Bo Bäckman: Price-value elasticity (PVE) – Nokia´s transformation into a Superbrand

2009/12/18

Today Nokia is the undisputable Superbrand in mobile phones – but threatened by Samsung, LG, Rim and soon Google. When and why did this happen? What did Nokia see in the market that many others did not foresee? And how do you measure factors that will turn a market upside down. In this case from an engineering product developed by technicians to a total experience (Nokia) set in motion by designers (both technical platform designers and experience designers).
The basic assumption is that it pays to do market research and that you need to go from often non committing attitudes to priorities among the consumers. And that price has to be taken into account.
What is so important that the market is prepared to pay for it? What is so unimportant that few are willing to pay?

The method – Conjoint analysis
Traditional market research often asks “what is important to you when buying a mobile phone”? The answers you get are often a Christmas wish list. “I want it all at a low price”. The trick is not to ask about each feature at a time but instead combine the factors systematically and ask about a whole with a price tag. The basic assumption is that the market can prioritize between offers . They can weigh between price and utilities. Even more subtle utilizes like image. “I want to be seen in an Odd Molly dress and besides I love their unique design. They cost more but it is worth it”. When you buy a detergent you have a large selection of brands to choose from but you often know what you are looking for, what features you prioritize. A price reduction on a detergent you usually do not buy might jolt your priorities. “That is a good price and I know the product. I buy that instead of my old brand and will save money”

Attitudes are often measured in research. Priorities are what should be measured. The method that can handle priorities is Conjoint – Considered Jointly. Not sequential questions as in traditional research but in a systematic fashion that uses “Full concepts” instead of one question at a time.
The respondent in the survey assess a”whole” – not attitudes to each feature. Not price by itself, not design by itself but the tradeoff between price and design. You need to find the priorities, the tradeoff between features and price

The Nokia case

The study was initiated by SVID, Stiftelsen Svensk Industridesign, who was primarily interested in the impact of design.  Below are the attributes and the parameters that were used. It is a simple model that focused on elasticity for design vs. price.  What trade off between designs and price was the market prepared to make? At that time (end of the 1990:ies) there were two main design features: The more square Ericsson design and Nokia´s more organic design. Today the design of mobile phones has entered a new realm. But still possible to analyze with a Conjoint method.

Conjoint is a very cost effective method done on the net today. It is easy to set up but you must not have many attributes and parameters. It makes answering the questions too complex and will reduce reliability and validity. As it is a cost effective, fast (2-4 days with analysis) method it is possible to do more than one test. You can refine by penetrating deeper into a parameter.

The results
Price was the single most important factor followed by design. The more technical aspects and manufacturer had less impact on the choice of a new mobile phone.

Simulation – The eternal “What if” question.
What if we raise price – what is the price elasticity? Will we lose market share?
What if we introduce a new design – what is the value elasticity? Will the new design attract new customers and at what price?
After the survey and the initial analysis the interviews were set up in a database. We “constructed” two phones:
1. A Nokia design with different prices
2. An Ericsson design with different prices
The technical aspects were the same – we wanted to focus on:
1. Value – design
2. Price – what was the design worth
In the simulation phase we analysed a number of “phones” in order to find what the design was worth.
With the same price 25% would chose Ericsson with its design. 54% Nokia.

If an Ericsson cost 500 Nokia could charge 1 000 and still get the same choice share. The design had doubled the value of a Nokia.

Segmentation before you start
Today the market is much more fragmented with specific target groups and a large variety of features and applications. This means that you need to segment before doing a Conjoint.
A broad segmentation in Sweden today:
1. The silent majority (51%) – just calling and answering
2. The talkative (30%) – communicating with the phone
3. The applicationists (15%) – the terminal as a tool for experience and the daily life
Choose segment and do a Conjoint. It is worth it.

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Bo Bäckman: Find and develop Gaps in the market

11/12 2009

As much of brand perception is based on values it is interesting to identify values that are “homeless” in terms of Brands.

Today in Sweden we are 10 months away from the national election. The political map is changing and volatile and values will play an important role.

Are political parties’ brands? Yes I think so. They are dependent on brand promises, strategy, communication, media tactics, ambassadors, management, PR … The same prerequisites as for creating a Superbrand.  Many of  the prerequisites  are mirrored in values.

To measure political parties

Traditionally you ask a sample about “Which party is best today”. But below “Best” there are more or less probable options. These you can identify by asking: “Which parties can you consider voting for”.

• Definitely
• Probably
• Maybe
• Hardly
• Never

The analysis will show:

• Percent convinced – have a “Definite Party”. These are hard to move and make good ambassadors
• Shared potential – might consider two or more parties. Make then go your way. They will listen as they are hesitant and need to find a reason to make a choice.
• The “neverists” – they will never believe anything from that party. And they will take every chance to discredit that party.

• In short: Find and influence the possible flows.

Political BrandMapping:

SD: Sweden Democrats S: Social Democrats FP: Liberals M: Conservatives C: Center party V: Socialist party MP: Environmental Party

1: Modern life style, but with a focus on the local.
2: Concerned about the society – empathy.
3: Selfcentered with a focus on a troubelsome everydaylife.
4: Open for modern life style and pretty content with life. Want to express themselves. A global perspective.

The concept for Political BrandMapping is to start with many values, extract the Political Drivers by finding what core values correlate with having a political party on your “Short list”:

The Core values map (see below) is formed by plotting values against each other so that the values have a maximum distance between them and then position the parties with a maximum distance between them.  If you have a value in the right hand upper corner and another in left hand upper corner these are not shared by the same individuals. They split the political Brand map and the parties.

Conclusions

The new party (SD) is filling a Gap among those who are more passive. The SD possible voters are hostile towards the large cities. They want to protect their little world from changes – be it new values or strangers. Life is often tough for them (and unfair in their opinion).

The party that is closest to SD is the Social Democrats – but still a distance away. We must remember that S is a large party that holds sometimes opposing values. The common denominator is equality.

The environmentalists feel a little bit lonely. Their values do not correlate with other values as you can see in the chart. Environmental matters are quite far from other values.  Being an environmentalist seems to be a priority – not very much else matters.

The two parties that attract the votes of the environmentalists are MP and V.

KD and C are close and their potential voters are quite content – life is good to them. An interest in Looks&Fashion is correlated with thinking “Life is good”. But that life is good doesn´t prevent them from taking in new impressions.

Being a liberal (FP) is to be split: To be an early adopter as well as a traditionalist.

The conservative party M is very close to the liberal party FP. M is far away from S but as S is a large party there are values in the new M strategy that attracts S-voters

The next step in value positioning is to elaborate on the values. The values above are a condensation of several values that correlate and have been labelled. There must a more thorough analysis in order to understand more of the value drivers. This will not be done in this article.

The possibilities

Spring 2009: How many are possible for the parties? How many are convinced?
Source: Orvesto 2009. 16 000 interviews

In all 61 % have a “definite” party. The sum of all possible parties is 224 i.e. the voters have 2.2 alternatives.

So everything is possible – the political map is volatile. This also makes political choices very sensitive to different moves from the political actors and media. The closer you get to the election the more important it gets to make a choice – you observe more, you listen more and you discuss more. And media and politicians are very eager to provide “information”

The table below shows cross possibilities. I.e. if you have C as a possibility what other parties can they consider? 68% of the possible C-voters have FP as a possibility (definitely or maybe vote for). As you see from Sum possible The smaller parties (C, FP, KD, SD, V) have higher sums. The flows between them can change rapidly. You can also see that there is a rather large propensity to move across the political boarders. 24% of the possible S-voters can consider voting for M.

Bo Bäckman

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Mass personalization.

2/12 2009

In the 1970’s Burger King introduced their “have it our way” slogan summing up its difference from rival McDonald’s. The slogan was abandoned soon after, only to be brought back in full effect in 2004. Andrew Keller, creative director in charge of the account at Crispin, said at the slogans re-launch  “At a time when self-expression and mass customization are critical elements of culture, the line makes total sense.”

Keller was tapping into the rising culture of ‘ME’ which is so much more prolific with the rise of social media. Social media now sets the individual firmly in the center of their world, leveling the playing field and allowing their opinions to carry as much, if not more, influence than that of the traditional channels. You may see narcissism as a negative trait, but to the ME generation it as a means to an end. In a recent poll of American students the consensus was that “being self-promoting, narcissistic, overconfident, and attention-seeking is helpful for succeeding in a competitive world.”

This growing narcissism is leading to more and more brands allowing their customers to personalise their products. Since 2007customers to Nike have been able to create their own unique shoes online. With the Nike iD Website a customer can pick the shoe model, choose the color of almost every aspect and have a short message embroidered on the heel. This today, has developed into Nike placing “customisation” as an integral part of their webshop.

Mini Cooper allow their American customers to create their own personal mini online, with almost every part of the car being changeable. This of course, has been offered before from other manufactures, but mini goes one step further, with their custom paint shop. Here customers can use an extensive set of design tools or even go as far as uploading their own images to create a truly personalized mini.

HTC is successfully using personalisation in the fight against the mighty iphone. The Make It Mine, concept is “About feeling your HTC phone was created for and by you.” HTC are not only doing this through the customisation of Googles Andriod mobile operating system. They are also allowing their customers to design their own personal cover for their phones.

Finally a newly started Swedish company, Few are taking on the traditional watch industry, by combining logistics with e-commerce allowing their customers to create their own personal timepiece. Customers can choose to combine all details of the watch leading to, as they say  “around 1 billion possible combinations – offering a unique possibility for you to wear a unique watch!”

These are just a few examples of how advancements in manufacturing, logistics and e-commerce, are enabling brands to cater to the demands of the ME generation. More and more customers are no longer satisfied with the premium product. They also expected it to be to personal.

Steinar Danielsen

Steinar Danielsen is the co-founder and Creative Director of Supernative, a digital communication agency based in Stockholm. He works with providing analysis, online strategies, creative concepts and digital identities, for a range of international brands.

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