or enterprise IM etc. Users cannot connect Windows mobiles to corporate Wi-Fi either.

Smart Phone users want to have one single device for both work and personal use. So if the corporate IT does not support Windows Phones, like it does on Blackberry or iPhone, users are being discouraged to buy Windows phones.

Nokia and Microsoft, especially Microsoft will have to increase its efforts to promote Windows Phone as the preferred enterprise mobile platform - if they intend to succeed.

Apple and Android on the other hand are leveraging the users to force enterprise IT to support their platform, and in my organization , I can now connect my iPad, iPhone and Laptop to corporate network - and that was a major factor in my final decision to opt for iPhone.

In my opinion, Nokia and Microsoft have not yet developed an integrated marketing strategy for the Apps and Enterprise usage.

Closing Thoughts

Nokia has developed a good Smart Phone - Lumia 800 & 900. The device itself is very good. But Nokia has blundered in the sales & marketing of these new smart phones.

Despite having a huge sales network across India, a dominant marketshare, a loyal customer base, Nokia is struggling. If Nokia fails to execute on all fronts then Nokia will have a long down hill ride to abyss - just like Sony & Motorola.

2 comments:

Anuradha Goyal said...

Excellent Analysis Arun. I still continue to use Nokia - have N8, but looks like this may be the last Nokia I may use.

Hope someone from Nokia reads this.

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