Back in 2007, when we started Channelplay, one of our first projects was an In-Store Promoter Program for Nokia. At that time, Nokia dominated the GSM market with over 70% market share and the highest retail penetration across all brands. Walk down MI Road or Ganpati Plaza in Jaipur, and you’d likely find 20 shops within a 500-meter radius selling Nokia phones.
Despite being a commodity, selling Nokia phones wasn’t just about the product—it was about the experience. However, with minimal differentiation, retailers leaned heavily on price as their primary lever to close a sale. For instance, a phone purchased at a Dealer Price (DP) of Rs. 2800 might be sold for Rs. 2850, then Rs. 2800, and eventually dropped to Rs. 2750.
How did this happen? Nokia ran schemes offering additional incentives upon reaching monthly targets. Retailers, in their bid to capture a larger market share, started betting that by cutting prices to the lowest level among competitors, they would hit their targets and earn the scheme incentives—even if that meant losing money on each sale.
This strategy triggered a fierce price war. Stores where Nokia held a 70% share of sales ended up with about 50% stock share and only 30% visibility. Nokia’s in-store promoter was often tucked away, limiting customer interaction. Worse, retailers began de-selling Nokia phones by citing overhyped issues—like “poor battery backup” or “heating problems”—and steering customers toward competitor products. Retailers couldn’t stop selling Nokia due to its market dominance, yet they sabotaged the interests of their biggest partner by engaging in relentless price-cutting.
Fast forward to 2016, and Nokia has nearly vanished from the Indian market. While much has been said about Nokia’s product innovation failures and the rise of Android and iPhones, I believe the first significant drop in market share was largely due to channel dynamics—specifically, the absence of price discipline.
Today, many brands have learned from this scenario by instituting strong Market Operating Price (MOP) and Suggested Retail Price (SRP) enforcement programs. These initiatives provide clear price guidelines for products and leverage mystery shopping programs to monitor and ensure channel compliance.
By enforcing price guidelines, brands protect their channel partners from engaging in destructive price wars. Although strict enforcement can cause some friction, it ultimately benefits everyone—ensuring that retailers make a sustainable profit and remain motivated to promote the brand.
By ensuring that channel partners respect pricing guidelines, brands can safeguard their market position and avoid the pitfalls that led to Nokia’s downfall in the Indian market.
