Samsung: Redefining a Brand Case Summary

Samsung: Redefining a Brand Case Summary

Ikwuagwu Bassey Ikwuagwu

Marketing Management

University of Ontario Institute of Technology

Description of the Situation

Samsung Electronics emergence as a leading global consumer brand was regarded as one of the great success stories of the past decade. Samsung had been named the world’s fastest growing brand by consulting firm Interbrand in each of the last two years. During that period, the estimated value of the Samsung brand had risen from US$6.37 billion in 2001 to US$10.85 billion in 2003 (see Exhibit 1). A major factor behind this impressive growth had been Samsung’s effort to redefine itself as a vendor of cutting-edge, “gee whiz” consumer technology. This brand repositioning was seen as vital to the company’s future success, and remained a key corporate objective. Despite this success, senior executives in Samsung’s head office in Seoul, Korea, believed that much work remained to be done in their effort to redefine their brand. While the Samsung name had become more familiar and more favorably regarded among consumers, it still carried many strong associations with the company’s past, when Samsung’s consumer product line consisted primarily of low- to midrange products sold at affordable prices via a hodgepodge of retail channels. Largely for this reason, many North American and European consumers still saw the company as a follower rather than a leader in bringing new consumer technologies to market. To overcome this problem, Samsung executives had directed country managers to “take the necessary steps to establish Samsung as a premier consumer brand” in each of their respective markets. Canada was one of such markets, and J. S. Park who was the president of Ontario-based Samsung Electronics Canada (SECA) was charged with developing a strategy for managing the evolution of the Samsung brand in a highly fragmented Canadian market (with dozens of multinational firms competing for market share and, Sony clearly leading the pack in terms of brand recognition and sales) consisting of less price sensitive buyers who placed a great deal of emphasis on good customer service, favorable return policies, and were highly technically savvy and quick to adopt new technologies.

Samsung management divided the Canadian consumer electronics market into four

segments:

• high-income families segment: which usually yielded the highest margins and thus constituted the primary target for most major brands. Sales to this segment were estimated to be growing faster than the 20 per cent average annual growth rate experienced by SECA in recent years, and generally consisted of large, onetime purchases of durable goods such as high quality TVs. Brand image played a critical role in their purchase decision, as consumers in this segment were known to favor well-known, established brands.

• young generation segment: consumers in their teens and 20s who were highly interested in, and knowledgeable about, digital technology. These individuals were generally not brand loyal and were open to trying new products, although financial constraints meant that they tended to buy smaller “gadgets” rather than more expensive purchases, such as large-screen televisions. Due to the technical savvy of this segment, high-tech digital products such as hand-held devices and MP3 players were enormously popular.    
• The business user segment: which was unique in that its main purchasing criteria were reliability and the ability of the product to satisfy a specific set of needs. For instance, major Canadian banks had recently replaced thousands of bulky CRT monitors in their branches with thin LCD monitors in order to increase workspace and convey a high-tech image. Customer support and service were also major factors in their purchase decision, since products purchased in large volumes typically required ongoing service.

• Hobbyists segment: who were a relatively small niche market of technology enthusiasts who enjoyed building their own electronics using off-the-shelf components. Sales to this segment were modest and, because these consumers, were usually price sensitive, the market was characterized by extremely low margins.

Identification of the Major Problems

 Park knew that there would be many obstacles to achieving this task, and was concerned about a number of issues:

• What changes should be made to Samsungs marketing mix ?
• How much would the brand repositioning cost ?
• How might Samsungs distributors, competitors, and existing customers react to this attempt to move the brand further upscale ?

Solutions for Solving the Problems

• New innovative, next-generation, and easy to use digital consumer electronic devices with cutting-edge technology should be developed and introduced to the market to establish Samsung Electronics brand   as a frontrunner in bringing new  consumer technologies to the market. This change would be welcomed by the Canadian consumers who are highly technically savvy and quick to adopt new technologies. These new products should be designed to target the needs of the different profitable segments (high-income families, young generation and business user) in the Canadian market. Low-end items that are not especially compatible with the company's new positioning should be slowly phased out, replacing them with more quality, reliable, and better user friendly high-end upgraded version.

• Although the low prices being charged for some Samsung products were undermining the company's efforts to reposition the brand, raising retail prices (with no additional value added to the product) across the board on the company's lower end offerings would most likely drive Canadian consumers to other brands which would have a negative effect on sales. Any increase in the price of a product should be accompanied with an increase in value offered. Added value endowed to a product is what defines brand equity. The better approach to adopt in resolving this issue is to slowly transition the products with low prices into high priced models by making innovative changes to them. If you want the consumers to pay more for a product, give them more value.

• Expanding the Company's distribution network in Canada to include its own nationwide product retail and service channel, would give the company a reliable distribution channel over which it would have complete control, giving them an opportunity to showcase their leading-edge products in an ideal retail setting, improve brand recognition, and offer quality product maintenance services. In addition, It would also give the company greater leverage when dealing with the increasingly powerful Best Buy/Future Shop retail chain. Also a website should be designed for the Canadian market to boost the company's online presence in the region considerably, offering e-commerce services.

• New promotional campaigns need to be developed and implemented to communicate the company's redefined value proposition to the Canadian consumer. Loyalty programs should be introduced to improve consumer patronage and  loyalty, especially within the young generation segment of the Canadian consumer market. The introduction of new electronic products with cutting-edge technologies would increase the marketing and advertising budget (which currently stands at $15 million).

• Samsungs attempt to move its brand further upscale would be seen as a welcome development by the distributors because of their inclusion in the company's strategic plan.  With effective advertisements and promotional campaigns, the customers would identify with the company's redefined brand. Competitors will keep looking for innovative ways to remain competitive that is why it is important for Samsung Electronics to ensure its research and development (R&D) division remain properly funded to enable them keep making innovative discoveries.

Comparing Feasible Alternatives

Another approach to resolving the issue of low priced products would be to introduce new and better performing products, with more appealing features and functions that encourage the consumer to make the switch.