Marketing principles

====================

There are many priorities within a business, but in a marketing

orientated company like Nokia, many of the following principles will
be high on the agenda:

1. Customer satisfaction: Market research must be used to find out

whether customers' expectations are being met by current products
or services.

2. Customer perception: this is based on the images consumers have

of the organization and its products, this can be based on; value
for money, product quality, fashion and product reliability.

3. Customer needs and expectations: This is anticipating future

trends and forecasting for future sales. This is vital to any
organization if they wish to keep their entire current market
share and develop more.

4. Generating income or profit: This principle clearly states that

the need of the organization is to be profitable enough to
generate income for growth and to satisfy stakeholders in the
business. Although satisfying the customer is a big part of a
companies plans they also need to take into account their own
needs, such as:

5. Making satisfactory progress: Organizations need to make sure

that their product is developing along with the market, if a
product is developing well, then income should increase, if not
then the marketing strategy should be revised.

6. Be aware of the environment: An organization should always know

what is happening within their designated market, if it is
changing, saturation, technological advances, slowing down or
rapidly growing, being up to date on this is essential for
companies to survive.

There are also certain external factors that a company should be very
aware of, such as P.E.S.T factors (political, environmental, social
and technological) and also S.W.O.T (strength, weakness, opportunity
and threat). A business must take into account all these constraints
when designing and introducing a marketing strategy.

P.E.S.T:
Political factors- Legal constraints (such as the G3 technology
constraints that Nokia have to take into consideration) must be taken
into account because many businesses aim to make a profit so they may
be tempted to mislead their customers about prices, quality of
products and the availability of their products. They may also try to
cut expenditure by using lesser quality materials in their products
(such as weaker materials for Nokia cases and batteries), also some
companies may also dispose their waste in ways that damage the
environment (pollution) and not ensuring high standards of hygiene and
safety in the workplace and outlet stores, all of these are illegal
and can leave companies in big legal trouble.

The governmental bodies in the U.K have introduced new laws into the
business environment, which ensure that none of these procedures take
place; if a company is to be successful they must follow all of these
laws.

Environmental social and ethical factors- some businesses view profits

are more valuable then a strong ethical code and this can govern
behaviour and business conduct. Some un-ethical practices are against
the law and companies can not become involved in them (I have
mentioned these above) but there are also some practices that aren't
illegal by law but are considered highly un-ethical by the consuming
public, companies who engage in these practice's can lose a lot of
market share if they are found out. An example of this is cosmetic
testing on animals, it is legal but some of the consuming public are
not happy about it and boycott Certain products because of it,
companies must be very careful about how they conduct themselves.

Nokia have managed to be quite environmentally friendly and have not

done anything that the consuming public have taken huge offence to,
they have been very careful about this and this is one of the reasons
they are such a popular brand of mobile phones.

Technological- In the communications market technology is perhaps the

most important factor that companies like Nokia have to take into
consideration. They have to keep up to date with all the newest
technological advances (like camera and motion capture phones) if they
are going to capture the biggest market share and stay ahead of their
competitors (Sony and Seimens).

S.W.O.T

SWOT analysis is also another way of deciding on a successful

marketing scheme, we must look at strength, weakness, opportunity and
threat.

Strength (internal factors)- Is looking at the companies current

market share and researching how recognised Nokia is amongst consumers
in the target market. Nokia is currently one of the most popular
Mobile communications companies in the industry, generating over
52,000 sales in 1997, which was a 34% increase from 1996. Nokia's net
sales for the October-December period in 1997 came to a total of FIM
15 857 million (FIM 12 669 million in 1996).

Weakness (internal factors)- This is basically looking at where the

product is failing or not doing as well as it should in the market.
Nokia's problems are that:

1. They are currently aiming their products at a saturated market

segment.

2. Their wage costs are forever rising.

3. Higher import charges have now been put into place.

4. There are some quite high supply chain costs that Nokia are
currently paying.

Opportunity (external factors)- This is the area in which Nokia can

make more profit, or gain more market share. There are 2 ways in which
Nokia can currently do this:

1. Improve the technology that they are using to make their phones and
use in their products, for example, camera phones and advanced picture
messaging would attract new consumers to purchase phones under the
Nokia brand name.

2. Using innovation to re-invent their products, change and develop

within the market to offer something none of the competitors have.
Also the fact that phone call charges are being forced to fall should
prove to be an opportunity for Nokia to sell to the people, who
previously may have not purchased a phone because of higher call
charges.

Threat (external factors)- This is looking mainly at the competition

that are taking away Nokia's current market share and also government
legislations (the total costs of 3G licensing in Europe is 110 billion
euros) that could hinder Nokia's development as a company.

For an existing product it is often useful to draw up an Ansoff's

matrix, in order for Nokia to grow as a business we must look at:

· Market penetration

· Market development

· Product development and

· Diversification

Market penetration- the aim of market penetration is to sell existing

products to an existing market, to do this Nokia must do a few things:

1. Change the pricing scheme (for example, penetration or competitor

based)

2. Introduce discounting

3. Start up a different advertising campaign or consider changing an

existing one.

Market development- To complete market development successfully, Nokia

must look into the following:

· Researching and selling to a different market (in case of saturation

or poor market share)

· Change times that television adverts are aired at and alter the
places in which print adverts are being displayed (this can help your
products appeal to a whole new market segmentation)

· Lower current prices to help the products appeal to a wider range of

consumers.

Product development- This area of the Ansoff's matrix involves keeping

up to date with the latest technologies available in your chosen
market and using them to appeal to different people (for example, WAP
phones are aimed at more professional people while Camera phones are
aimed at the youth market)

Diversification- This refers to developing technology that offers

consumers something new or different, this is the most common way of
companies trying to gain greater market share and increase their
profits.

Market research
A businesses success is based on whether they can give the customer
what they want and when they want it. Market research involves the
collection, collation and analysis of data relating to the consumption
and marketing of relevant goods and services.

The purpose of market research is really to find out whether there is

a gap in the market for your product or service or whether you can
make customers want your product through persuasive adverting. We
already know that there is a market for mobile phones but the current
market gap has become saturated (or if not saturated, almost
saturated) so Nokia need to find a new market segment to aim their
products at. In order to classify the wants and needs of the consuming
population, companies need to gather information on the following:

· Consumer behaviour- How do customers react to advertising? Whether

they are partial to prize give-aways or free gifts? What are their
reactions to new and developed products?

· Buying patterns and sales trends- Organizations need to look at how

buying trends and patterns are affected by class, gender, religion and
region. They also need to understand how buying patterns change over
time and what markets are expanding and are worth trying to enter and
obviously which markets are contracting and companies shouldn't aim to
enter into.

· Consumer preferences- What customers are looking for in a product,

for example, style, colour, technology, amount of outlets, customer
service and promotional styles.

· Activities of competitors in the market- Nokia need to examine how

their rivals are adapting their prices and products to meet the
consumers need's, how well the rivals are selling and what marketing
strategies they are using.

Market research should supply the company with all the information
they require about consumers preferences, whether they buy certain
products, what design features are preferable and what kind of retail
outfits are most frequently used for purchasing certain products.

Sources of marketing information

The information that companies collect through market research can be

in one of two forms, either quantitative or qualitative data.

1. Quantitative data refers to data presented in numerical form,

usually figures, for example, Nokia's operating profit in the 4th
quarter of 1997 was 830 million.

2. Qualitative data is the information concerning the motives and

attitudes of consumers; for example, more people buy Nokia phones then
Sony phones because Nokia phones are more reliable.

The two main sources of market research information are primary

research (where the company has gathered the information about the
markets themselves) and secondary research (when researchers use
information that has been discovered by other companies).

Methods of collecting primary data:

· Face to face survey

· Open ended interview

· Telephone survey

· Postal surveys

· Consumer panels

· Observations

· Experiments

Methods of collecting secondary data:

Internal sources:

· Existing reports

· Distribution data

· Shopkeepers opinions

· Stock records

· Sales records

· Accounting records

External data:
· Government statistics

· Specialist business organization, for example, Mintel or Neilsons

retail audit.

· Consumer databases.

To help decide what market segment to aim at companies can also look
at the buying habits of customers. In order to make decisions about
the type of products to make, what advertising to use, promotional
tactics, pricing and packaging. Nokia will need to know about the
following:

1. The types of goods customers buy

2. How much they buy

3. How often they buy

There are also certain variables that can affect peoples buying
habits, they include:

1. Age

2. Gender

3. Area they live in

4. Religion

5. Lifestyle

6. Taste

7. Fashion and preferences.

Nokias current marketing strategy

The marketing mix

Price- The phones that Nokia produce are usually sold at high prices
(new phones can be expected to enter the market at around £200+, if
they carry the latest technology). The price of the new phones usually
decreases after an introductory period, which is usually around 2
months long. Nokia's prices are usually competitor based, in such a
way as, they try to keep their prices a bit lower then those of the
closest competitors, but not as low as the "smallest" competition as
consumers do not mind paying the extra money for the "extra quality"
they will receive with a well known brand, such as Nokia.

Place- Nokia phones are generally sold at all established mobile phone
dealerships such as Carphone Warehouse and The Link, although they are
also sold at other retailers such as Dixon's and other electrical
suppliers. The products are only sold in the electrical suppliers and
stores other then dedicated phone dealerships after the introductory
period so the phones can remain limited edition, as this will
encourage younger consumers to buy them.

Promotions- Nokia tend to promote the new technologies and mobile

devices they create using one big advertising campaign that focuses on
a singular technology instead of each individual handset so they can
appeal to a lot of different markets with one campaign.

Product- Nokia phones tend to include all the latest technology and a
lot of the consumers favourite aspects such as text messaging and
games like Snake and Memory. When the phones came out they were big
and bulky and quite unattractive but now they are all quite sleek and
stylish with phones now getting small enough to fit in the palm of
your hand as standard. Most of the phones produced nowadays have
accessories that consumers must buy with them (carry cases, hands free
kits and in-car chargers) these generate Nokia a lot of profit, as
they are very high priced.

Nokia's marketing mix has worked very well until recently as the
market they are aiming at has become more and more saturated and after
looking at all the mobile phone sales figures, it looks as if the
phone companies can aim at this same youth market for about another 2
years until they need to change, but they should change sooner so they
can start making a bigger profit and get a head start on the
competition who will also have to change the market they are aiming
at. Nokia's current promotional strategy is working very well as they
are able to "talk to" a large number of consumers in different markets
rather then the niche markets the old promotional strategies where
restricted to.

Market segmentation

In order to plan their product Nokia must look at what area of the
market they want to aim the products at, as the current youth market
is more or less saturated Nokia will have to research into a new
market, I suggest the 55+ market as they will have lots of disposable
income and my research shows that most people aged 55+ do not
currently own a mobile device and could be persuaded to buy one by
certain promotions and a good advertising campaign, also the drop in
call prices should attract a lot of people who may have previously
been hesitant due the high costs.

Below is a table showing the population in terms of social grouping of

the U.K in 1999:

Socio-economic group

% Of population

A-Upper class

2.8%

B- Middle class

18.6%

C1- Lower middle class

27.5%

C2- Skilled working class

22.1%

D- Working class

17.6%

E-Low income earners

11.4%

I think that Nokia should aim their products at the socio-economic

group B (middle class) event though they aren't the biggest group they
are the group that is most likely to spend their money on a mobile
telephone as my questionnaire results showed.

Investigating consumer trends

As the main aim of market research is to develop an idea of market

opportunities, an important part of this research must be to track
sales in order to identify those products, which are likely to
experience a rise in sales and to look at those in which the sales are
likely to fall.

Changes in customer demand, which continue in the same direction for

more then 2 years, show a long-term trend or saturation is occurring
within the market. This is definitely a bad market for businesses to
be in (the mobile phone market is in the first year of a continuing
trend) and the company must consider changing their market or product
to a market or product that is currently showing a continuing upwards
trend.

The marketing mix

-----------------

The marketing mix refers to the combination of elements within a

companies marketing strategy, these are designed to give the customer
what they want and in the long term are designed to maximise profits.
The marketing mix is based around the idea of the 4 P's:

Product-The product is the centre of the marketing mix and the other
three P's are based around it. Consumers purchase goods and services
for a variety of individual reasons and a company must be aware of all
of these when selling a product (that is why they conduct market
research).

Price-Is a key factor in the selling of a product, and is usually the

one that is open to the most change based on different pricing
strategies, for example, competitor based, penetration or skimming.
The three main factors affecting the amount charged for a product or
service, are; the cost of production, customer demand and competition.

Place-This refers to the chosen outlets for a product or service, for

a product to be very successful it must be easy to access, Mobile
phones are very easy to access nowadays, they are sold in
supermarkets, specialised outlets (either by network or brand) and all
major department stores.

Promotion-This involves providing information to the customer over a

variety of media platforms, using radio, television and print
advertising as well as using other promotional tools such as "money
off deals" and "free giveaways".

The stages of marketing

-----------------------

1. Market and product research:

* Finding out what your customers want

* Technical research

2. Product launch

* Test market

* Pricing

* Branding

* Packaging

3. Product promotion

* Advertising

* Merchandising

* Publicity and P.R

* Sales promotion

4. Sales and distribution

* Managing the sales force

* Type and amount of sales outlets

* Local, national or international sales?

* Transportation of goods

5. Monitoring and analysing the sales

* Meeting customer satisfaction?

* Does the product need modifying or replacing?

* Is a profit being made?

* Is customer service satisfactory?

* Have the sales targets been met?

* Is the promotion and distribution policy effective?

If a company gets to section 5 of the marketing cycle and a

substantial amount of the goals haven't been met then they will have
to consider re-launching the product or taking it out of the market
completely and placing it in a different market or changing it to meet
the needs of the current market.

Product life cycle- Mobile phones

---------------------------------

Introduction

When mobile phones where first introduced they were low quality
technology (bad reception, poor reliability and had a short battery
life), high priced (around £100 for a basic model) and consumers had
to be persuaded to buy mobile telephones, as they were not yet
established as a necessity. When products are first released,
companies can expect high promotion fee's as the public are probably
not yet familiar with the product.

Also when mobile phones were first released they were bulky and hard
to use, as product design and development are a key figure in success,
Nokia had to design phones that were smaller and simpler for consumers
to use. As people had paid a lot for earlier, more primitive products
they were obviously not going to pay the same high prices for later
products so Nokia had to develop phones that could be sold for less
and would last longer, this is where companies can expect to pay high
production costs.

When Mobile phones were first introduced they were not such a popular
item and there weren't as many competing companies in the market. So
Nokia and a few other companies (Sony and Panasonic) could charge
higher prices then they would in the highly competitive market that
they are in today, as there aren't so many companies competing for
market share.

Growth
In the growth stage of the product life cycle companies can expect
advertising and promotional costs to be as high as in the introduction
stage as more companies will enter the market and competition for
market share will increase. Advertising is a proven way of promoting
technological advances within a market (as with the new company 3
promoting their new technology that allows people to watch video's on
their handsets) so higher advertising costs can be expected as the
technologies available get better and more advanced.

The growth stage is also the stage that companies will (hopefully)
start to make a profit, based on good market research and a strong
sense of branding and a successful marketing scheme. In the growth
stage profit isn't the only thing that will start to develop, as there
are more companies in the market it is obvious that more technology
will be developed and that will drive prices higher, this is how
companies start to make profits (because consumers have accepted the
product, in Nokia's case, mobile phones, as a necessity they will be
more willing to pay higher prices for new phones that emerge in the
market).

Maturity

When a product enters the maturity stage, advertising and promotional

prices should decrease, as consumers are more aware of the product and
will research new additions to the market instead of being told what
is new (this is because phones have been promoted as fashion items and
will be desired by the consumers). At this point in the product life
cycle the main producers (Nokia, Siemens, Sony etc) should be clear as
they will have the most money to develop and promote their phones
while the other, less popular producers of phones (Panasonic, Toplux
and NEC) will be struggling to survive and will drop out of the market
either here or they will seriously struggle in the next stage,
decline.

Decline

This is the stage that Mobile phones have entered (Nokia had recorded
their first drop in sales earlier this year), and all the remaining
companies are trying to re-launch their products by either developing
their products or entering new markets. At this point phone sales will
be decreasing and promotion and advertising costs will start to rise
again as companies fight for the remaining market share and struggle
to make a profit.
Market research
Nokia's business strategy (statement taken from www.nokia.com)

"Our business objective is to strengthen our position as a leading

communications systems and products provider. Our strategic intent, as
the trusted brand, is to create personalised communication technology
that enables people to shape their own mobile world.

Nokia are currently creating innovative technology to allow people to

access Internet applications, devices and services instantly,
irrespective of time or place. Achieving interoperability of network
environments, terminals and mobile services is a key part of our
intent.

Nokia need to capitalise on our leadership role by continuing to

target and enter segments of the communications market that we believe
will experience rapid growth or grow faster then the industry as a
whole.

By expanding into these segments during the initial stages of their

development, Nokia have established themselves as one of the worlds
leading player's in wireless communications and significantly
influenced the way in which voice and other services have been
transferred to a wireless, mobile environment.

As demand for wireless access to an increasing range of services

accelerates, Nokia are planning to lead the development and
commercialisation of the higher capacity networks and systems required
to make wireless content more accessible and rewarding to the end
user. In the process, we plan to offer our customers unprecedented
choice, speed and value.

Nokia has a history of contributing to the development of new

technologies, products and systems for mobile communications. Recent
examples include: the commitment to the open mobile alliance; the
co-development of the new operating system for the future terminals
with symbian; short-range wireless connectivity with bluetooth; the
development of wireless LANs for enabling local mobility in fixed
LANs; and MMS for enabling mobile multimedia messaging.

In addition, Nokia have continued to be active in IP convergence. They

have established alliances with other service providers in order to
make mobile access services easier for the end user.

Market segmentation
Market segmentation refers to the different areas of the population
that companies can aim their products towards. The market segment that
Nokia has chosen to aim is the youth market focusing on students aimed
13-19 as market research has shown that some of the youth market are
receiving large amounts of pocket money and most have no real
commitments to spend it on and that means they have lots of disposable
income and will be able to spend a lot money on new mobile phones.

As a big company Nokia are able to do a lot of promoting and

advertising that smaller, less successful companies, may not be able
to afford, such as television advertising and sponsoring lots of
events that will be viewed or heard by large amounts of people in
their chosen market segment (events such as music festivals and music
awards are a goldmine for companies as they are viewed by millions of
people worldwide). Adverts such as television and print adverts will
be put into certain areas so that they can attract their chosen market
segment, Nokia tend to put a lot of their print adverts in men's
magazines such as FHM and Loaded so they can appeal to all of their
readers instead of a smaller percentage of the readers they would
attract in magazines such as Lifestyle and Good Housekeeping. I think
Nokia's way of promoting is very good as they can appeal to mass
markets and large amounts of people in their chosen market
segmentation with certain advertisement's and with sponsoring large
events like the ones I have previously mentioned.

Pricing strategy

Nokia's current pricing strategy is based on 2 main theories:

1. Penetration pricing- although this strategy is usually for

companies that are trying to gain instant market share in a new
market, companies who are already well known in the market still
do it with new products that carry new technologies so they can
take more market share form their competitors.

2. Competitor based pricing- this is used when there is a lot of

competition in the market and a company is looking to take another
companies market share by offering the same or similar products
for a lower price, this happens a lot in the communications market
and this strategy is used by every mobile phone producing company
that is still in business.

Nokia's pricing strategy has proven very effective, this is down to

the fact that they first sell their products for high prices and have
very limited sales but make big profits on each sale, they then lower
the price of their product and have lots more sales but they make less
profit, but they still make a large profit due to the amount of sales,
the other reason that they are so successful is that they offer high
quality products and they sell them for the same price and sometimes
even lower prices then the competition and have now built up the
highest market share, they currently have 37.2% of the mobile phone
market share and are the biggest selling mobile phone company in the
world.

Branding

Nokia phones are seen as being of the highest quality and this is
reflected in their massive sales figures. The fact that they are seen
to be such high quality products is partly down to successful
branding, they have a highly recognisable packaging style and the
style of their handsets is similar in every line of production with
the company name printed just above the screen and just below the
earpiece. The fact that Nokia operate such an aggressive marketing
strategy has elevated them above the competition as consumers are
fooled into believing that branded products are "better" then
un-branded products or products produced by lesser-known brands such
as One Tel and other lesser-known phone producers in the market.