How To Boost Your Handset Margins

by Carlo Longino on 23. May, 2007 in Mobile Phone Evolution

3109.jpgFor 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…

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  • 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.
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