Nokia: A Phone for Every Segment "While practically everybody today is a potential mobile phone customer, everybody is simultaneously

different in terms of usage, needs, lifestyles, and individual preferences," explains Nokia's Media Relations Manager, Keith Nowak. Understanding those differences requires that Nokia conduct ongoing research among different consumer groups throughout the world. The approach is reflected in the company's business strategy: We intend to exploit our leadership role by continuing to target and enter segments of the communications market that we believe will experience rapid growth or grow faster than the industry as a whole.... In fact, Nowak believes that "to be successful in the mobile phone business of today and tomorrow, Nokia has to fully understand the fundamental nature and rationale of segmentation." THE COMPANY Nokia started in 1865, when a mining engineer built a wood-pulp mill in southern Finland to manufacture paper. Over the next century, the company diversified into industries ranging from paper to chemicals and rubber. In the 1960s, Nokia ventured into telecommunications by developing a digital telephone exchange switch. In the 1980s, Nokia developed the first "transportable" car mobile phone and the first "handportable" one. During the early 1990s, Nokia divested all of its nontelecommunications operations to focus on its telecommunications and mobile handset businesses. Today, Nokia is the world leader in mobile communications. The company generates sales of more than $27 billion in a total of 130 countries and employs more than 60,000 people. Its simple mission: to "connect people." The mission is accomplished by understanding consumer needs and providing offerings that meet or exceed those needs. Nokia believes that excellence in three areas-product design; services such as mobile Internet, messaging, and network security; and state-of-the-art technology-is the most important aspect of its offerings. THE CELLULAR PHONE MARKET In the 1980s, first generation (1G) cell phones consisted of voice-only analog devices with limited range and features that were sold mainly in North America. In the 1990s, second generation (2G) devices consisted of voice/data digital cell phones with higher data transfer rates, expanded range, and more features. Sales of these devices expanded to Europe and Asia. In the twenty-first century, Nokia and other companies are combining several digital technologies into third generation (3G) communication devices that reach globally and feature the convergence of the cell phone, personal digital assistant (PDA), Internet services, and multimedia applications.

The global demand for cell phones has increased significantly over the years-from 284 million in 1999 to 410 million units in 2000 to 510 million units in 2001. Producers of first and second generation cell phones used a geographic segmentation strategy as wireless communication networks were developed. Most started with the U.S. and then proceeded to Western Europe and Asia. However, each market grew at different rates. By 2001, Asia had the largest number of handsets-170 million units. Western Europe was a close second at 167 million units, followed by North America at 90 million units. Latin America had sales of 42 million units while the rest of the world had sales of 38 million units. In terms of market share, Nokia led all producers with 32 percent in 2000 and 35 percent in 2001. Motorola and Ericsson, the second and third share leaders respectively, each had less than 20 percent of the market in 2001. The total number of worldwide wireless subscribers reached 1 billion in 2001 and is expected to increase to 2.3 billion by 2005. Demand should increase due to the growing demand by teens for high-speed handsets that will provide Internet and multimedia applications. According to the Cellular Telecommunications& Internet Association (CTIA), U.S. wireless subscribers spend an average of $45 per month on calls. HOW NOKIA SEGMENTS ITS MARKETS According to Debra Kennedy, Director of America's Brand Marketing at Nokia, "Different people have different usage needs. Some people want and need all of the latest and most advanced data-related features and functions, while others are happy with basic voice connectivity. Even people with similar usage needs often have differing lifestyles representing various value sets. For example, some people have an active lifestyle in which sports and fitness play an important role, while for others arts, fashion and trends may be very important." Based on its information about consumer usage, lifestyles, and individual preferences, Nokia currently defines six segments: "Basic" consumers who need voice connectivity and a durable style; "Expression" consumers who want to customize and personalize features; "Classic" consumers who prefer a traditional appearance and web browser function; "Fashion" consumers who want a very small phone as a fashion item; "Premium" consumers who are interested in all technological and service features; and "Communicator" consumers who want to combine all of their communication devices (e.g., telephone, pager, PDA). NOKIA'S PRODUCT LINE To meet the needs of these segments, Nokia has recently introduced several innovative products. For example, for the Communicator segment, Nokia's 7650 features a built-in digital camera, an enhanced user interface, large color display, and multimedia messaging (MMS) functionality that allows users to combine audio, graphic, text, and imaging content in one message. Once the user has selected a picture,

written text, and included an audio clip, a multimedia message can be sent directly to another multimedia messaging-capable terminal as well as to the recipient's email address. Nokia's 6340 phone allows Classic consumers to roam between various global networks; has a new wallet feature that stores the user's credit and debit card information for quick wireless Internet ecommerce transactions; supports voice-activated dialing, control of the user interface, and three minutes of voice memo recording; and includes a personal information manager (phone book and calendar). To target the Basic segment, Nokia provides very easy-to-use, low-priced phones that are likely to be used primarily for voice communication. They are designed for consumers who are buying their first cell phone. "We want it to be a very easy choice for the consumer," explains Kennedy. Products designed for the Expression segment are still in the low price range but allow young adults to have fun while communicating with friends. Nokia recently introduced the 5210, a cell phone that offers a youthful and vibrant style with improved durability, for this group. Features include a removable shell, a built-in stopwatch, a thermometer, downloadable game packs, a personalized logo, and a personal information manager. Nokia also designs phones for the Fashion segment-people who want a phone to "show off." The Nokia 8260 and 8390 products are in this category. They provide basic communication and other features but are not designed for heavy use. One of Nokia's television commercials for fashion phones showed two people sitting on a couch trying to talk to each other at a loud party-so they call each other on their phones! In addition, Nokia offers phones for the Premium segment-people who also want a distinctive and elegant design, but as a fine item to appreciate rather than to show off. The Nokia 8890, a phone with a chrome case and blue back light, was designed for this group. In addition, Nokia recently introduced the all-in-one 5510, which features an MP3 player that can store up to 2 hours of music, an FM radio, a messaging machine with full keyboard, a game platform with game controls for two hands and keys located on either side of the screen, and of course, the cell phone. THE FUTURE FOR NOKIA A fast-growing segment for wireless mobile cell phones is the automobile. According to the ARC Group, the number of cars with "telematic" systems will increase from 1 million units to 56 million units by 2005. Ford, Nissan, and other automobile manufacturers have recently introduced systems in selected models. One reason for the expected popularity of these devices is their "hands-free, voice-activated" operation, which is designed to reduce cell phone-related automobile accidents. The CTIA has recently developed a public service announcement (PSA) to curb this dangerous behavior and forestall legislation designed to eliminate cell phone use in the car entirely. Nokia Executive Vice President Olli-Pekka Kallasvuo is so optimistic he recently commented that "our ambition should be extremely high," as the company has set its sights on capturing 50 percent of the worldwide mobile-phone market.