Segmentation strategy has been successful for Nokia because it introduced low cost products available for large target market. Nokia is a company that differentiates products and is faced with the need to instill an image in the minds of customers that distinguishes their products from others and causes the customer to react more favorably toward them. This might be the result of the image of the company itself, its distributors, or the product per se.
Converging strategy refers to the convergence of demand for product variety among individual market segments, so that distinct markets are satisfied by a single or limited offering. Here, variations in individual consumer wants are minimized, and heterogeneous demand converges upon the product or product line. Divergent mobile phones product policies adjust product lines to individual market segments — they implement market segmentation. By assuming that demand is heterogeneous, market segmentation obtains a better match with distinguishable market segments. Nokia produces mobile phones in several languages which helped it to reach diverse audience (Nokia Home Page 2009).
At the early stages of market growth, the main segmentation variables were income, class location, professional sphere and personal image. Product differentiation gives Nokia a share of a broad, horizontal market, whereas market segmentation tends to result in cultivation of a market position in depth. Given the analogy of a layer cake, product differentiation seeks to secure a layer of the cake, whereas segmentation seeks a wedge.
Differentiation is characterized more as a promotional strategy that endeavors to control demand by advertising and other promotional efforts, whereas segmentation (which relates to recognition of segmented, homogeneous product preferences), is a mer-chandising strategy. Successful product development requires the utilization of both product differentiation and market segmentation. The former Nokia’s strategy adjusts or bends demand conditions to meet the seller’s conditions. The latter represents a more precise adjustment of products and production to market conditions (Kotler and Armstrong 2005).
Nokia uses income and class characteristics in its segmentation strategy. Market segmentation often results from substantial growth. After markets are developed on some general basis, they reach the point where additional effort tends to yield diminishing returns, and attention is given to specific market segments that become large enough to be attractive. By cultivating specific market segments, Nokia seeks to make use of a greater opportunity to maximize customer satisfactions.
This maximization, in turn, results in the development of a more secure market position and posture. As mobile phones are designed to serve the needs of individual customers, they assume a special character and increase their distinctiveness (Nokia Home Page 2009).
A market-product grid suggests that Nokia will creates new products and enter new markets in order to remain successful and profitable. For Nokia, he closer the product is to the point of customer purchase, the more differentiated it becomes, and less flexibility is available to the manufacturer. For some mobile phones, the demand of an individual customer may be unique, and the product takes on rigidity. Where possible, manufacturers would like to reduce risks by postponing differentiation as long as possible, and only incurring changes in form and product identity at the latest possible point in the flow of marketing.
Thus, differentiation and postponement followed by Nokia have opposite effects. Postponement serves to reduce marketing risks, since it means that products can be matched to broader segments. Differentiation which matches mobile phones with the specific needs of a particular market segment, also makes the product less suitable for market segments and increases the risks incurred if these new markets do not accept it.
Ansoff product grid.
References
Kotler, Ph., Armstrong, G. (2005). Principles of Marketing. Prentice Hall; 11th edition.
Nokia home Page. (2009). Web.