For the past several quarters, analysts have kept close watch on Nokia’s handset margins and their average selling prices, as they get squeezed by the huge amounts of low-cost devices the company sells in emerging markets. The company’s effectively managed these concerns thus far, thanks to its economies of scale and other factors. Still, higher margins is always a good thing — so how do you boost them?
Take a handset you’ve developed for emerging markets, swap out a few features, then release it as a “classic” voice-centric device for established, higher-income markets. Then watch A-list bloggers fawn all over it as the answer to their “yearning for a simple phone” (even though the US has been the dumping ground for plenty of simple Nokia devices for quite some time).
Pretty shrewd, really. Announced price of the Nokia 2630, a device for emerging markets that also happens to be Nokia’s thinnest: 90 euros. Cost of the 3109 classic, intended for higher-income markets (and which ditches the 2630’s camera, but adds USB connectivity and microSD memory): 140 euros. Perhaps in the excitement over such a simple, straightforward device, nobody will even notice that it offers two hours less talktime than the emerging-markets phone…
Excellent strategy by Nokia:
- It re-uses existing technology and design, hence quick and inexpensive to deploy more broadly. There’s no down-side, except possibly increased logistics due to even more phone models.
- It compensates for some of the losses in the developing markets.
- Most people only need (not saying they necessarily buy) a basic phone, and that goes for people anywhere in the world. Phones being status symbols kills that argument, but in a perfect fluffy teddy bear dream world it would hold true.
- Basic phones like this are excellent for prepaid.
- They are less of a burden purchase-wise for operators.
- “Basic” is a relative term. These phones are very far from basic if what you need is only voice calls, SMS and a phone book. They have plenty more features than that.
- The UI/usability of such simpler phones tends to be better than on more advanced. It’s not given, it’s just what I’ve experienced. Less/simpler features typically means easier access to those features. They also tend to have more practical, less designed, keypads.
- As most such phones support downloadable ringtones, MIDlets etc, there’s still a considerable after-market, creating revenue beyond the phone sales.