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Youth part of Ericsson's future focus

By , agencyfaqs! | In | September 15, 2000
With the launch of two new mobile phones in India - the entry-level A2618 and the technology-packed R310 - Ericsson is training its sights on the youth segment

N. Shatrujeet
agencyfaqs!
NEW DELHI, Sep 15

Executives at Ericsson speak a different lingo from executives elsewhere. Market segmentation, for instance, isn't along Sec A, B and C lines. Ericsson brass talk about A, T and R. Or rather, ART segmentation.
Cutting a long story short, A-type phones are entry-level phones. Which means they have most of the standard technology features that Ericsson offers, plus the low-cost advantage. The flip side is they are only that much advanced, feature wise. T-type phones are, by contrast, far more advanced. But that's not the differentiator. These phones are defined by their styling - small, slender and compact in design. The dress phone, to coin a term. R-type phones are at the very end of the spectrum, packed with cutting-edge technology features.
Interestingly, ART segmentation is as much about consumer profiles as it is about Ericsson's products. "This segmentation of products is extremely helpful in researching markets and launching phones," says Ranjivjit Singh, director, mobile phones and corporate communications, Ericsson Communications Ltd.
"Consumers in markets that are yet to mature chose A-type phones as they are looking for something they can be comfortable with, both in terms of price and usage," he adds. "Take India's example. One look at this market and you know that A-type phones are what will sell here." Since 1995, when Ericsson first entered India, the company has launched approximately 30 models. Of these, close to 70 per cent are entry-level phones.
In fact, in the entire Asia-Pacific region, A-type phones account for 60 per cent of Ericsson's sales, by volume. T-type phones account for 30 per cent, and the rest is R-type. In value terms, of course, T-type phones account for 50 per cent and A-type accounts for 40 per cent. "As consumers become more comfortable using mobile phones, they start demanding more features and styling. And that's when they upgrade to first T-type, then R-type phones," explains Singh.
Last week, Ericsson unveiled two new phones for the Indian market - one, the entry-level A2618, and the other, the R310. The A2618 is Ericsson's effort to breach the Rs 10,000 price barrier. This WAP-enabled phone is priced at Rs 9,995 plus taxes. The idea is to offer consumers an opportunity to shift to the new-generation WAP technology at an affordable price.
The R310 is a "tough and rugged phone meant for active and outdoor people". This water-, dust- and shock-resistant mobile phone is targeted at the youth segment and is priced at Rs 15,495 plus taxes.
Speaking at the press conference that announced the launch of the phones, Jan Campbell, managing director, Ericsson Communications Ltd, said that these two phones were evidence of Ericsson's dedication to bring the latest technology to Indian consumers. "In two years, the number of mobile phones in India will exceed the number of fixed lines. We want to be a part of this wireless revolution and take mobile phones to the masses."
The size of the global mobile phone market is estimated at 450 million units. In comparison, the Indian market is a smidgen - a mere 1.5 million units are likely to be sold this calendar year. However, the silver lining is that the domestic market is expected to grow at 100 per cent, with sales of 2 million and 4 million units in 2001 and 2002, respectively.
For mobile phone manufacturers, the low penetration of phones - due to the prohibitive tariff structure - is disheartening. And if that isn't bad enough, with duties on handsets of up to 44 per cent, the hapless manufacturers end up losing consumers to the grey market. No wonder manufacturers are keenly awaiting the implementation of the revenue-sharing model between operators and the government.
As far as Ericsson is concerned, the focus is going to be on the youth. "India is an expanding market, and in any such market, the youth is the biggest segment," says Singh. The company is targeting the 20-30 age group and claims that more than half of its sales come from this segment. "For the youth the mobile phone is all about image and lifestyles," says Singh. "That's why we have come out with the R310 and the A2618. One is a trendy, technology-led image statement, the other puts the convenience of mobile telephony within the target segment's reach."
This is certainly part of Ericsson's global strategy. Take the daily six-minute interactive interstice on MTV, branded 'LiLi TM : version 1.2'. LiLi is the virtual veejay who chats with show callers in real time, who plays their favourite music video requests and gives viewers a glimpse of the latest technology and street trends. LiLi is powered Bluetooth wireless technology, pioneered by Ericsson - which also sponsors the show.
"Ericsson sees teenagers as driving the future," says Singh. "They are energized, emotional, market-wise and tribe-minded. More importantly, they grasp new technology very quickly and are constantly hungry for more. We believe their early adoption of new technologies will spearhead 3G, the next communication revolution."
The idea is to catch 'em young. And tell them that Ericsson has the technology they're seeking. Which is one area where Ericsson has been lagging in consumer perception. Nokia and Siemens have always been perceived to be technologically superior. Ericsson wants to put the record straight, it appears.
When asked about the sales targets that Ericsson has set for the R310 and the A2618 Singh replied, "We have very high expectations from the A2618s as it is positioned for the first-time buyer, and most of the growth is coming from this segment. It appeals to young buyers as well as businessmen who need WAP. The R310s will appeal to a smaller segment than the A2618s. The more outdoorish, rough-and-tough kind of user who carries off this phone with a lot of attitude."
Without mentioning figures, Singh said Ericsson's growth in India would be in line with market growth. He also claims that Ericsson is one among the top three players in mobile phones - the other two being Nokia and Motorola. "We have a market share of 12-15 per cent in the 1.5-million-unit market." The target is to take that share to 15-20 per cent over the next 12 months. "In a market that is growing by 100 per cent," he stresses.

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