China, India, USA: 3 Largest Phone Markets vs Nokia via HMD. Why Nokia 6 will not matter in USA but will rule in India: Marketing Fundamentals 101

Nokia's handset return story via HMD is a marketing challenge. How HMD is handling it, tells us they know their marketing and are executing a strategy that should please all marketing professors. HMD understand about a segmented offering, about regional differentiation, about positioning against competition, about brand strengths and weaknesses, about market opportunities ('low hanging fruit') and most of all in handsets of course they know about retail distribution. This is the 'sensible' analysis of the Nokia 6, the Nokia 5 and Nokia 3.

Let me add this provocative thought for you. Apple gave us the iPhone SE as a cheap lousy low-cost do-over of old tech, to repurpose an old obsolescent iPhone for India, that is now also ridiculously overpriced for its lame specs. Nokia used the same factory and Nokia did what Steve Jobs would have done. The Nokia 6 is how Steve Jobs would have released his 'cheap India smartphone'. It is an EXCELLENT smartphone at THAT PRICE point. Not a lousy old hand-me-down. Steve Jobs would not have released the iPhone SE until it was just about as good as the Nokia 6 is now. (and OMG have you compared the two side-by-side, its a disgrace! The SE is instantly outclassed while it costs 50% more). And he'd then have priced it where the SE is priced now, and it would be a global superhit iPhone too. Understand the market and the targeting. This article is about marketing precision.

This article explains why its foolish to hope these phones will be 'Coming to America'. This article explains why its moronic to talk about these phones being the way HMD and Nokia are 'taking on the iPhone' or the Samsung Galaxy top-end premium smartphones from Korea either. These phones were DESIGNED not to take on the iPhone and Galaxy (such smartphones will come, the first is likely branded Nokia 8. We are likely to see the first true flagship released later this year). It is as silly as claiming in the Vietnam War the North Vietnamese were fighting a sea-battle against the US Navy and its aircraft carriers (like how Japan had tried three decades prior). The North Vietnamese knew their enemy was strongest at the sea so they DIDN'T go fight where the enemy is strongest and you are weakest. You do the opposite. You fight where THEY are weakest and YOU are strongest. This was not in the air where the US Air Force had overwhelming air superiority. It was not out in the open fields where American tanks could kill you at long distances. No, the place where Vietnam was strongest and USA the weakest, was in the jungle. The local Vietnamese soldiers were all trained and equipped to fight in a jungle war (the US was not) and all Vietnamese weapons were optimized for that type of combat (the American rifle which is good in many ways, does not shoot through trees; the Vietnamese rifle (from Russia) does shoot through trees - a vital distinction in jungle warfare; for just one example).

That is the concept of 'smart positioning'. To know where you are strong and where your enemy is weak.So lets take the Nokia comeback case, and view it via the three largest markets for mobile phones - China, India and the USA (in that order, yes USA has fallen to 3rd largest phone market). How will HMD play these three markets? And what is the logic of the Android smartphones, Nokia 6, Nokia 5 and Nokia 3? Oh, and in THIS context, what is the deal with the 3310? Lets do the 'serious' analysis of the HMD comeback and not the silly tech writing you've been reading from almost all other tech writers this week. Please remember, only this blog called correctly EVERY step of the Nokia collapse 2011-2016 including that Nokia would be sold to Microsoft AND that Microsoft could not make that venture work either.

FOUR FACTORS FOR THREE MARKETS

I'm going to build a very simple four-factor model on the 4 issues that currently matter the most for the Nokia brand return in the actual commercial success in the market. When HMD/Nokia considered its initial launch country markets, and where to put its first design and launch marketing efforts, it had to prioritize. It cannot do everything. It cannot try to win everywhere. But some areas are far more promising than others. So first. Are the handsets sold with a subsidy (hiding the true costs into two-year contracts) or without subsidy. Nokia has traditionally sold best in markets with no subsidies where consumers pay full price and know exactly what they are buying. Apple by contrast, sells its iPhones best in markets that are heavily subsidised so consumers do not get fair comparisons on a real-price basis (like the USA and Japan).

HMD could certainly start to sell also in countries that have heavy carrier subsidies to handsets, but those sales cycles will be very long, the carriers will demand all sorts of concessions or exclusive deals (remember how Apple started with the iPhone? Nearly all its early markets were on an ‘exclusive network’ basis, in the USA you could only get an iPhone on the AT&T network for example). The sales effort would take a lot of effort and time, and yield a modest return, if the whole process turns out well in the end. (This is a risk. It may go belly-up too. Remember the Microsoft Kin phones? Carriers pulled their deals only weeks before launch, destroying Microsoft). But at the start, HMD is wise to steer away from heavily-subsidised markets and their demanding carriers/operators.

The second consideration is competition. In most major markets there are some local brands (often only badge-engineered locally-branded Chinese-made phones). But in some markets there are STRONG international brands. South Korea is a perfect example. It would be a horribly costly attempt to go try to invade the South Korean domestic phone market in Samsung’s and LG’s backyard, not to mention all the domestic needs (did you know the Koreans even have their own alphabet, its different writing from the Chinese writing etc). So a market like the USA will have strong domestic competition (well, Apple iPhone is all thats left haha, but as brands while Motorola is now owned by Lenovo of China, it still is seen as an American domestic brand by many buyers). Similarly China has a whole slew of powerful domestic brands that are already major handset powers internationally - Huawei, ZTE, Oppo, Vivo, TCL-Alcatel, Xiaomi etc.

In India there are also domestic brands, led by Micromax and Karbonn but the domestic India brands are not that powerful and are not a major force internationally (at least not yet). To show their relative power, Samsung easily dominates handset sales (smartphones and dumphones) in India while Samsung is only a mid-tier player in China. The local competition is WEAKER in India than in China or the USA.

The third consideration is migration rate. How mature is that market for smartphones? In the USA four out of five phones sold last year were smartphones. In China its three out of four. But in India last year most new phones sold were not smartphones. Dumbphones still outsold smartphones by a two-to-one ratio. So if you want to sell a smartphone in China or the USA today, odds are, the buyer will be replacing an existing smartphone and upgrading. But in India the odds are, that the smartphone buyer is a first-time-smartphone-buyer. THAT is a remarkable difference in the market opportunity and presents opportunity to target a marketing offering.

The fourth and final consideration for our simple model is Nokia’s own brand image in that market. In the US market, Nokia was never a major player. Because of bad relations with the carriers that lasted more than a decade, the carriers regularly refused to sell Nokia’s top phones, so Nokia’s brand in the eyes of most American phone buyers is that of a discount brand. A cheap plastic colorful ‘burner phone’ you could buy for a kid, or one that a drug dealer might use and dispose, throw away. The Nokia brand in the US phone market is remarkably weak - and that of a cheap phone.

In China Nokia had a stellar reputation and the brand was powerful. Nokia ruled atop the Chinese smartphone market against the whole lineup of domestic smartphone makers - up to idiot CEO Elop’s market suicide moves of 2011. The last six years have seen a disaster following a catastrophe following a calamity by Nokia in the world’s largest phone market. Yet its brand still endures and there is a ton of love for the Nokia brand. However, within the smartphone side of the phone business, Nokia’s brand now is stuck in the crowded mid-field. It does not stand atop the race like it did seven years ago.

Contrast to India. In India until recently Nokia was not just the most valuable tech brand (obviously most valuable phone brand, far ahead of Apple iPhone or Samsung Galaxy) it was the most valuable brand. Period. Ahead of everybody and I mean literally everybody. Nokia ahead of Mercedes Benz and Rolls Royce and IBM and Rolex and Nike. The most valuable brand of India. I think it was two years ago that Nokia brand dropped from the top to second place haha...

The massive damage of the Lumia-Windows saga at Nokia in the past six years did also damage Nokia in India - but remember, even last year two thirds of new phones sold in India were dumbphones/featurephones. Not smartphones. So the damage of Nokia's smartphone fumbles had only minor impact in India (vs Europe or China for example). And Nokia had plenty to offer consistently in that space - including the very advanced featurephones called the Asha series (which outsold the Lumia series smartphones globally in the quarters that these two rival phones were sold side-by-side by Nokia). Whatever damage Elop was doing to Nokia brand, that was least-felt in India (of these 3 big markets). The Nokia brand WAS the strongest already before, in India, of these 3 markets, and in the recent turmult, the Nokia brand has RETAINED its brand value the most - in .. India.

THREE MARKETS AND HMD

So the USA. A market where phones are sold with subsidy (bad). Where local phone brands are strong (bad). Where the migration rate to smartphones is far (bad). And where Nokia brand is weakest (bad). That to me is a bad-bad-bad-bad choice.

Then there is China, where phones are not sold with subsidy (good). Where local phone rivals are strong (bad). Where the migration rate to smartphones is also quite far (bad). And Nokia brand is still pretty strong (good). This is a far better market than the USA, for HMD. Its a good-bad-bad-good market.

Compare to India. Where phones are not sold with subsidy (good). Where the local rivals are weak (good). Where the migration rate to smartphones is very early (good). And Nokia brand is very strong (good). This is obviously the optimal market for HMD and Nokia its a good-good-good-good market!

Understand this point. HMD has to make choices. It cannot try to fight everywhere. It has to prioritize. There are 3 large handset markets. HMD could go to the one country that is bad-bad-bad-bad (the USA). That would be supremely dumb if better choices exist. HMD could go to China, which is good-bad-bad-good. That would be better. So HMD already released the Nokia 6 for sale in China. But the obvious market with a gaping huge opportunity for HMD is India that is good-good-good-good. This is why the Nokia 6, Nokia 5 and Nokia 3 seem to be perfectly designed - FOR INDIA. And in particular, the 3310, is not intended as a ‘retro phone’ for Americans (or Europeans or Australians or Singaporeans) haha. No, it is intended to help WIN IN INDIA. Not China. Win in INDIA.


COMPARING NOKIA IN THE THREE LARGEST MARKETS
Item . . . . . . . . . USA . . . . . . . . . China . . . . . . . . India
Subsidies . . . . . yes . . . . . . . . . . no . . . . . . . . . . no
Competition . . . strong . . . . . . . . strong . . . . . . . weak
Migration . . . . . 80% . . . . . . . . . . 75% . . . . . . . . 33%
Nokia brand . . . weak . . . . . . . . . good . . . . . . . . strong
Source: TomiAhonen Consulting analysis 3 March 2017

This table may be freely shared


That explains EXACTLY why we have a Nokia 6, a Nokia 5 and a Nokia 3. It also explains WHY the 3310 does not have 3G and is only a 2G phone. Most of India is still 2G. HMD is targeting INDIA and countries that are similar to India (from HMD’s point of view). So markets where there are no handset subsidies, where the local competition is not strong, where the migration rate to smarthpones is not yet strong and the Nokia brand has historically a good position. So markets like Nigeria, Egypt, Pakistan, Indonesia, Brazil, Russia...

LARGE SCREEN, CAMERA, LUXURY

Nokia (and HMD) understand the mobile consumer GLOBALLY and by various customer segments better than anybody else. They have more consumer surveys and studies than anyone else on the planet. They have studied to minute detail everything about mobile. And currently two things govern phones. The killer deciding factor is screen size. Not screen pixel density and clarity. Screen size decides. This is even more true of first-time buyers of smartphones. For many of them their first smartphone is their ‘poor man’s personal computer’. It is their ‘choice’ when they also briefly considered buying a tablet. They will often want a phablet screen so the smartphone can behave like a mini-tablet PC.

The screen is the magical bit of the phone. It shows our videos, it shows the pictures, it acts as the mirror when using the selfie camera. It displays websites and you can play videogames on it. So Nokia knows this. They put giant screens on their phones and made sure they are BRIGHT big screens, they look good. Because those phones will then be compared, side-by-side in a phone store. These 3 smartphones, Nokia 6, Nokia 5 and Nokia 3 - were designed to WIN INSIDE THE STORE. How can you illustrate a ‘faster CPU’? That takes a ton of effort by the sales dude or dudette and the final outcome might not even be noticable by the buyer... a lot of effort for no gain. But a larger screen is easy to illustrate. And a brighter screen seems better.

Then there is the camera. Nokia knows the cameraphone. Nokia has won the cameraphone-of-the-year awards more years than all other phone makers combined. And from Nokia’s own research, Nokia (and HMD) know that for Nokia loyal brand buyers - they rate the camera consistently as one of their top priorities when buying a new phone. If you remember early iPhones (back when they were haha 2mp and 3mp cameras) many iPhone buyers snobbishly said, I don’t care about the camera because I own a digital camera that I use instead. I can never imagine using a smartphone as my main camera. Hahahahahahahahaha

Nokia knew better. Which is why Nokia’s flagships have consistently rated the best cameras in the industry. Now these three smartphones are NOT flagship-class phones. Nokia often brands its top phones with Carl Zeiss optics and even the Nokia 6 does not include Zeiss branding. These are not the best that HMD can do in cameras. But in this CLASS of phones (costing less than 300 US dollars in unsubsidised price) these are absolute top-of-class cameras including a huge 8mp selfie camera with wide-angle lens.

DON'T FIGHT IN THE OCEAN - FIGHT IN THE JUNGLE INSTEAD

The Nokia 6, Nokia 5 and Nokia 3 were not designed to take on the Samsung Galaxy and the Apple iPhone. They were not designed to win in the US market (or Europe). They were not even designed to win in China. They were designed to win where HMD has its best chances - in India (and similar markets). The world average price of smartphones is 254 dollars (source TomiAhonen Phone Book 2016). 26% of all phones sold last year were in the mid-price bracket (Source TomiAhonen Phone Book 2016) where these three new Nokia Android smartphones all are positioned. That market is the size of 520 million new phones sold this year. And Apple does not sell a smartphone in this price range. Samsung’s smartphones sold in the under 300 dollar range are decidedly plasticky-cheap end versions where Samsung of course prefers its customers migrate to buy top-end Galaxies instead.

Now here is the FAR more detailed part. How is India domestic phone market vs the world? Haha, check out this detail. The world average price for all phones (smart and dumb) is 193 dollars last year. But for India the domestic phone market average phone price (weighted average of dumb and smart phones sold) is .. 75 dollars! (again yes, data courtesy of the TomiAhonen Phone Book 2016). Yes, that is the India phone market. That is what an average India phone buyer an afford. India is 120 dollars UNDER the world average. There is no way Apple sells 700 dollar iPhones in any meaningful amount in India. Now consider the Nokia 3. The world average smartphone price is 254 dollars. If we take 120 dollars off that price then roughly speaking India average smartphone price today is 134 dollars. Now consider the Nokia 6, priced at 299 dollars. The Nokia 5 at 249 dollars and the Nokia 3 at 179 dollars. Nokia is pricing itself ‘JUST ABOVE’ the mid-point of India’s domestic market - as a PREMIUM BRAND for THAT MARKET.

These phones were not designed for Europeans or Americans. They were PURPOSELY DESIGNED to win in India (and Nigeria, Brazil, Indonesia, Russia, South Africa, Argentina, Ukraine, Philippines, Vietnam, Bangladesh, Egypt, Pakistan, Iran, Turkey, etc).

Now consider the luxury aspect of the new Nokia Android phones. They are a drastic departure from the neon colors of the Lumia Windows smartphones. They are sleek, metal, classy and ‘luxurious’. They feel premium, expensive, classy. They are designed to win in the store. That when you compare two similarly-priced phones, a Huawei something and a ZTE something vs the Nokia, you end up saying - hey, I’ll take this Nokia. Why? Because Nokia knows handset RETAIL. They know this aspect of the industry - again better than anybody else. They know that half the time the phone buyer walks out of the store with a different phone than what they intended to buy when they walked in. These 3 smartphones were designed to win inside the store.

Not against the iPhone!

These phones will never be seriously considered side-by-side by a serious generic random non-geeky phone buyer who is currently owning an iPhone that they bought when it was new (who is not a loyal ex-Nokia fanatic; there will of course be a few of those too). No. I mean a customer whose budget is limited to 300 dollars (or less). That phone buyer will not compare the Nokia to an iPhone in the store. That buyer will compare it to a Huawei or ZTE or LG or perhaps a Motorola and whatever local brands are there like the Lavas and Solos and Mifones and Xiaomis and Micromaxes and Karbonns. And that is when the luxury of the Nokia design will win over many customers. In particular any who loved Nokia already. They will easily fall for the classy luxury feel of the premium phone body in the new Nokia smartphones. Great screen, great camera/s, and very very classy body. And yeah its at the top-end of my budget, but gosh, I’ll take this Nokia......

These 3 smartphones were DESIGNED to win in India. Not in Europe, gosh not in the USA. Designed to win in India (and the other markets I listed). Not even designed to win in China (although they will sell well in China too). These are purpose-designed to be a success in the best market opportunities for HMD/Nokia return. Starting with India.

So. MicroSD. Duh. Great battery life. Duh. FM radio. Duh. Dual SIM. Duh. These are all issue that are VERY important in India that most Western writers didn’t care to talk about when they reviewed the Nokia 6, Nokia 5 and Nokia 3. Most of the Western press wrote endlessly about how this is competitive that the Nokia series have a clean and unclutted Android OS. Who cares? A few geeks maybe. These phones were NOT INTENDED to win in Europe or America! These were intended to win over FIRST-TIME smartphone buyers in India! Those buyers couldn’t care less about Nougat version this or that! What a silly approach to the story! Yes you and I may like it - personally - but as a MARKET - that is IRRELEVANT. Those buyers will not decide ‘I take this phone not that’ because it has ‘an uncluttered Android OS’ come on? What sheer bullcrap reporting again? These phones were designed to win in India. The buyer barely understands what a smartphone even is... They were told an Asha is or is not a smartphone so they themselves may or may not have owned a smartphone already haha. They care about Facebook and Angry Birds. Maybe a few care about Pokemon Go or Super Mario. But they don’t care which version of Nougat haha. Come on. Two thirds of new phones sold last year in India were still basic featurephones/dumbphones. Part of the country is still illiterate! The average phone sold in the country only costs 75 dollars when in the rest of the world it costs 193 dollars. Lets understand THIS market and treat this launch properly?

SO NOKIA 3310

First off, again. The Nokia 3310 is not the ONLY ‘dumbphone’ that HMD/Nokia is offering to the world. HMD introduced for example the Nokia 150 in December, which is a very basic 2G dumbphone costing 26 dollars without subsidy. But it does have a color screen, a very basic VGA level camera (including LED flash) and FM radio, DUAL SIM and yes, microSD support. This is the LOGICAL path for HMD to take, as it has a huge legacy of profitable customers who buy basic Nokia phones all around the world (except not the USA or Japan or South Korea) and at the very low end, Nokia is still able to make a profit even on this type of basic phone. The 3310 is no ‘anomaly’. It is a sound product in a product RANGE of dumphones/featurephones - to serve millions of customers who even when Microsoft owned the Nokia handset business - this sector was profitable business. The smartphone side with Windows was unprofitable (viciously so). But this featurephone side, that was safely profitable.

One quarter of the world’s phones sold last year were not smartphones. Thats nearly 500 million phones! Understand how MASSIVE this global market is. That is larger than the total tablet market, plus the total laptop PC market plus the total desktop PC market - combined. We can toss in even the world videogaming consoles into that pile and its not as big a market as the dumnphone market is in size. 500 million phones is nearly 1.5 million phones sold EVERY DAY of the year, 7 days a week. Just because you and I have a smartphone, it is too easy to forget, for half a BILLION new buyers last year, the only type of phone they could afford (or the only type they were willing to buy) was a dumphone. HMD/Nokia is SERVING that market need. These phones, like the Nokia 150 and now the Nokia 3310 - they are designed to sell to those customers who don’t want to or cannot afford to buy a smartphone. Nokia brand has a near-global footprint for those phones and because the business is profitable, HMD would be idiots not to take advantage of this market to help build their smartphone business.

Now consider the INDIA strategy as I outlined in the above. Forget silly European tech journalists pining about a ‘retro’ customer who rejects smartphones and wants simplicity and would buy the 3310 - the 3310 was not INTENDED to help ‘win’ in Europe (or America or Australia). It is designed TO WIN IN INDIA.

The average price of a dumbphone globally is only 23 dollars (says the TomiAhonen Phone Book 2016). So even the Nokia 150 is well above the average price point (it is sold as a premium phone within its price bracket). Now consider the 3310 - that costs more than TWICE the average. At 49 dollars, the 3310 is literally more than twice as expensive as an average dumbphone is today. And it does not have astronomically phenomenal specs either. It has a good camera yeah and large screen (for a dumbphone) but it is ‘just a 2G’ phone and is not a touch-screen based featurephone/internetphone like many rivals in that price level are.

What is the 3310 intended to do? Think of its market and the buyer. We are now in INDIA again so forget all your stupid thoughts about being a European or American. In INDIA. The Nokia brand stands for rock-solid durability and legendary battery life plus remarkable ease of operation. A resale value that qualifies a Nokia purchase nearly as an investment (if you take VERY good care of it and protect your most prized possession well before you sell it). The original 3310 has tons of fans. The original 3310 still has many active users left haha, old phones onto their sixth or seventh battery and still going strong. There is in every market a segment of buyers who don’t want change. Who like things as they are, and don’t want any changes. Who would prefer all progress stopped. And for many of those types of buyers in mobile phones, they tend to be older users, who are clutching an old Nokia basic dumbphone and refusing to let go. It may be a 3310 but could be another phone of that era. Typically though, its a Nokia. And it is not a touch-screen phone. It is operated by T9 keyboard entry. THAT is what the customer WANTS.

Its not what you and I want. Its not what most consumers today want. We may laugh at the fact that the 3310 is not ‘modern’ but do not deny it, you know your own relatives, we all have some relatives who are like that - they want to hold onto that old tech they loved. There would be SOME size of a market for the 3310 type of customer in almost every market where Nokia once was strong. But what about India? In India last year, two thirds of all NEW phones sold were still dumbphones! This is not a ‘retro’ phone in India, this is a ‘current’ phone updated, for many buyers in India! I don’t mean this as a slight to India, I mean literally, many in India are still using phones like this - they will not ‘notice’ this as a ‘retro’ phone, they see this simply as an ‘update’ to what is normal in their phone stores. Hey, I like that update from Nokia...

Now consider the PRICE point. 49 dollars for the 3310 (vs 26 dollars for the simpler Nokia 150). Where the average dumbphone price worldwide is 23 dollars. Why is this price ‘so high’? That is part of the magic and the brilliance of the positioning. There is certainly a segment of the market who don’t ‘really care’ exactly about the price (within reason, and say within 10 or 20 dollars one way or the other) if they ‘just had that phone they really wanted’. The 3310 is the perfect gift by any techie-obsessed relative, to their luddite old grumpy uncle, whose old Nokia is literally falling apart and held together by scotch tape. It is ‘exactly’ like the old Nokia dumbphones but it DOES have a modern camera and nice big color screen to look at those pictures of the nephews and nieces too.

For price-conscious buyers if the average price is 23 dollars, then 26 dollars is a tall ask and 49 dollars is as silly as offering them a sailing yacht like a Swan from Nautor or an executive jet like a Gulfstream G6. The 3310 is utterly outside their price range. If the buyer however is relatively affluent but a ‘technophobe’ some kind of luddite - who could AFFORD a simple smartphone but just hates them or fears them - for them this is a god-send. Then the price becomes almost an irrelevant issue. Is it a Nokia? Does it have a removable battery? Are you sure it does not have that weird touch-screen? Ok, I’ll take it. how much?

I am certain that for a significant slice of those who end up buying hte 3310 for themselves, they could easily afford the Nokia 3 but simply will not buy a smartphone today. For those customers, 49 dollars is an ‘irrelevant’ price point. Its a good phone, familiar, its their fave brand, its like the old one they had. It has a kind of funky larger screen, ok. And it has a camera too? Ok, thats nice. But yeah, they want the phone. And they’ll buy it. And they are not ‘price-hunting’ against a rival phone from a local no-name brand that costs 19 dollars. The typical 3310 buyer does not visit the phone store. They will walk in, say I want the 3310, and take it and pay and walk out. They won’t compare to other phones. They are customers who have already decided years ago, this would be the phone they would buy. Now they have it, and they will buy it.

Similarly a major slice of the 3310 sales will be purchases as gifts. Gifts to grumpy old uncles, and also gifts of first-phones to kids. And because of the incredible battery life, some will buy te 3310 as their ‘emergency phone’ (but this will be a far smaller slice of the market). Some who buy the 3310 will be considering it a 'tool' (eg taxi driver) who will consider its life cycle to be 5 years or more, and its just a 'business investment' that is wise to make now, you never know when another 3310 might be made again, if ever. Those customers mostly will not care 'precisely' about the price ie was it 49 or 39 or 29 dollars - but this phone is overpriced and thus has a ridiculous profit margin for HMD. And it will sell like hot cakes (at least initially, for a quarter or two. We have to see is the sales level sustainable for a year). And that means it helps HMD profits in its roll-out costs - immensely. Not to mention the vast amount of free publicity it is generating.

The 3310 does not have 3G because it was INTENDED not to sell in Europe or Singapore or Australia or the USA. It was DESIGNED to win customers in India. And then we get the beauty of the 3310. The 3310 serves two strategic purposes to HMD in the INDIA (and similar) market(s). First, it drives consumers to the stores who otherwise would not be there. That means the stores will love the 3310. Look at the incredible press the 3310 has had everywhere. So this makes it easier for HMD to build its retail distribution - which of course HMD needs for Nokia 6, Nokia 5 and Nokia 3. So the 3310 is a ‘headliner’ product that opens doors - and boy is that smart how they did that (HMD). They were able to do a headliner product out of an old forgotten generic dumbphone (rather than try to design an iPhone-killer flagship to achieve this same effect).

The second strategic effect is more profound but takes longer to be realized. It is the time-conversion of those 3310 buyers into smartphone buyers of Nokia in the future. So consider the actual 3310 buyers in the next year to 18 months. Most of those who buy a 3310 for themselves will fit the pattern of - existing Nokia owner, does not own smartphone, current Nokia was dumbphone/featurephone that did not have a touch screen (ie was not a Nokia Asha featurephone). Yes, there will be others too, some will by 3310 for themselves as their second phones (Taxi drivers, will by 2-3-4 as their other phones) but most who buy for themselves fit that pattern. Existing Nokia owner. Current (previous) phone is (was) dumbphone that did not have a touch screen. That older Nokia phone typically did also not have a camera! So now the 3310 does the ‘behavior change’ transformation of the 3310 buyer.

Now the buyer of the 3310 gets a camera - usually it will be the first camera that consumer has ever owned. They will not use it often (to begin with) but in the next two years, most 3310 users will become accustomed to using the camera at least on a weekly basis. Some will become obsessed with it and use it daily. Most will not, but will use it a couple of times per month.

THOSE customers are now ‘baked into’ becoming Nokia smartphone users in the future, because of the camera (and the larger screen). The NEXT phone will then be considered for its camera (and it has to be again a Nokia) and then.. they will appreciate suddenly a larger screen. How much better the pictures (and videos) shot on the phone will seem, when its a massive 5 inch screen vs the 2.5 inch screen on the 3310 they used. Then add microSD and Nokia’s easy software to help move files from one phone to another and you have a loyal Nokia happy 3310 owner eventually moving to their first-ever smartphone - which will be a Nokia on Android. Perhaps a Nokia 1 or Nokia 2 in about 2-3 years from now.

That is what the 3310 is intended to do. It is not the ‘retro’ phone for us Westerners. It serves a genuine need right now, in markets like India. Where thre are still millions of adults are illiterate and have no use for any smartphone far less their apps. But a camera does not need literacy... press the button and look at the image. Even an illiterate - but can be quite affluent - older consumer in India can learn to love the simple intuitive camera on their new 3310. Understand what it is INTENDED to do. What is its INTENDED market. And then go read the press in the Emerging World markets and see how much they love the Nokia 6, the Nokia 5 and Nokia 3. And how much they think the 3310 will be a huge seller in their home markets. And they think this is all very normal, by a smart brand that is strong in their home market.

TO SUM UP

The USA market is hopeless for HMD and Nokia. Even when Nokia was the world’s largest handset maker and threw all its marketing efforts into succeeding in the US market, it didn’t. The USA is bad for HMD/Nokia now, for its handset subsidies; it is bad because of strong local competition; it is bad because the migration rate is so far gone; and its bad because Nokia’s brand image is bad in the US market.

China is better but not optimal for HMD. China is good for no handset subsidies but its bad for many strong rival handset brands. China is also bad for its migration rate to smartphones but China is good for Nokia’s brand image still being quite strong.

India is by far the best of these three large markets. There are no handset subsidies, the local rivals are weak, the migration rate to smartphones is only in its early stages and Nokia’s brand is remarkably strong.

The Nokia 6, 5 and 3 were designed to win where it counts - in India and the other countries like India. If you leave out China, and take the next 10 largest countries in the Emerging World (like India, Indonesia, Brazil, Russia, Nigeria etc) you have a global market that is literally one third of all phones sold. This is NOT the market where most iPhones are sold (although of course the rich in those countries will buy iPhones too). HMD is leaving America, Japan, Australia and Western Europe for Apple and Samsung and Sony and others to fight over. HMD went where its best opportunity lies. It targeted three smartphones for where one third of the market is, and where the iPhone is not a player. Where half of all phones sold are still dumbphones. Where most smartphone buyers are switching from a dumphone. Where Nokia’s brand is golden. And where many more affluent DUMBPHONE owners currently... have a NOKIA branded dumbphone. For those customes - they created the Nokia 6, 5 and 3. And if you don’t feel like buying a smartphone yet - no worries, we have a 3310 for you. It has a great camera and screen and a removable battery and it lasts a month on standby...

HMD went with ‘the low hanging fruit’. Note that Apple once again, in its infinite wisdom, elected NOT to pursue this market even though it has sat there for years staring Apple in the face. Look at the Nokia 6. Seriously. It is manufactured by THE SAME COMPANY as the iPhone, ie Foxconn. Look at the Nokia 6. Seriously. Look at it. Imagine it saying Apple iPhone 6E. Cost $299 without contract. Primary market intended: India, Brazil, Nigeria, Indonesia, Bangladesh... That would have sold like hot cakes. And Apple would today have 20% market share in the world of smartphones and have a 10% share in the Emerging World markets. They are once again... leaving money on the table. Look at the Nokia 6 and squint your eyes, that could just as well have been the iPhone 6E. E for Emerging World. And now (you can stop squinting your eyes) think back at HMD. They are taking a page out of Apple’s book. The previous generation of Nokia went all plastic and cheap vs Apple (Lumia/Windows). Now they are going ultra-luxury-premium. Like Sony Xperias. Metal, classy. Not the tacky plasticky blend Samsung has where you can SEE its a Galaxy from far away because of part-plastic parts. Again, smart move HMD.

Steve Jobs saw the original Apple musicphone concept prototype and said - no. He forced the designers to go back, do a total redesign, and do it better. It was not 'Apple enough'. The original Apple iPod-Music-Phone was according to rumors a phone with traditional buttons and no touch screen. The designers started again, and a year later they had the iPhone. While it made Apple lose a year in its entry to phones - Steve Jobs got his Jesusphone. It was the device worthy of Apple's brand and effort. It would change the world. It was truly amazing. Now go to last year's Apple event with Tim Cook and the iPhone SE. What was that? And yes, imagine if it was Steve Jobs? He would have looked at that SE and his team and said - guys, this will not be the most beloved phone in India and this will not change the world - go and redesign it and do it properly. And you know what? What Apple would now have is.. the Nokia 6. Of course Steve Jobs would still have priced that iPhone at something like 399 dollars not 299 dollars but gosh, seriously! Look at the Nokia 6. If you plaster Apple logos on it, that could just as well have been the iPhone 6E. And THAT smartphone, that would have sold well in India... This Nokia 6 (and its sisters) gosh, it will take OVER the Emerging World for Nokia and HMD. Great move. The move of a master. A Jedi Move. HMD you made a smartphone Steve Jobs would have made.

Ok, thats what I had in mind today. If you need all the data on the phones industry, the brand new TomiAhonen Phone Book 2016 just came out two months ago. All data current. Get yours now. Costs only a minimal 10 Euros, come on, it will not bankrupt you. 180 pages, 100 charts, absolutely must-have if you’re into phones/handsets.

Comments

[Tomi T Ahonen]

Hi Wayne

Great comments and questions. Let me take just the China question.

China was timing only related to their gift-giving season. Nokia is strong brand, the Nokia 6 the most expensive of their new phones, they could do a modest early run. Not quite ready for Western Christmas (mid-December) but just-in-time one week before Chinese New Year. So it was just the gift-season timing issue. The 'proper' way to do the full launch is like HMD did, with a national event and max press etc - like they did now in Barcelona.

Note Nokia did the same also previously for example with the E7 (the last 'Communicator' on Symbian) which just missed the Christmas launch period for 2010 but did just make it into the New Year sales for China in 2011. Then right after Chinese New Year was done, Elop came with his big press event announcing - oh, we're ending Symbian (sorry China who just bought a couple of million flagship phones that will become instantly obsolete and whose resale value collapsed overnight).

Tomi Ahonen :-)

[zlutor]

@Wayne: some Indian HMD exec told in an interview N6,5,3 and maybe even 3310 will be manufactured in India. If true local brands hardly could achieve annyi nthing with government. HMD will be as global as any other locals.

Not to mention India is the biggest democratic country of the World so even government follows the laws there... ;)

[Wayne Borean]

This is going to be awesome to watch. Designing a product for a specific set of markets can be really lucrative if you get it right.

Nokia/HMD has obviously put a lot of thought into these phones. I'm really looking forward to seeing the sales numbers after they've been on the market for a year.

[Tomi T Ahonen]

Hi zlutor and Wayne

zlutor - thanks, I hadn't seen that. If Foxconn is setting up a factory for manufacturing inside India - partly for Apple - then haha, it would/should be no big problem to use that factory also to make Nokias there.. There WAS a Nokia factory too in India (I wonder if Foxconn received that in the stuff they bought from Microsoft) and if that is involved..

Wayne - haha yeah, this is going to be an interesting aspect to the year. The first roll-outs (apart from China) won't really happen until Q2 so we won't have any kind of real numbers of any scale until after Q3 but there should be some early signs in some of the markets. Also we'll have to see what kind of data HMD will be willing to release. Will they report actual unit sales numbers.

Now on 'designing a product for specific set of markets can be rally lucrative' yeah. That was how Nokia did it up to Elop meltdown. Nokia had a portfolio of more than 50 new smartphone models and at least as many dumbphones they released every year - one per week on average - and they were almost all aimed at some specific region, not just a specific customer segment. Only very few models were 'global' models of a kind of 'generic' design and these would essentially only be the low-volume very expensive top end phones. The large volume phones would almost invariably have a regional focus with an Africa-oriented phone model being truly different from say Latin America oriented (similar) model or say a China phone (also similar). African phones from very early on were dual SIM phones - that most operators/carriers hated. China had its own 3G technoloy so there were often 'only China' variants to a given phone and then they'd do various other China-things while they had that, starting from of course the language and setup of the phone defaults.

But to do regional differentiation does mean you need scale. I don't think HMD will ever get to the stage Nokia once was, even many in the industry felt Nokia had gone too far in managing a complex matrix of products and segments and trying to keep all that in line. But obviously the 'only one model is enough per year' view from Apple iPhone has also been abandoned, as Apple already has gone to three new phone models per year. Slowly moving towards where Nokia was, while Nokia obviously has come back from the extreme level of differentiation. Samsung is nearer today to where Nokia then was. HMD will end up probably somewhere between where Apple is now and where Samsung is now. A dozen new models per year (smartphones) and half that in dumbphones for say year 2018 could be reasonable. Thats on average one new smartphone model released per month - in reality probably staggered so, that most phones come out abuot once per quarter at a bigger HMD/Nokia event.

Tomi Ahonen :-)

[E.Casais]

You state $299/$249/$179 as announced prices for the 6/5/3, but what I have seen published are €299/€189/€139 -- which is significantly (though not massively) different for the 5 and 3 models.

Is there an authoritative announcement from HMD about the pricing of these new devices?

[zlutor]

@Tomi: http://www.bgr.in/news/hmd-global-to-manufacture-nokia-3310-in-india/

http://m.economictimes.com/industry/tech/hardware/hmd-global-to-make-nokia-3310-other-models-in-india/articleshow/57436063.cms

maybe 3310 only? let's see...

[William Hamilton Whyte]

Excellent article and spot on... One other big reason HMD can succeed in the countries like India, Indonesia, Vietnam, Nigeria etc ... Most major distributors have a historic and emotional connection with Nokia... And are I am sure ready to gamble and see if they can fulfill the gap that was left.

[Huber]

Nice read, and very spot on.

But I think that the new Nokia smartphones also will sell at least in Europe. They won't be earth-shattering successes, but I'd guess they'll find their target audience.

The Motorola G4 also did quite well last year, I know a few people who bought it. They can't or don't want to afford a high end phone, but those who aren't flashing custom ROMs are disappointed by Lenovo's slow updates. Also, at least one person I know would have preferred a metal phone, but went for the better overall package with the G4 plus in the end.

I guess that competing with the likes of the G4 (or now G5 in 2017) in Europe may not have been a top priority for HMD, but I do think that they will position the N6 accordingly. Also I guess this is also part of their plan, as demonstrated by the promises of monthly security patches.

[Tomi T Ahonen]

Now this IS disappointing

Story that is quoting official Nokia account says Nokia smartphones will no longer feature Carl Zeiss optics. That is VERY disappointing. And article also suggests Pureview is not coming either. (could not post link, article I read was at PC Tech Mag)

Some days the gods of mobile phones are merciful and smile upon us mere humans, other days the gods may throw their dice, their minds as cold as ice, and someone way down here, loses tech so dear...

Tomi Ahonen :-)

[b]

@Tomi

Sorry Tomi, but nowadays the camera field is going towards Light camera's direction (see: https://light.co/camera ) which means that the key role is the algorithm which does the image processing whilst the image comes from some cheap physical camera/lenses. That is the future!

So, I think that Nokia's direction is a good one.

[johnleslie]

An enormous round of applause, continue the great work.
telephone area codes

[vodafone telephone]

The Info in the blog is out of this world, I so want to read more.
talk talk telephone

[processing]

Your articles and contents are encouraging.

[ChrisB]

Looks like Tomi was (almost) right with his 3310 forecast: HMD was taken by surprise with the enormous demand for the 3310. In India, where the recommended retail price was set at 3,310 (!) rupees, the stores ran out of stock quickly:

http://www.helsinkitimes.fi/business/14792-hmd-surprised-by-sales-of-resurrected-nokia-3310.html

https://nokiapoweruser.com/hmd-india-acknowledges-huge-nokia-3310-2017-demand-official-statement-given-npu/

As for the "almost" part: It also seems to be a hit phone in the UK, where it was sold out within less than 24 hours, even after retailers allowed pre-registrations of orders since March:

http://www.telegraph.co.uk/technology/2017/03/07/nokia-3310-demand-astonishing-says-carphone-warehouse/

https://www.theinquirer.net/inquirer/news/3009801/nokia-3310-on-sale-uk-sells-out

https://www.theregister.co.uk/2017/05/25/nokia_retro_3310_sold_out/

And that was even *before* it was launched in other important markets like South Africa or Malaysia, and *before* the new smartphones are being shipped in June. It almost seems like the boys and girls at HMD know what they are doing ;)