Vendors in battle of mindshare vs. market share: Nokia and Apple need both, for different reasons

A portrait of success for a handset vendor might contain these elements:
Offer a unique product that captures the consumer’s imagination (mindshare!) and suits their wallet and watch global sales ignite like a wildfire (market share!).
The mainstream media does flashy anatomy-of-a-success stories, while the sycophantic industry press wont’ leave you alone – making the latter ripe for leaks to feed the frenzy. Sales boom. You have the upper hand in deals that take you from your home market across the world.
Add a CEO who spouts faux-Zen-like statements, which later sound like smack from someone with too much self-esteem. That’ll get you prodigious profits and a shot at the big time. (Yes, arguably, this is Apple Inc.)
Or try a different model: a low-key but relentless use of innovation, branding, marketing and manufacturing that leverages your home market advantage into a steady stream of incremental, global successes – the long march. Develop myriad products that meet the different needs of consumers in the global patchwork quilt of markets, geographies, cultures and price points. Eschew the world-beating single product for more modest mindshare in each of your key markets. (Yes, a simplistic portrait of Nokia Corp.)
The pursuit of mindshare and market share – buzz and bigness, if you like – poses an intriguing dichotomy. The two concepts are linked, though not necessarily by causality. Mindshare may lead to market share, a move now underway at Apple with the iPhone. Market share delivers an audience, but capturing mindshare isn’t guaranteed – arguably, a perennial challenge for Nokia, which has run away with the global handset market over the past several years. Arguably, to thrive, you need to attain a measure of both objectives.
And, clearly, it’s not all about handsets. Apple has created a closed loop of device-and-content that is exclusionary. Nokia is building a more open device-and-content paradigm. Both seek an Internet-based, software-driven stream of renewable revenue that keeps one-time gadgetry sales in perspective.
Skirmishing in the U.S.
How Apple conducts its global rollout will undoubtedly speak volumes on the arc of a mindshare to market share narrative. And how Nokia conducts its nascent resurgence in the United States seems certain to reflect how a company might approach mindshare and market share with equal fervor.
In fact, the two companies have already crossed paths in the U.S. Apple made AT&T Mobility bend to its revenue model, while Nokia continued to struggle with SKUs (stock-keeping units) at that carrier. But when Apple fans cried foul over the closed iPhone platform, Nokia swiftly ran full-age ads in major metro newspapers touting the unlocked nature of its flagship N95 handset (though the company denied the link). Undoubtedly there’s more to come for the American audience.
Apple has leveraged its flexible platform to morph its product to market demands, dumping its 4 GB iPhone for a 16 GB model, launching an SDK (software developers kit) to encourage third-party applications and adding functionality to please I.T. managers in enterprise.
Meanwhile, U.S. market changes – particularly the public call for open-access networks – continue to fall in Nokia’s favor.
The pairing of these two powerful companies to illuminate the mindshare/market share sides of the coin is admittedly fraught with peril, as analysts pointed out when contacted on the subject. The two concepts can be complementary and contradictory at the same time – a conundrum, if you will, of the handset market.
Analysts weigh in
“The open question for Apple is how many SKUs do you need to create scale?” said John Jackson, analyst at Yankee Group. “You can get into potentially treacherous territory as you expand (the diversity of your portfolio). One has to master the cadence of product launches and SKU management (i.e., when to refresh). Apple may have buzz right now, but as Nokia has pointed out, they will turn out several thousand phones as we speak.”
On the other hand, Jackson added, Apple may not need a broad portfolio. While localizing design and feature sets has been important to most incumbent vendors, Apple may decide that healthy margins and profits beat the pursuit of big market share.
“In a sense, mindshare begets market share, which begets mindshare,” Jackson said. “Nokia has a big scale advantage in emerging and in mature markets. They’re concerned about getting out-softwared by the likes of Apple as they monetize vertical markets in music and enterprise. And capturing upgrade sales is an ever-present challenge.”
How does this affect the U.S. market?
“Nokia clearly recognizes the mindshare potential of the U.S. – particularly the minds on Wall Street,” Jackson said. “And it is making efforts accordingly.”
Analyst Rob Enderle at Enderle Group said that if Apple wants market share, it has no choice but to expand the portfolio – downward.
“Apple needs a line of phones, a portfolio of entry-level and mid-range products, and get all of them accepted by enterprise,” Enderle said. “The iPhone currently is largely viewed as a toy and Apple will have to address its image problem in the smartphone market.”
“For its part, Nokia may want to look at fielding fewer platforms,” Enderle said. “They really need to figure out who their customers are and build for them – be more marketing oriented, like Apple, and less engineer-driven.”
“The upgrade cycle,” Enderle added, “has always been the Achilles heel of all these vendors. Nokia’s exposure is that, with 40% market share, they’re the target for the competition.”
The American opportunity
Analyst Avi Greengart at Current Analysis said conditions were ripe for both companies to make strides.
“I don’t see a challenge for Apple, they’re in a wonderful position,” Greengart said. “I don’t see a conflict between mindshare and market share. They’ve got a platform they can build on. They’ve released an SDK that changes the product from a month ago. And if they wanted to lower prices and expand their market and be even more dangerous, they could do that. But they’re dangerous now, pulling away the high-end consumers in this market. That’s like Nokia in Europe with the N95 – if it’s subsidized, why buy anything else?”
“The exact same thing is true for Nokia,” Greengart said. “In Europe and parts of Asia they have an astounding level of both mindshare and market share. In emerging markets, it’s crazy off the charts. ‘Nokia’ translates to ‘upwardly mobile’ – okay, that’s a joke, but it’s true. Nokia has 70% of the Indian market. In the U.S., of course, they have neither mindshare nor market share. But it looks like Nokia will make a half-decent run here this year. So, in the U.S., Nokia has a dual challenge, but this market’s also its biggest opportunity.”
Greengart said that brand loyalty will play in Nokia’s favor globally, particularly if the hits keep coming.
“In India, Nokia is clearly already getting a chunk of upgrade sales,” Greengart said. “Brand loyalty alone won’t get you the upgrade sale, but if you can stay on top of the wave of innovation, you’re okay. You can’t ever let up in this market – that’s the No. 1 rule.”
To analyst Iain Gillott, Nokia’s success in the U.S. depends on embracing CDMA technology and that means reaching a licensing agreement with Qualcomm Inc.
“Nokia has to settle this thing,” Gillott said. “They should look at Motorola and be scared. Moto had mindshare and market share and now it has neither. Nokia could miss on LTE if it’s not in tight with Verizon Wireless and (parent) Vodafone.”
The downside of 40% marketshare, said Gillott, is that “you’ve got to keep the hits coming. Nokia can’t lose even a little market share now or it will get pounded by Wall Street.”