Research Notes

Terminal manufacturers will need to rethink their market strategy

To be able to work with micro-segmentation, it is necessary for handset manufacturers to have a comprehensive knowledge of the mobile market, putting totally new demands on handset manufacturers regarding market understanding, as handset manufacturers will need to have a far greater understanding of consumers’ needs and tastes than they have today.
Understanding the market is necessary if the handset manufacturers are to develop mobile handsets that suit the many different micro segments, as the handset market and handset manufacturers are moving away from developing mass-market mobile handsets to developing segmented handsets – from no customisation to mass customisation.
There will therefore be a far greater focus on the customer on the future mobile market, than there is today, where the mobile sector is generally more focused on technology than customers actual tastes and needs. The handset manufacturers will also need to focus more on the customers. Nike is one example who has developed a concept where customers are in focus and can via a web site design their own clothes shoes etc from Nike. This concept can be copied by the mobile industry, so a mobile provider could for example offer their customers to design their own mobile handsets.
Handset manufacturers will over the coming years launch an increasing number of handsets targeted at increasingly narrow segments and for the handset manufacturers the difference between success and fiasco will be whether they understand how to create mobile handsets that will match the segments the individual MNO, MVNO, SP, BR or sub-brand is targeting.
As handset manufacturers in the future will be launching an increasing number of mobile handsets targeted at an increasing number of narrow segments, they will need to be able to identify these different segments. The handset manufacturers will need to collect in-depth knowledge about segmentation to be able to develop mobile handsets that fit in with different segments needs. Without this knowledge, a handset manufacturer will only be able to develop mobile handsets targeted at the mass-market and will find it difficult offering a mobile handset to customers demanding unique/segmented mobile handsets to differentiate themselves.
There are examples of handset manufacturers developing mobile handsets targeted at a certain segment, but then it has been a completely different segment that has actually purchased and used these mobile handsets. An example of this is the now classic Nokia 6310 – a mobile handset designed for the corporate segment, but that also became incredibly popular among private customers. There are many other examples where private customers have more advanced mobile handsets than corporate customers and for the handset manufacturers it can also be difficult to spot the difference between a private and corporate customer. A corporate customer will often be interested in the same mobile handsets as the private – why shouldn’t a corporate customer that travels a lot be interested in a mobile handset that features a MP3 player?
The mobile world is also being influenced by the increasing level of individualism in society. The increase in individualism can mostly be seen in the mobile world by customers personalising their mobile handsets by e.g. purchasing new handset covers and downloading ring tones and logos. Through these downloads, customers achieve a small level of differentiation to other customers.
But the level of personalisation will grow and customers will increasingly differentiate themselves via their mobile handset and the available offerings that allow their handset to be different from friends, families and colleagues’ mobile handsets.
Handset manufacturers therefore need to be become better at identifying trends in current society, that are influencing society globally, regionally and nationally.
If the handset manufacturers can develop mobile handsets that follow trends in society, they will be in a very good position to increase customer loyalty in their products.
There have been a number of examples of handset manufacturers not spotting trends in society that had significant consequences for the handset manufacturers business and has damaged their market shares.
For example, for a long period of time, Nokia ignored the global success of the clamshell handsets that spread from Asia to the rest of the mobile world. Nokia were very late in realising that they had misinterpreted the market for clamshell phones and have since developed a number of clamshell handsets. Nokia’s misinterpretation of the mobile market – or lack of ability to spot that trend, resulted in Nokia losing market shares to competitors that already had clamshell models in their product portfolio. Nokia has since fought to regain their lost market shares by amongst other things launching clamshell handsets and have been successful in their change of strategy, with increasing market shares as a result.
For more information about the terminal manufacturers and the challenges they face, we refer you to our strategic report –  How to Succeed in the Second-Generation MVNO Market– in which the terminal manufacturers role in the mobile universe is analyzed. The report also analyses the terminal manufacturers challenges as well as possible changes in their business models.

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