A marketing strategy is the logic by which a company/business unit hopes to achieve its marketing objectives (Kotler & Armstrong, 2006). It includes the building on segmentation, targeting, and positioning, the customer decides which customer to serve and how (Kotler, 2005). Positioning is the act of designing the company's offering and image to occupy a distinctive place in the mind of the target market. The aim of positioning is to create a customer focussed value proposition, a convincing reason why the target market should buy the product.
The new product will target the average rural African customer who desire to receive mobile calls, messages, browse the web and watch selected television channels on their mobile phone. The phone will be positioned as a "once in a lifetime offer" to follow the World Cup tag line and its name Nokia Woza (Zulu imperative meaning 'Come on/here') will attract those in rural Africa who cannot afford a television set. The phone will include a solar charger to cater for those without electricity.
The company aims to sell a minimum 1.5 million pieces in the first year at a profit not less than $9 million. In the second year the company will aim for sales of 2 million mobile phones and a profit of $20 million.
Nature of the opportunity
- Africa is the fastest mobile phone consumer market.
- This will be a potential target market because young adults in Africa want to be up to date with technology.
- Despite the high level of poverty, there is a segment that is more likely to spend money on technological items.
- With the competition in the media industry, it is becoming cheaper to advertise cell phones throughout the continent so that more young people can afford them based on their income.
- With Sub-Saharan Africa increasing GDP and average income, younger people will benefit from this growth and purchase more expensive goods.
- The South Africa World Cup 2010 is a unique opportunity to bring a new product for those who cannot go to South Africa to watch the world cup.
- Prediction shows that the ascending cell phone trend will maintain throughout Africa.
- The political stability and rise in per-capita in large consumer populations like Nigeria, Congo, Algeria, Tunisia, Ghana and South Africa will allow people to spend more on luxury items.
- Mobile phones will be less expensive.
- There will also be declines in tariffs throughout the African continent.
- The cell phone is actually considered a necessity in many African countries.
Scope of the Opportunity
- Market Size
- Potential Market Share
- Risk assessment
With a total population of 991 million Africa (WikiAnswers) is the fastest growing market with average penetration standing at more than a third of the population, and in North Africa it is almost two-thirds.
The cell phone population reached more than 350 million users (David Smith, 2009) and the forecast shows the upward trend will be maintained.
In Kenya service provider have introduced the mobile money transfer "Mpesa" and "Zap" and it has now become a necessity for one to have a phone, especially in the rural areas. This will probably expand to the rest of the continent and it is an opportunity to capitalize on.
Africa is experiencing rapid growth and it is growing faster than the industry as a whole. The potential of cellular phone sales Africa are in the tens of millions. Despite this large competition, there is a shortage of cellular phones compared to the projected number of potential cellular phone users. Considering that Africa is highly price sensitive, with competitive pricing integrated with good quality Nokia can maintain its supremacy and grab a good portion of the potential market share.
Why this market?
The population of Africa is more than 991 million and in this year of the World Cup WOZA 2010 (Pronounced WHOA-Zah, Zulu imperative meaning 'Come on/here') it would be an ideal opportunity to capitalize on this 'Once in a lifetime' event to penetrate the market with a product that will be memorable. The mobile phones are also becoming increasingly popular in Africa due to various reasons. One reason is that as a matter of economic development it is cheaper to install and maintain wireless infrastructure as compared to using landline connections. Also, in some countries it takes years to have a landline phone.
Moreover, the GE/McKinsey Matrix Analysis indicates that with a 57% market share in Africa, Nokia is a strong business attractive market it would be therefore wise to maximize on its R&D core competence to focus on growth strategy and reinforce the leadership position.
Due to intense competition, entering the market should be done with caution. With the existence of established brands on the continent it will important to rightly position the product create the right product image.
There is also the 'grey market' in some countries that sells replicas of all the models of phones that exist. There is therefore, a need to make the product quite affordable making unattractive to the "grey market" operators.
Differentiating features - Product Positioning
We aim at providing a good quality phone at an affordable cost. Those are our two major points that we will use to target our customers. Our phone allows rural area workers will be able to manage their bank account and watch television with a special chip implanted into the phone. This is unlike other cheap phones and would help separate the product from the rest of the field.
The Nokia Woza will be positioning as a low priced but moderately equipped durable phone. It will position towards rural area residences, which could be, the single largest untapped market in cell phone history. This will be backed by media plans and pricing strategies as well as promotions.
Customer Profile - Market segmentation
Market segmentation refers to the division of a market into distinct groups of buyers who have distinct needs, characteristics, or behaviour and who might require separate products or marketing mixes (Kotler ,2006).
By choosing the rural African consumer Nokia will have to focus on the low to medium user who would look at practicality of the product, price sensitive and needs low information search.
The rural African has moderate amounts of disposable income and most have no real commitments to spend it, but as the mobile phones is becoming a necessity they would want to spend it on new mobile phones.
Given that more that 80% of the rural customers are farmers, the product will be built sturdy to fit the harsh conditions of the various African countries.
Marketing Objectives: Volume, Share
Given the huge market potential that Africa represents the objectives on how much volume and share are nearly limitless for the next few years. Nokia will need to focus on its brand image and avoid stock rupture. The initial goal of 15 million phones over the whole African continent seems to be reasonable and the cost should not be problematic as the technology already exists.
Marketing Mix of the New Product
- Product we are selling
- Pricing Strategy
- Distribution Strategy (Placement)
- Promotion Strategy
The Nokia WOZA 2010 is not just a phone. It is the symbol of Africa, an objet d'art, affordable, durable, and weather resistant mobile phone to be marketed in Africa. Visitors will buy them as a relic, a souvenir. The phone will be manufactured and service to authorized dealers and mobile services providers. Pan African service providers like Vodaphone, Zain, and MTN provides Nokia with an established marketing platform and it is anticipated that the market to expand even farther after we introduce our product. The focus is on selling a symbolic product.
Need or Want? Established, latent or incipient?
We hope that overtime the product will become an African wanted commodity. After the World Cup, rural area families will use their cellular phones to communicate with family members who may have moved into the cities and to receive and send money to their relatives. Its basic internet features would allow farmers to access the weather forecast and through the television features. Since it is just forming it would be considered an incipient feature.
Contrary to the usual skimming strategy with new products, Nokia should adopt a pricing policy that will lead to increased market share penetration, moderate profits, and customer affordability.
This is possible due to the fact that that the technology released with the phone already exist and is not as advanced, the cost of production would be low, making it an affordable phone.
The phone will be established as low cost phone that can be affordable for low income rural residences. The price should not exceed 40 US dollars. With this price Nokia will demoralize competition with more expensive phones and will really make an impact with its target market.
The channel of distribution is to provide a link between production and consumption by filling the gap or discontinuity which exists between them. Such intermediaries can provide valuable information or advice to manufacturers about the divergent needs of customers. On the other hand they do also advice consumers of the specific characteristics of the specific offering. In order to determine the most appropriate channel of distribution, cost and effectiveness of the channel are the primary factors to be considered (Baker, 1992). Other factors include location of potential customers, legal considerations, company strengths, service and technical skills possessed, and the competitive standing.
In order to have a wide and sure distribution Nokia will be partnering up with mobile service providers who are already well established in Africa.
Participating in a partnership with service providers like Vodafone, MTN, and Zain will allow the product to grow and thrive in Africa in a much more cost effective way. Nokia will be able to sell our product in their storefronts and will be able to take advantage of the good reputation that they have established in mobile technology.
The service providers will also use the product for their World Cup promotion, which will allow a wide distribution in several countries.
Nokia will be selling the product to its network authorised dealers who will be supplying our product using their current distributors. Where there are no distributors Nokia will need to recruit new distributors following a rigorous selection certification process.
The African rural area market has very limited access to television and internet. Therefore print media would be the best way to go. Newspapers, billboards and magazines would likely be the main focus with print adds.
However, the inner city members would be targeted slightly differently. The main focus would still be in print ads but once the products is established through the adds as well as word of mouth marketing we could go for television commercial. Though expensive and risky, it is more attractive to the city dwellers.
Nokia can capitalize on the publicity acquire through it sponsorship of programmes the Face of Africa pageants.
An Indication of the Costs of the Marketing Strategy (Budget)
The company expects to use quality products as the focal point for market penetration. Television and newspapers will be used regularly to promote the mobile phone.
Market Share, Long Run Sales and Profit Goals
The following assumptions and approximates are made in the analysis:
- Estimated units to be produced and sold annually: 1 500,000.
- Price per unit: USD 40.00
- Variable cost per unit = 28, 000,000/1 500,000 = USD 19.00
- Variable cost per unit will remain constant during the time of analysis (at least one year).
When the Company Should Expect Return on The Investment
Break even analysis is used to establish the point at which the company moves out of loss making to profits. To undertake break even analysis, the costs are separated between fixed and variable costs. The break even analysis technique is ideal because it provide for both units and sales revenue.
Break Even Point (BEP) in Units
The BEP (Units) = Fixed cost/contribution margin
Contribution margin = price - variable cost per unit = USD 40.00 - 19.00 = USD 21
Thus, breakeven point in units = 22,000,000/21 = 1 047 619 units
At breakeven point, neither profit nor loss is made. All the revenues are used to finance costs.
From the analysis made, the adoption of the marketing strategy will result in huge profits for the company. Differentiation and market segmentation will be key drivers in expanding market share and overall profitability.
From the break even analysis undertaken above, sales above 1 100,000 units generate profits. Nokia should always strive to produce and sell more than 1 100,000 units every year. In the above analysis, production and sales of 1 500,000 units will yield a net profit of USD 9 499 980 in the first year and by producing 2 million units in the second year, Nokia will double its profits (+ 20 million)
Given that basic technology is required that cost of production will be low, which make it an attractive phone for its market.
However, the target market comprises consumers whose tastes and preferences can change quite rapidly. This means that the company should continuously carry out market research to remain abreast of the consumer demand requirements.
The company should also appreciate the African region is an emerging market. Therefore there is a greater potential for a big market in the long term. Although reaping of profits quickly may be desirable in the short run, investments should nevertheless focus on the long term.
- Arbache, J.S. and J. Page (2007), "More Growth or Fewer Collapses? An Investigation of the Growth Challenges of Sub-Saharan African Countries", World Bank Policy Research Working Paper # 4384.
- Baker, M, J. (1992), 'Marketing Strategy and Management' 2nd ed, Macmillan Press Ltd, Hamshire, London.
- Kortler, P. (2005), 'Marketing Management' eleventh Ed, Pearson Education, Partparganj, New Delhi, India.
- Kortler, P. and Armstrong, G (2006), ' Principles of Marketing' eleventh Ed, Pearson Education Inc, Upper Saddle River, New Jersey, 07458.
- World Bank. 2008. "Youth and Employment in Africa - The Potential, the Problem, the Promise.", N.W.Washington, D.C. 20433, U.S.A.