1. Case Study on NOKIA’s Pricing Strategy
Skimming Pricing Strategy:-
Price skimming is a pricing strategy in which a marketer sets a relatively high price for a
product or service at first, then lowers the price over time. It is a temporal version of price
discrimination/yield management. It allows the firm to recover its sunk costs quickly before
competition steps in and lowers the market price. Price skimming is sometimes referred to as
riding down the demand curve. The objective of a price skimming strategy is to capture the
consumer surplus. If this is done successfully, then theoretically no customer will pay less for the
product than the maximum they are willing to pay. In practice it is impossible for a firm to
capture all of this surplus.
Penetration pricing is the pricing technique of setting a relatively low initial entry price, often
lower than the eventual market price, to attract new customers. The strategy works on the
expectation that customers will switch to the new brand because of the lower price. Penetration
pricing is most commonly associated with a marketing objective of increasing market share or
sales volume, rather than to make profit in the short term.
Nokia’s pricing strategy
Nokia is one brand name that inspires all those who are into the mobile culture. Of all the brand
that touches our lives, Nokia stands out significantly. It has taken mobility a step forward by
creating products with continuous innovations in this industry has made it imperative that every
player keeps pace with changes. Nokia has been one step ahead in anticipating future market
moves and strategizing accordingly.
Interestingly the company prices its products so competitively that it not only ensures that its
margins are covered but also assures revenue maximization. Let us see how Nokia leveraged it
2. segmentation strategies, appealed to various segments with uniquely designed messages and
differentiated between its products at every level to communicate and connect effectively with
the intended target audience. When Nokia positions its product to the top end segment, it does it
as a classy product. To the middle segment customers it is in the form of the best alternative. To
the lower end segment, the carrot is that Nokia gives real value, as a high tech product, at low
affordable price. The pricing strategy of Nokia can be better understood when the juxtaposed
with the skimming strategy and further interposed on Philip Kotler’s nine price/quality strategies
With a vast family of brand that caters to every segment, one can clearly see how Nokia, yielding
to the pressure due to the competitive and innovative mobile handset market, slides each brand
down the segments, one at a time by reducing its prices carefully and consistently)
Here are some live examples of Nokia’s skimming pricing strategy:
Classic Nokia 8250:
Nokia phone model 8250which was available with the vendors during the year 2000 was price at
Rs. 18000. It was without modern features like camera and MMS. The telecommunications
infrastructure of the country was in its initial stages and so were the service provider’s fares.
Hence only the premium segment could have afforded the phone. However with the easing of the
government regulations and increased competition, market dynamics changed, and during 2004,
the price of the model took a nosedive and was made available for Rs. 8000-10000. Now the
model has been completely phased out. Only second hand products are available. Here was one
product which despite market forces maintains its price distinction and continued to carry a
premium connotation to it.
Neo Classic Nokia 6600:
This model from Nokia was made available in 2003, complete with a color screen, integrated
camera and other contemporary features. In the beginning the product was prices in the range of
Rs. 21000-22000. By November 2004, it was available in much lower, 15000-16000 range. The
model is currently available for price of Rs. 9000-10000 only.
3. Modern Nokia 9500:
This is known as the snazziest model ever launched by Nokia in India. The Nokia 9500
communicator comes with office features and a large screen, coupled with increase and
Bluetooth technology. Available in the market since 2005, it was initially priced at 42,000, but
currently can be bought for just 26,000. All the above models were produced in quick succession
and Nokia’s strategy was to deliberately allow them to eat into each other’s market share. At the
same time, Nokia proliferated the market with as many models as possible by 2006, at virtually
every price point. Each one of Nokia’s model played a role in catapulting Nokia to the top of the
heap, in the Indian mobile handset market.
It would be apt to map Nokia’s pricing strategy on the line of the premium, high value, and super
value strategy, especially on the price-quality model. On the flip side, consistent price cuts in
rapid succession have the potential of smearing the brand image. But, in the buoyant telecom
sector, where change is name of the game, the consumer is discerning enough to have a rational
outlook towards a particular brand and its attributes, irrespective of the pricing strategy.
After all, skimming or no skimming, customer benefit is almost always guaranteed in the
price sensitive competitive market.