In 1995 when cellphone services started in India, the Nokia brandname had zero recall. Yet ever since, it has been this Finnish brand that has dominated the legal handset market in India with a share of more than 50 per cent, a point competitors and analysts concede (market shares are estimates since official statistics are not available).
This performance is mirrored in the grey market, which accounts for about 55 per cent of the total handset market in India.
The other remarkable point about Nokia's dominance is that it has been been established in spite of the fact that it does not offer the cheapest range of handsets. This in a market that is reputed to be ultra price-sensitive.
As a result of the brand's success in India, the country has emerged as one of the now-struggling $ 36 billion Finnish parent's most significant markets, along with Russia and China.
It is easy to assume that Nokia achieved its dominance by exploiting a first-mover advantage. This is only partly true. It is also fair to say that this ringing endorsement of the brand in one of the world's fastest-growing markets was achieved against formidable odds.
To start with, Nokia's potential competitors at the time "" Sony, Motorola, Ericsson and Siemens "" were all powerful global brandnames that had a strong incumbent advantage through their presence in the country's consumer electronics or engineering businesses.
For another, Nokia was entering a new market in which policies hardly encouraged mass usage. Import tariffs at the time were high (27 per cent plus countervailing duty), usage charges for services astronomical (at Rs 16 a minute) and consumers displayed a low degree of techno-readiness.
In the mid-1990s, then, the challenge, was two-fold. One was establishing a presence against strong global brandnames. The other was to actually create a market for mobile phones. So what did Nokia do? Its principle strategy was to stay focused on the basics: product and distribution.
Establishing 'caller ID'
The fact that Nokia was starting from a position of weakness actually proved to be an advantage. It knew it had to work harder at establishing itself a full year before cellular services began to give it a head-start over competitors.
Since it had "zero brand awareness" as Sanjeev Sharma, Managing Director, Nokia Customer and Market Operations, India, puts it, Nokia focused on building a credentials campaign for its products through print and TV campaigns.
At the time, the conglomerate had not become the world's largest mobile phone manufacturer "" a former paper manufacturer, it took a decision to focus on mobile telephony only in the 1990s. But as Europe's largest, it had a reasonably strong base from which to start.
The print advertisements spoke about Nokia's status, its global R&D spends and the global awards the company had won. "We had to provide consumers with the assurance that they were buying a leading brand," Sharma explains.
Establishing good credibility for its products was as crucial and, in India at least, this hinged on introducing products that were user-friendly. Global surveys around the time showed that users placed the most value on three attributes. In order of importance, they were (1) ease of use; (2) design; and (3) advanced technology.
These findings formed the basis for the introduction of two models, the 2010 and 2110, which were unveiled when the first mobile service was launched in Kolkata under what was then Modi Telstra (now Hutch).
Both products supported Caller Line Identification that included displaying the name of the caller, which was a novel feature at the time. (The model numbers indicate psychographic segments. For instance, models starting with, say, 7 were aimed at the "fashion category.)
The 2110, in fact, became an icon product with its large display screen and classic user interface facilities designed to play a significant role in dispelling the average consumer's techno-aversion. "Nokia's user interface did to mobile telephony what Windows did to computing," says Sharma.
Acknowledges telecoms consultant Mahesh Uppal, "Nokia phones are the most user-friendly. In fact, I don't think there is an element of hard-selling "" it's just that the products have caught the customer's eye."
India calling
Even as the market developed and grew with steady reduction in call rates and import duties, however, Nokia kept its efforts strongly focused on product attributes instead of taking the more evolutionary route of brand building.
This decision was driven by the fact that despite the steady reduction in call rates, cellphone penetration in India was a low 3 per cent, an indication that techno-readiness remained an issue.
Central to its focus on user-friendliness was localisation (components of the instruments are manufactured in different locations and assembled and shipped in Hong Kong).
The first initiative here was simple, but with strong psychological allusions: an Indian ring tone, which was incorporated in a special edition of the 5110 model.
Launched on August 15, 1998, India's 51st year of Independence, the 5110 offered as a ring tone Pandit Ravi Shankar's robustly patriotic Sare Jahaan Se Acchha.
The product was positioned as a tribute to India and the ring was adapted by Shankar. The introductory offer included, for the first time, interchangeable coloured covers.
The 5110 became one of Nokia's most popular handsets, and enjoyed a life-span of nearly three years "" much above the one to one-and-a -half years life that handsets usually have.
The performance of the 5110 encouraged Nokia to focus on more feature-specific localisation. The 3210 model, for instance, introduced in 1999, offered user interface menu in local languages.
At the same time, Nokia tied up with Sony Music to offer the top 20 Indian and international hit songs as ring tones "" this included songs by Latino star Ricky Martin and Venga Boys as well as singles from the film Kuchh Kuchh Hota Hai.
Accessing these ring tones was simplified substantially by giving users a sequence of keys to press for each tune. By 2000, once the 5110 was phased out, the 3210 had become Nokia's largest selling product.
By 2002, the grey market starting shrinking dramatically following sharp cuts in import duties in that year's Budget "" from 27 to 17 per cent "" and market penetration more than doubled to 7 per cent. With its firmly established brand image of user-friendliness and a wide distribution network (discussed later in this article), Nokia was in a strong position to dominate the market.
Says Pankaj Mohindroo, national president, Indian Cellular Association, "Nokia answered the call for focusing on Indian tastes through the Made for India product line."
The company continued to consolidate its position by introducing more localised elements in its handsets. The 3610, for instance, allowed users to send SMSes in Hindi.
To reinforce the "global and local" message, Nokia also launched a new advertising campaign entitled Made For India, designed by agency Bates. The campaign, which broke in March 2002, highlighted the attributes and performance of a Nokia handset in quintessentially Indian situations. It was a logical move.
As Mahindroo explains, "After establishing itself as a brand the world prefers, Nokia is trying to establish itself as an Indian player, too."
Localisation efforts were now oriented towards consumer needs and were the outcome of consumer research. The result of one such exercise resulted in the launch, in August 2003, of the Nokia 1100, which offers a dust-free keypad, a built-in torch and anti-slip grip, and was priced at under Rs 5,000. The 1100 is now the third among Nokia's top three best-sellers, the other two being the 3315 and 3310.
Wide area network
If the focus on product attributes enabled Nokia to establish strong brand recall among consumers, its ability to capitalise on the boom in handset sales from 2002 onwards was as much the result of its distribution strategy, modelled on that of the larger FMCG firms.
At its apex is the national distributor, which is HCL Infosystems for GSM handsets (CDMA handsets are still largely distributed through service providers). Under the national distributor are redistributing stockists who, in turn, supply handsets to over 10,000 outlets countrywide.
The outlets include over 200 Nokia Priority Dealers (exclusive or shops-in-shop) who participate in the corporation's brand programmes.
As a result of this saturation coverage, Nokia today is present in every town where mobile services are available, and its distribution model is being emulated by competitors.
All of these will be reinforced as growth in the cellular services market accelerates. Today, the market for new subscriptions is growing at 2 million a month, thanks to tariffs that have dropped steeply.
And with handset prices having fallen 45 to 50 per cent since 1995, after reductions in import duties from 27 to 5 per cent and sales tax from 16 to 4 per cent, Nokia intends to saturate the market over the next few months.
Against the 19 GSM and three CDMA models that are currently available, Nokia plans to launch over 20 new products in India over the next year, including seven CDMA handsets.
Recharging for growth
The question now is how far Nokia will be able to consolidate its leadership. Mahindroo suggests the market is growing so fast that there is space for everybody.
"Nokia will have to take a position in trying to grow the market itself. In handsets, people are not competing against each other, but are trying to make customers out of those who don't own mobile phones yet," he says.
It is true, however, that the nature of the market is changing. For one, competition at the lower end of the market is building up with Chinese mobile manufacturers trying to enter.
For another, as Uppal points out, "Phones are becoming an accessory like pens and umbrellas. People are not that willing to pay a premium for extra features." He suggests Nokia will have to make itself felt at the lower end of the market.
Sharma, however, says that Nokia sees its challenge as expanding the size of the addressable market, which is a particular issue in India given the low average revenue per user (ARPU) of Rs 300.
The idea, he says, is to work with operators to provide solutions to lower the overall costs for consumers "" including that of handsets "" and thus expand the market.
For instance, one of the solutions Nokia is offering is AMR (Adaptive Multi Rate) technology that supports a higher number of subscribers on the same spectrum within the network.
The other element of Nokia's strategy going forward is to bring in new value-added services and convergence technologies to help operators increase ARPUs from existing subscribers. For Nokia, growth is clearly a function of how fast it can expand the market it dominates.
(Additional reporting by Prerna Raturi)
