NOKIA DIALS UP WINNING TACTIC FOR ELECTRONICS

By Published on .

Most Popular
Finnish electronics company Nokia Group is the world's No. 2 manufacturer of cellular phones, with more than $5 billion in annual sales and a telephone market share in Europe of about 30%. But while Nokia is synonymous with cellular phones, few consumers realized that the company sold other products-notably consumer electronics.

Every family has a black sheep; in Nokia's case it's the long-suffering consumer electronics division. The division accounts for 23% of sales but never made a profit. That's about to change.

Nokia started buying European TV names in 1985, and by 1991 the company had a grab bag of eight brands across Europe, making marketing and advertising programs a country-by-country nightmare.

Compounded by a flat European market, Nokia put the consumer electronics division up for sale in both 1992 and 1993, but found no takers.

Two years later, a turnaround is around the corner. While sales for 1994 to date are still lower than 1993, they are gaining strength.

Nokia was the first on the market with a hot new wide-screen TV technology, and the company plans to boost its 7% share of the 21 million-unit European TV market to 10% in five years.

Not only has the division been pulled off the block, it's also anticipated to break even for the first time this year. In 1994, the division lost money, but less than in previous years. For the eight months ended in August, consumer electronics reported sales of $863 million as compared with $877 million for the same period in 1993.

Since joining Nokia in 1991, Michael W. Schmohl, the division's VP-marketing and product management, has replaced Nokia's old TV ads emphasizing features and prices with a slate of ethereal pan-European spots.

A typical one from Euro RSCG, Paris, begins with a seagull against a field of blue. As Nokia's wide-screen TV slowly spins into view, a soothing female voice says, "Nokia gives the freedom to go beyond these technologies in the most simple and natural way. Welcome, intelligent television."

Mr. Schmohl, previously exec VP-marketing product management sales at sportswear marketer Adidas, knew that strong local brands had lost steam in Europe. His strategy, therefore, was to phase out Nokia's eight TV brands to create a single name in Europe.

"I was convinced that consumer electronics would have no future if we continued to fool around in a marketplace with `me too' products, no focus and eight different brands," he said.

After a bit of a struggle with local country managers, the company consolidated its ad account from eight agencies scattered across Europe. The business went to Euro RSCG, not previously a Nokia agency.

Meanwhile, Nokia's cellular phone sales were booming, taking top management's focus away from consumer electronics.

Even today, Nokia's ad spending for TVs-sold only in Europe-accounts for only 25% of the company's total budget on the Continent.

Spending for TVs will be $26 million in 1995, up 44.4%. Meanwhile Nokia's worldwide budget for phones is $157 million, up 42.7% from $110 million. Half of that is devoted to Europe.

It took four years, but Mr. Schmohl's lobbying effort was successful.

"You have to explain to people that although they may not get 100% satisfaction of their local needs with a European campaign, it is better to accept a 70% or 80% satisfaction and to have the cross-border impact."

Recent Nokia research shows consumers are making a connection between the seagull ads and Nokia's cellular phone spots, which is what was supposed to happen.

The phone campaign, centered around the theme "connecting people," shows scenes of disparate couples meeting with each other on park benches. Grey Advertising handles the ads through individual agencies in its European network.

Nokia is also redirecting much of its business-to-business communication to the consumer, moving its account to Grey's consumer agency from its business-to-business arm.

Nokia's new strategy is allowing both of Nokia's businesses to flourish. "Cross divisionally, it is building the Nokia brand," said Mr. Schmohl.

In this article: