Is Nokia Committing Retail Suicide?

Illustration for article titled Is Nokia Committing Retail Suicide?

The Lumia 920, lauded and yearned for as the very savior of Windows Phone, goes on sale today for $100. It's a pretty sweet phone! Not quite what we hoped it'd be, but a solid handset. But is the lower price a problem rather than a selling point?


Nokia—and really anyone trying to sell something that isn't an iPhone—faces a horrible dilemma. People generally don't like spending money if they can help it, so making your Thing cost less than Apple's Thing might make people consider your Thing instead.

But here's where that tactic gets tricky: If we see a phone that costs too little, we might lump it in with the rest of the cheap phone schlock and assume it's a budget dud. The kind of phone AT&T gives you for free after you drop your real phone in the toilet.

Nokia is really in a bind here. It needs to get Windows Phones into peoples' hands—and quickly—while also painting itself as desirable and worth being excited about. Basically, Nokia has two choices—and choosing wrong could be disasterous.

Choice A: Make the Lumia 920 cheap.

Nokia is trying still trying to dropkick its way into a saturated market—smartphones are everywhere, and both Apple and Samsung sell millions upon millions of them. There's also the slight problem of nobody really knowing what the hell a Windows Phone is, despite it being a pretty awesome OS. Nobody pays attention.


One way to get attention? Price to sell, baby—put those 920s out there and undercut the hell out of the competition. Whatever Nokia lacks in status, maybe it can make up for in sales. Maybe the 920 won't be the luxury diamond that the iPhone is (and Samsung's big screens are becoming), but, as Professor Anindya Ghose of NYU's Stern School of Business school notes, "Every market is segmented into low price and high price goods and there are takers for both kinds of goods." In other words, Nokia could run the cheap show—which, if recent history is any indicator, could become the free show before very long.


This is, obviously, the move Nokia made. The big risk? "It will be seen as a cheap product," Ghose predicts, despite all the hype and glamor at its back.


Which leaves..

Plan B: Make the Lumia 920 expensive

We like expensive things, even when we can't afford them. We want them. And in the eyes of many, Nokia's still the same company that made the first plasticky cell phone you ever owned. The one with Snake, right? That's not premium. That's not luxury. And it's sure not very cool.


"It's very hard for Nokia to reinvent its brand overnight," explains Professor Kartik Hosanagar of the Wharton business school at the University of Pennsylvania. "Consumers have a certain mindset with Nokia—it's a safe product, not necessarily sexy."

And the only thing that can hurt Nokia more than its un-sexy reputation is selling its phones like off-brand sneakers. "It's an uphill battle for Nokia despite lower prices," says Prof. Ghose. "There are always takers for lower price goods, but in the smartphone market [Nokia] has too much of a late-mover disadvantage compared to Apple and Samsung." In other words, the time for a Lumia that wins by undercutting might be over.


Pricing your flagship phone so far south of the competition also sends a clear message to our buying brains: "Consumers have a 'latitude of price acceptance,' (a minimum and a maximum price that they think a product should cost)," explains Stern's Professor Priya Raghubir, who specializes in the way we think when we spend money. "If price falls below the lower level in this latitude, they will most likely believe it is a 'lemon' and the lower price will lead to reduced demand (e.g., a new car that sells for 3K!)." That yellow 920 could be a poor color choice...

What we could be left with is a phone that looks like a washed up beauty queen at the AT&T store: a bright face in a dim room at a price that's sort of sad. Too cheap to be a status item, too expensive to be a freebie, too heavy to enjoy holding. And that's not a route that points to your wallet. Or pocket.


It's a tricky situation.

Photo by Ryan Ozawa



Brian Barrett

I've said this before to Sam but I'll say it again here: this argument makes no sense to me. Nokia (and Microsoft) need these phones to get in as many people's hands as possible. No one knows what Windows Phone is. Why in god's name would you take a $200 flyer on something you're unfamiliar with when the iPhone costs $200?

Maybe, MAYBE this makes sense if the Lumia 920 is the best phone on the market by far. But it's not. It's a brick. So how on earth does charging more for something that's not as good turn into a win for Nokia? Even people who did get suckered into buying it just because it was more expensive would figure out pretty quickly that it wasn't worth it, and then they'll tell their friends what a ripoff Nokias are these days, and then you've lost countless customers for the next Lumia.

Even the experts you interviewed seem to indicate that $200 is far-fetched. It's hard to reinvent overnight, Nokia's at a late-mover disadvantage. What about those says "charge more"? To me that says that Nokia's got a hard enough time as it is even at $100, not that doubling the price would make things at all better.

Nokia is doing what it needs to do to gain market share and to introduce consumers to an unknown quantity. That's a win for them, a win for consumers, and a win for Windows Phone 8. Suddenly declaring yourself a luxury good even though there's nothing luxurious about your product? That's what would be suicidal.