<%@ Language=VBScript %> <% CheckState() CheckSub() %> Sony Ericsson T610 - Redrawing the adoption curve
IPA

IPA Effectiveness Awards

2004

Institute of Practitioners in Advertising, 44 Belgrave Square, London SW1X 8QS, UK
Tel: +44 (0)171 235 7020  Fax: +44 (0)171 245 9904

Agency: Bartle Bogle Hegarty Authors: Martin Smith and Heather Alderson

Sony Ericsson T610

'Redrawing the adoption curve'

INTRODUCTION

This paper is about how the Sony Ericsson T610 became the 'must-have' mobile phone in the autumn of 2003. Despite the risks, Sony Ericsson was courageous enough to break with convention at launch. It adopted a different targeting strategy from the competition and hence different creative and timing strategies. Its courage was rewarded: it achieved more than double the payback that it would have generated had it adopted a standard marketing approach, and with the help of the T610, Sony Ericsson reported its first ever quarterly profits.

This strategic change means that this paper is not just a story of advertising effectiveness, it is also a story of advertising efficiency.

Background: A Critical move from a recent joint venture

In October 2001, Sony Mobile and Ericsson Consumer Handsets Division merged, to create the Sony Ericsson Mobile Communications joint venture.

Joint ventures are notoriously problematic: McKinsey estimates that around two-thirds of company mergers end either in failure or below-forecast sales performance, through a multitude of reasons, including differences in culture, management style and conflicting corporate agendas.

Market commentators were sceptical about this new joint venture. As one bluntly put it, “Two losing teams in mobile telecommunications entered into loose talks in the summer of 2000 to join forces & for Ericsson to cut its dreadful losses and for Sony to re-enter the global arena in mobile handsets”(Sigurdson, J, Stockholm School of Economics)

But Sony Ericsson was determined to prove the sceptics wrong.

In the period October 2001 to Spring 2003 Sony Ericsson marketed a series of phones that had been in the pipeline at their parent company.

By the summer of 2003, Sony Ericsson was ready to launch its first all-new mobile phone, the T610 camera-phone with a radical 'piano-black' and brushed aluminium design. (See Figure 1)

The T610 launch was a big roll of the dice for Sony Ericsson, and by this stage it was clear that the launch environment was harsh:

It was clear that some new thinking would be required to build a lot of sales and build them fast.

The Traditional Launch Model

The traditional model when launching a new mobile phone is to:

Target Early Adopters with feature-rich broadcast advertising because

  1. There is a belief that their recommendation (either verbally, or tacitly through visibility of use) will in turn influence the Early Majority/more mainstream consumers.

  2. This helps handset manufacturers cement relations with Network Operators (Vodafone, T-Mobile, Singular etc.) who sell via retailers to the consumer. By deploying broadcast at launch, they hope to start a chain-reaction of sales. (See Figure 2)

New thinking

Our hypothesis challenged this view. We felt that the influence of Early Adopters on the Early Majority was generally over-estimated. It was based on the assumption that Early Adopters mix and discuss mobile phones. We had no evidence that this was the case.

Sony Ericsson conducted an extensive segmentation of mobile phone users based on personal values and attitudes to phones.

Analysis revealed that both groups seek exclusivity. An Early Adopter's definition of exclusivity was, in part, the exclusion of the Early Majority. Similarly Early Adopters would distance themselves from more mainstream consumers in order to maintain their sense of status.

The study also suggested that Early Adopters are very focused on what they can do with phones. In focus groups they eagerly discuss the more advanced applications and compare performance credentials. The Early Majority, on the other hand, tend to focus on the appearance of the phone and look for obvious clues that something is new, different and better.

In practise this means that the Early Majority value different things from the Early Adopters. What is more, further lifestyle analysis (TGI Europa and Simmons in USA) suggested that Early Adopters move in different social circles and exhibit different behaviour from the Early Majority.

There has been some academic evidence to support this view. The work of Geoffrey R. Moore (author of 'Crossing the Chasm') first pointed out the notion of a 'chasm' between Early Adopters and Early Majority consumers in 1991. As illustrated below. (See Figure 3)

We decided to challenge the common practice of targeting Early Adopters and attempt to redraw the standard adoption curve for the T610, in order to create more sales more quickly. Essentially this meant changing the targeting and changing the timing.

The traditional model targeted Early Adopters with feature rich broadcast advertising at the outset. Our approach was to target the Early Majority with appropriate advertising 4 months after launch. For the rest of this paper this strategy is referred to as the 'Early Majority Approach'.

We believed this would have the added advantage of advertising against an optimal distribution base. However, it was not without risk. It could potentially alienate the network operators. Also given that mobile phones typically only have a lifecycle of about 12–18 months we could potentially shorten the overall selling period of the phone. (See Figure 4)

The Communications Strategy: Creating Desire amongst the Early Majority

Sony Ericsson's segmentation model describes the Early Majority as 'trend-followers'. Compared to Early Adopters they take fewer risks. Very often they seek the reassurance that their choices will earn them social acceptance ('is it the one to have and will my peers admire it?'). In order to assure them of social superiority, we had to give them all the right cues that the T610 really was 'the one to have' this year in mobiles.

It was clear that the design of the phone was not going to achieve social acceptance amongst the Early Majority on its own. When Early Majority consumers first saw the T610 in focus groups (NFO March 2003) they didn't quite know what to make of it. The new black &#38;#38; aluminium colour-way and square design was polarising. Some described it positively as;

'Simple

'Stylish'

'Neat'

'Retro'

'James Bond'

Source: NFO March 2003

Whereas others were more negative;

'Boxy'

'Old-fashioned'

'A remote control'

'Plain, rigid'

'Lacking in curves'

Source: NFO March 2003

As NFO commented in their research debrief

'&#38;#8230;..the rule breaking needs to be addressed, confidently and engagingly in any communications strategy (either in a visual or verbal context). Otherwise an important proportion of potential purchasers will simply default to marketplace norms.'

Source: NFO March 2003

Furthermore, they were still nervous of camera phones, fearing that they were potentially silly and with no real role.

'There is also a requirement (esp. with males) to express the social context of the device; bring it to life. The context is not one of juvenile pranks (although it may be used in this way)'

Source: NFO March 2003

The Role for Broadcast Advertising

The role for advertising was clear; to create social cachet for the T610 whilst communicating the simplicity and social importance of the in-built camera. Visual cues were key, we had to create an obviously stylish world for the product and bring to life a simple expression of the camera functionality.

The creative brief focused on the presentation of the T610 as a 'beautifully honed performer' by making the understated pared-down design of the T610 look irresistibly beautiful and by offering a slicker, cooler way of using imaging.

This creative strategy was in sharp contrast to the rest of the category where it was common place to focus on features for the Early Adopters or lifestyle advertising in an attempt to appeal to youth.

We knew that the Early Majority were generally sophisticated consumers and would know how to read premium cues into advertising. It was critical that when celebrating the visual contrast of the T610's two-tone design style in an open, public arena we did so in a confident understated manner.

Reversed black, and a choice of aluminium, red or blue backgrounds were used to show the product off to best advantage. It was critical to be 100% clear that the T610 was the 'one to have' in the media strategy. So instead of the usual placement in 'gadget media and newspapers, The Media Edge CIA recommended we place these simple, iconic product statements in arresting outdoor locations (see Fig 5) below) and in the style press (See Fig 6).

Additional copy was introduced in the more contemplative sections of publications. This was used to sell the benefits of the camera and give people a more detailed look at the phone. All good bar-room ammunition for the Early Majority (See Figure 7)

The point of sale reflected the print (See Figure 8)

The TV introduces people to the stylish world of the T610. We were aware that the details of functionality are rarely aspirational to people more interested in acceptably stylish products such as the ixus or the IMac. In the 'Pass it on' commercial everything is choreographed around the process of sharing an image. The phone is centre-stage, everything moves to the rhythm of the phone as an intriguing image is passed on around the globe. (See Figure 9)

The overall media strategy is illustrated below. The campaign achieved 70% reach at 1+ cover. (See Figure 10)

THE ADVERTISING EFFECT

We will demonstrate the effect of the campaign via 2 pieces of analysis:

  1. Sales with advertising compared to projected sales without advertising – to determine the advertising effect.

  2. The uplift in T610 sales compared to other advertised camera-phones – to demonstrate the proportion of those sales that were due to the Early Majority Approach. (See Figure 11)

How we will Measure Effectiveness

Markets

Proving advertising effectiveness requires robust, comparable data, from many sources. Whilst the T610 activity ran globally, such data is only available from six European countries: Great Britain, Germany, France, Italy, Sweden and the Netherlands. Combined, these countries account for two-thirds of Sony Ericsson's European business.

Analysis periods

The periods used to prove effectiveness are pre and post advertising: (See Figure 12)

Seasonal Adjustment

The camera phones market sees an uplift in sales in December. There is therefore a danger of overestimating the advertising effect. To remove this, the December uplift has been removed in all our charts and calculations.

THE ADVERTISING EFFECT

Sales Increased Post Advertising

Sales grew faster after advertising than before. The following chart illustrates the T610's sales before and after advertising and we see that sales increased significantly across all countries. (See Figure 13)

The Overall Sales Contribution of Advertising

In order to calculate the effect of advertising, we first need to compare the actual T610 sales with what sales would have been without advertising.

We do this by measuring the number of sales per distribution outlet (RoS) before advertising and applying this to the monthly distribution after advertising. (See Figures 14, 15, 16, 17, 18 and 19)

Based on the difference between the 'with and without' advertising curves, the total sales generated by advertising in each country are given below. (See Figure 20)

It is important to note that, because the 'without advertising' curve is based on post-advertising levels of distribution, we have removed the effect of distribution from the analysis.

The Proportion of Sales Effects Due to the Early Majority Approach

Comparing T610 sales with the market

We now need to know what proportion of these sales was due to the Early Majority Approach

To do this, we must make a comparison with other advertised camera phone launches, and compare the shape of the two adoption curves.

From the two adoption curves, we can see that T610 adoption grows ahead of market adoption as soon as the Early Majority advertising is launched and continues to do so, accelerating consumer adoption of the T610.

Therefore, the market adoption curve reflects the adoption level that T610 might have achieved if a traditional targeting and timing approach had been used. The difference between the market curve and the T610 curve tells us the proportion of incremental sales generated by the Early Majority Approach.

Broadcast Advertising brought forward sales among the Early Majority

In most technology markets adoption slows down as a product ages. However, our analysis shows that advertising accelerates T610 adoption, compared with other camera phone launches.

Some six months from launch, this is unlikely to have been caused by Early Adopters. Instead, advertising manipulated the standard adoption curve, by bringing forward sales among more mainstream, Early Majority consumers. (See Figures 21, 22, 23, 24 and 25)

Calculating the Sales Contribution of the Early Majority Approach

These learnings allow us to determine the sales effect of the Early Majority Approach, versus the effect of a traditional advertising approach. We do this using the T610 adoption curve and the market adoption curve in the following calculations:

Based on these calculations, the sales contribution of changing the adoption curve, versus 'standard timing' is illustrated in the table below and we can deduce that sales due to manipulating the adoption curve accounted for 61% of incremental sales. (See Figure 26)

Advertising Drove Product Desirability

Brand tracking research demonstrates that consumers' perceptions of the appearance of Sony Ericsson phones went up. Ratings for 'having attractive phone designs' with 'superior camera functionality', and phones people 'wanted to be seen with', all increased as a function of advertising.

That these ratings have increased significantly versus pre T610 data also suggests that desirability was driven by advertising and not by product visibility alone. (See Figures 27, 28, 29 and 30)

Advertising Drove Product Desirability Among the Early Majority

The same data also suggests that advertising drove desirability among the Early Majority, as opposed to Early Adopters & in line with our strategy. (See Figure 31)

Advertising Drove Drand Consideration

Consumers' willingness to consider buying a Sony Ericsson handset also appears to be driven by advertising, with brand consideration increasing significantly in the post advertising period.

This is remarkable, given Nokia's market dominance. With 40% of the camera phones market, Nokia had more than double the share of the next-largest competitor. It therefore would have attracted a disproportionately large degree of brand consideration, making the job of creating consideration for smaller brands such as Sony Ericsson even more difficult.

(Note: brand tracking research was not conducted in Sweden) (See Figure 32)

Advertising Drove Brand Consideration Among key Target Groups

The sales response of key target groups is also supported by brand tracking data. This shows significantly higher levels of consideration for Sony Ericsson during the advertising period compared with beforehand. Furthermore, these levels are higher among Early Majority consumers than among any other group. (See Figure 33)

DISCOUNTING NON-ADVERTISING FACTORS

Christmas

As previously stated, we have removed the sales that Christmas seasonality brought to the T610, by reducing December's sales by the market increase observed during that month.

Retailers were not 'Pushing' Sony Ericsson

This data is taken from an annual survey of retailers, who are asked to rate different handset manufacturers on a number of key criteria.

Retailers' ratings of Sony Ericsson declined in 2003, versus 2002. Retailers will therefore have been less predisposed to recommend Sony Ericsson handsets, including the T610, than competitor handsets and so we can deduce that retailer 'push' did not account for T610 sales. (See Figures 34, 35, 36 and 37)

Pricing

It is possible to calculate the average end user price for a given handset, taking into account different factors, such as operator and retailer deals. From this, we can calculate T610 pricing relative to the market price, to account for competitor price fluctuations that would either benefit or prejudice T610 sales.

Relative price has decreased slightly in some markets. However, we would expect any handset's price to decrease as it ages. The price decreases seen here are, if anything, smaller than expected.

Apart from that, the relative price of the T610 either remained broadly stable or increased pre/post advertising.(See Figure 38)

Distribution

Our calculations on the sales effect of the advertising are based on applying different rates of sale to the same distribution data. We have therefore removed the effect of distribution from our analysis.

Visibility did not help the T610

2003 saw the arrival of exciting new 'clamshell' handset designs, driven by Far Eastern manufacturers, particularly Samsung. The 'clamshell' design swiftly began to take attention away from 'stick-phone' designs, like the T610. 'Stick phones' share of all handsets fell by 7% in 2003, marking a shift away from the fashion value of 'stick phones'.

Also, consumer tracking shows that Sony Ericsson handset desirability and imaging functionality ratings only increased after the advertising was launched, not in the 6 months prior, and only among those aware of the advertising.

Based on this, we conclude that visibility did not help sales of the T610. If anything, it made conditions more difficult.

Competitor Activity/Share of Voice

Share of voice is not a relevant pre/post advertising measure, as Sony Ericsson had not advertised for some time before the T610 was launched and therefore had a zero share of voice.

A more accurate reflection of the competitive media environment is total handset spend. Owing to the build-up to Christmas, the T610 had to fight its way through a heavier weight of competitor activity than existed before T610 advertising. It therefore found itself in an increasingly cluttered environment, making the job of advertising more difficult than at other times of the year. (See Figure 39)

Operator co-op Advertising

Joint marketing activity between handset manufacturers and network operators is not recorded in terms of actual spend, as it is for, pure handset advertising, nor is it logged by the standard media research databases, such as MMS. For example, Vodafone media spend is logged simply as 'Vodafone' or 'Vodafone business' and does not therefore allow us to determine how much of this featured Sony Ericsson products.

However, Sony Ericsson's own analysis does highlight the proportion of T610 co-op sales they funded. Unfortunately, the sensitivity of manufacturers' relationships with network operators means that we cannot publish this data. However, we have been assured that the level of co-op support featuring the T610 was higher in our pre-advertising phase, in line with the traditional view of targeting early adopters. It therefore did not account for the sales effects shown.

CALCULATING ADVERTISING PAYBACK

Profit margins are highly sensitive and, for obvious reasons, it is not possible to publish Sony Ericsson's specific profit margins in this paper. However, we have based our payback calculations on an average profit margin for the market as a whole, taken from the five key manufacturers*.

According to this figure, Sony Ericsson make €47.4 profit from each handset sold.

Therefore, the profit generated by advertising is as follows (See Figure 40)

Total media & production spend for the T610 was €22 million**. Therefore, the advertising return exceeded the investment by at least 30%.

All the calculations in this paper are based on volume sales as reported by GfK. In fact Gfk data only covers 70% of the sales in any particular European market. If we gross-up the figures to reflect the total market, then our payback figures can be presented as follows. (See Figure 41)

Total media & production spend for the T610 was €22 million**. Therefore, the grossed-up advertising return exceeded the investment by at least 90%.

CONCLUSION

Sony Ericsson's unusual timing, targeting and therefore creative strategy has paid off. By delaying communications and targeting the Early Majority instead of Early Adopters, its advertising changed the shape of the T610 adoption curve.

At our most conservative estimate, the Early Majority approach more than doubled the effect of the T610 campaign, selling 618,566 extra handsets and generating a profit of €29,320,035: a return which exceeded advertising investment by 30%.

The sales performance helped Sony Ericsson to their first ever profits announcement and has been widely credited with turning around the fortunes of the joint venture:

'Sony Ericsson is beginning to look up. It has been in the red since it was set up in October 2001 but, thanks to high-end camera phones like its popular T610, the group has begun clawing back market share and made a small profit in the third quarter' (Financial Times, 29.12.03).

FOOTNOTES

* This will, if anything, underestimate payback, as the T610 was a premium priced phone and the average margin quoted is for all phones, standard and premium, old and new.

* Includes Nokia, Samsung, Sony Ericsson, Motorola and Siemens.

** This includes all the global production costs. They could of course have been apportioned according to media weight. In which case the payback would have been greater.



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IPA, Institute of Practitioners in Advertising, London, 2004