Social class remains a key demand driver on both a micro and macro level.
The perceptual map of the global cell phone market based on features and price is as follows:
The first point of segmentation is with respect to behavior, in particular the benefits sought and usage rate. The demand in the developed world for smartphones has been driven by demand for new features. Younger consumers are heavy users of text messaging and this has driven demand for smartphones (IDC, 2010). Growth of the Blackberry is related to the need for quality communications application while the growth of the iPhone has derived from consumer interest in gimmicky applications. There is room, then, for segmentation with respect to behavior because the feature emphasis drives demand for particular devices. Users seeking only basic features -- phone, text, camera -- will be satisfied with a traditional mobile phone.
The second point of segmentation is with respect to geographic segmentation, which ties directly into the social class aspect of demographic segmentation. Many users consider a mobile phone to be a necessity -- particularly in the developing world where landline infrastructure can be poor. However, there is a strong degree of price sensitivity in developing markets, where many consumers simply cannot afford feature-driven smartphones. In these markets, basic functionality at a low price is the key demand driver, rather than innovative features.
The third point of segmentation is within markets. In terms of demographics, within the developed world there are a number of breakdowns within the market. Each major manufacturer makes dozens of different models, each designed to appeal to specific segments of the market. Brightly colored phones, for example, may appeal to teenagers, or young adult females. Phones can be designed to fit easier in purses, or in pockets, depending if the target market of that model is men or women.
The fourth point of segmentation is psychographic. Psychographic segmentation relates to interests, attitudes and values. There are a few different types of mobile phone users. For some, the phone is viewed as an essential tool. These users may choose either a traditional phone or a smart phone depending on the tools that they need. Others view it as a multipurpose communications essential -- phone, text, camera and Internet access included. A third group views the phone as a toy, filled with mindless features with which to waste time -- iPhone users for example.
The leading company in the industry is Nokia. The Finnish company has succeeded by developing and launching a wide number of different phones with different features at different prices points -- a saturation strategy. Nokia presently occupies a portion of the market that is shrinking, given its relative lack of presence in smartphones and its lack of presence in the low end of the market. Nokia's product and price mix, therefore, is inappropriate in a market that is increasingly becoming segmented in ways that are incongruous with its current product line. It is recommended therefore that Nokia develop a smartphone, but that the company prices this phone at a point lower than the Blackberry or the iPhone, the two market leaders. The Nokia smartphone should receive the same ubiquitous marketing and distribution that other Nokia products receive. A lower-end smart phone not only has potential in the developed world, but is more likely to succeed in the developing world, where the degree of price sensitivity is higher. In short, Nokia should adopt a penetration pricing strategy. This phone should be aggressively promoted through Nokia's usual channels....
It should be backed by an expensive campaign, as this company generally not only is accustomed to doing considerable volume but it is competing against established players. Nokia has one of the world's best brands, so a penetration pricing strategy, saturation distribution and aggressive marketing campaign should allow the Finns the opportunity to build a leading market share in smartphones.
For Research in Motion, the focus should be on developing a greater breadth of models. The company has become established as a high-end producer of smart phones. However, smart phones are going mainstream. RIM's strong brand equity will help it develop a product line that is more segmented than the existing product line. RIM should expand distribution, particularly to the developing world where the new lower priced models have a strong chance at success. In addition, having a broader product line will allow the company to more accurately target specific segments of the market, in contrast to main competitor Apple which has a "one-size-fits-all-whether-you-like-it-or-not" approach to market segmentation.
Huawei is a Chinese producer of low end phones. As the traditional phone market becomes increasingly commoditized, all companies will be able to build feature-rich phones at a low cost. Huawei, by virtue of its Chinese cost structure, strong government support and vast domestic market, should be able to focus on a cost leadership strategy in order build out market share in the traditional mobile phone market. The company should keep its product line limited to low-end products, and price them below the competition. Huawei will also need to increase its global distribution. The company should retain its minimalistic marketing strategy and let its prices speak for themselves. In doing this, Huawei can increase its market share in traditional phones using its proprietary competitive advantages.
The mobile phone industry has two main segments -- smartphones and traditional phones. The former is a growth industry with the two main players being RIM and Apple; the latter is a mature industry that is dominated by Korean and Scandinavian firms and Motorola. Smartphones are in the growth phase with the strong possibility of building out to 100% market penetration in the next decade or so. As a result, all firms serious about maintaining a presence in the mobile phone industry need to build out a strategy to enter and build share in the smartphone market. The traditional phone market is headed towards commoditization, which means the firms best suited for that market are those such as Huawei that can effectively adopt a cost leadership strategy.
IDC. (2010). Mobile phone recovery continues with nearly 22% growth in the first quarter. IDC. Retrieved May 21, 2010 from http://www.idc.com/getdoc.jsp?sessionId=&containerId=prUS22322210&sessionId=C2EB017778B81D90DFB6B541A0F0D3B6
ITU. (2010). Global uptake of ICTs increasing, prices falling. International Telecommunications Union. Retrieved May 21, 2010 from http://www.itu.int/newsroom/press_releases/2010/08.html
Parkes, S. & Teltscher, S. (2010). ITU sees 5 billion mobile subscriptions globally in 2010. International Telecommunications Union. Retrieved May 21, 2010 from http://www.itu.int/net/pressoffice/press_releases/2010/06.aspx
McCain, R. (no date). Monopolistic competition. Drexel University. Retrieved May 22, 2010 from http://faculty.lebow.drexel.edu/McCainR//top/Prin/txt/Imch/MC1.html
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