‘Our experience is that consumers hate confusion’

‘Our experience is that consumers hate confusion’
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First Published: Wed, May 09 2007. 01 19 AM IST

Updated: Wed, May 09 2007. 01 19 AM IST
Mobile-communications companies sold nearly a billion devices around the world in 2006, and Nokia accounted for roughly 35% of them. It’s hard to achieve market share figures like that without establishing a strong presence everywhere, which is exactly what Nokia has done: roughly 38% of its sales went to Europe, 33% to the Asia-Pacific region (including China), 16% to North and South America, and 13% to Africa and West Asia.
Competing across the globe means that Nokia Oyj faces a diverse set of marketing challenges: from providing sales and service support to kiosks in small Indian villages to partnering with North American telecommunications service providers whose rate plans subsidize handsets. Add such factors as rapidly changing technology, an explosion of new products, and a splintering media environment, and you have an extremely complicated stew for any marketer.
Keith Pardy, Nokia’s senior vice-president of strategic marketing since 2004, wrestles with these issues every day. In this interview with McKinsey’s Trond Riiber Kundsen he contrasts the challenges Nokia faces in emerging versus developing markets and describes how it is coping with rapid product proliferation and changes in the media environment.
Nokia and its competitors seem to be launching a lot more products currently than they did just a few years ago. Why?
People are different, so why should we expect them to want the same product? We recently completed a global segmentation study, with 77,000 consumers from all over the world, to really understand their needs, attitudes, beliefs, and lifestyles. It showed us that there are 12 different groups of consumers out there, all with very different needs. For some, fashion and stylish looks are the key factors in the mobile device they decide to buy; for others, it’s about leading-edge technology and features. Or a device that helps you do your job on the move might be the must-have thing. If we are going to drive up our market share towards our goal of 40%, then we are going to need a product portfolio that’s both broad and tightly targeted.
What are the biggest challenges you face as a marketer in managing such a large product portfolio?
One issue is that when you’re introducing around 50 products a year, and the average life cycle of a product is from 12 to 24 months, you’ve got a tremendous number of ramp-ups and ramp-downs. Dealing with that schedule is tricky. We’ve invested heavily in our logistics and supply chain processes so that we have complete, real-time visibility into the product-life cycle, and our product-management teams stay with their programmes until the products are ready to ramp down. A second issue is that when you have many products, prioritizing communications becomes very important. Our experience is that consumers hate confusion, and maintaining relationships is much more important than flashy, big-burst marketing.
What impact have changes in the media environment had on your communications efforts?
The media world has completely changed in Western Europe, North America, and certain parts of Asia and Latin America. It’s not about pushing out messages any more. You have to initiate interesting conversations and build meaningful relationships with consumers. The Internet is playing a much more important role than anyone ever imagined. Brands are going to be made and destroyed on the Internet, and there’s a whole set of new marketing rules for it. One cardinal rule is trust and respect. I saw a great metaphor the other day: a picture of a sheep with the fangs of a sabre-toothed tiger. That’s a great depiction of marketing on the Internet. If you start playing games with people, they’ll find out and eat you alive. Consumers on the Internet are open to interesting ideas and they want to co-create content with you, but make no mistake: they are in charge
Marketers have to get used to people shaping our brand meaning via Internet marketing. As an industry we’re still pushing content and we haven’t figured out how to unleash all the creative potential that lies in people talking about our products in exciting new ways. I don’t think banner ads are a waste of money, but they’re not very effective. Context-relevant communication makes a lot of sense. We’re investing a lot in trying to understand how brands can interact with sites like YouTube and MySpace, plus blogs.
We also think the mobile device is going to become a primary media channel in the future, especially as GPS is offered on these devices. Just think about it. You land in New York. You flick on your cellphone. Your contact list does a scan. It bleeps, “Four of your contacts are active in New York.” One of them happens to be an old college buddy. He sends you a message, “Look, I’m busy, but here are the five best restaurants and nightclubs that I visit in New York. Go check them out. I’ll see you at the last one at 12.” Your navigation system leads you to the restaurant. I am sure that these types of experiences will generate new business models with some kind of ad revenue sharing. We believe navigation and context-relevant services are the next big inflection point in mobile services.
What’s the situation in emerging markets?
Media fragmentation there is less than we experience in Western markets, and we know that media evolution will take a different track. For example, people interact with the Internet in a totally different way. Take China: we get more hits a month from there on mobile.nokia.com than from any other country in the world. A lot of these people never had a computer, and they’re using their mobile phones to access the Internet. The same thing is happening in India, Africa, and the Middle East. So when we develop Internet solutions and products, those markets are always at the forefront of our thinking.
The growth potential in emerging markets is amazing. They now represent a larger portion of the global market for our business than developed markets do. It’s just the way the math works. You’ve got billions of people who may have limited buying power but are finding that these devices actually improve their standard of living by helping them get things done. These devices let farmers, fishermen, and craftspeople find markets and link supply with demand, whereas previously they would spend hours travelling to the marketplace only to find it was slow or nonexistent. This is transformational in nations like India and in large swathes of Africa, where there are relatively few fixed phone lines and poor infrastructure.
We have been very successful in emerging markets, and it is something we are pretty proud of. You will see a lot more innovation from us as we develop further down into the income pyramid. We envision a world where, for the first time in the history of humankind, three billion to four billion people will be connected at the push of a button. It’s quite a privilege to be involved in something of this scale and with this potential impact on people’s daily lives.
How does your marketing strategy differ in emerging markets?
Creating products for markets where cost is so critical takes a lot of very specific design, engineering, and production intelligence. It’s one thing to build and design a phone for €500, but it takes really innovative thinking to deliver the same Nokia promise of trust, reliability, quality, and connectivity for €50 or €60. It’s something we aren’t prepared to compromise on; it’s imperative that we provide the same quality experience in all our devices, whatever the price point. Building the whole customer-care infrastructure in emerging markets is also extremely important. Buying a phone for many people in these markets is the same level of investment as someone in a developed market buying a car. It’s a big investment, and customers have an ongoing reliance on and relationship with it. So the care they receive after they buy phones is a crucial part of the brand experience.
Of course, one of the other major challenges is getting distribution into very remote areas. Remember, in markets such as China, India and Russia, instead of the operator selling you a mobile device, it’s often sold through an independent distributor or retailer. There may be only one small village retail outlet—a kiosk—whose biggest issues are working capital and cash flow. You can’t go in there and drop off a tractor trailer-load worth of devices. A strong distribution system is a major competitive advantage. We’ve made big investments in merchandisers and salespeople and we can make deliveries on a much more frequent basis in these regions than in a lot of developed markets. Having a strong brand is also crucial in getting distribution. If you’ve got limited space in your kiosk and only so much money, are you going to buy that private-label brand that nobody knows about or are you going to buy Nokia, which you’ve sold at a rate of 40 per week over the past two years?
How would you contrast this with the marketing challenges in developed markets?
Things really change in markets where the majority of these devices are bought through large multinational telecom operators and the price is subsidized with some kind of rate plan. In those instances, marketing operates more like what you’d find in the fast-moving consumer goods industry, where there are large customers like Wal-Mart. For example, one of the main operators has about 20,000 outlets in North America. They’ll probably have 17 slots, in a six-month period, that are open for marketing devices and solutions. Seven or eight manufacturers are vying for those slots. The trick for us is to customize offerings that complement what the operators are trying to do in their business. Let’s say an operator is trying to increase its average revenue per user by boosting the use of data services. The best way to get consumers to use these types of services is through high-speed networks and devices. Operators who have made the investments in third-generation infrastructures are going to want a line of products that are 3G-enabled. They will also want a product story that’s unique to them because they are trying to differentiate themselves.
Could you talk about Nokia’s approach toward consumer insights?
Our approach is all about putting people at the heart of the way we design and market products: “First we observe, then we design.” We have teams of anthropologists, ethnographers, psychologists, and consumer insight experts observing and understanding people’s behaviour. Their insights are used to shape our R&D and design focus.
One thing we’re trying to understand is the unconscious mind and the real reasons people buy things. That’s where the gold dust is. Of course, the products have to be well engineered, and you’ve got to give people rational reasons to buy something. But there are very few consumers out there who buy only based on a rational, linear decision process. Emotional reasons—largely connected to the subconscious—play a critical role. This is especially true for items or objects that are consumed in the public domain. In these situations people don’t buy just for rational reasons.
Could you tell us a bit about Nokia’s efforts to hire marketers from outside the company?
Over the past year or two, we probably brought in 50 people from consumer-packaged-goods companies like Nike, Pepsi, Reebok, Coke, and P&G. As the company rapidly expanded to become truly global, it was virtually impossible to build the marketing capability from home-grown talent; we were expanding too fast. It is also healthy to bring in fresh talent with new experiences and build the overall diversity of the team.
How would you characterize the similarities with and differences between the marketing challenges facing Nokia and those of Coke, your former employer?
At the end of the day, a lot of marketing is about changing consumer behaviour. In Coke’s case it might be, “Everyone in Russia is drinking a beverage called kvass in the summertime.” You’d rather that they have a Coke in the summertime. In our case, we’re introducing products that offer the next wave of the Internet, making it a truly mobile experience, so we’re trying to initiate massive behavioral change—from consumers looking at the Internet on their home computers to browsing while they’re on the go.
Trond Riiber Knudsen is a director in McKinsey’s Oslo office.
Reprinted with permission, copyright (c) 2007, McKinsey & Co. The article was originally published in The McKinsey Quarterly and can be found on the publication’s website, www.mckinseyquarterly.com
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First Published: Wed, May 09 2007. 01 19 AM IST
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