Product Marketing vs Need For Innovation: Samsung Clearly likes the Former


Samsung in the recent years has been the global leader in mobile technology. At MWC 2014, they proudly announced that they had sold more than 200 Million Galaxy devices, and that’s a real feat for a company that has been labeled to just copy and paste. They are the ones to beat when it comes to Android platform and easily give the beating to Apple when it comes to products sold per number given that there is virtually a Samsung Galaxy device for every price point, starting somewhere in the region of Rs 6,000 all the way unto Rs. 46,000. That is quite a huge scale of product availability and usually it has been the case of throw plenty of wet stuff at the wall and hope some of it sticks, and no doubt a lot has stuck. However, post MWC 2014, there were plenty of noises that the Samsung Galaxy S V, the latest flagship from the company failed to play the so-called chords of innovation. The device is a solid overall player and will sell huge numbers, but imagine, had the same thing being done by say a Sony or an HTC, would they be so sure of big numbers? Perhaps no, so why is Samsung? Let’s find out.

Climb-Samsung

Reasons why Samsung is the global leader with the innovations?

1. The Solid Foundation is down to Innovation

Consumer technology is an industry that is driven by innovation. Usually it is the innovation in the product line, but Samsung has always adapted a different role. They say, marketing can only take you to a certain distance, but if there is somebody who has proven that statement wrong over a period of time, at least till right now is Samsung. They have successfully marketed their way out of innovation and it is a rather interesting story how they have done that. The first Samsung Galaxy devices, the Galaxy S I and the S II were without a doubt some of the best Android devices of the time, and then came Note I, which without a doubt was the differentiator of the time. An industry expert, someone who worked closely with the brand told us, “This was a time when Samsung still believed in traditional media, digital was always a supporting cast in this time while more cash was flown towards print ads etc, in fact, the digital spends, at least in India were around 5-10% of the total marketing budget.“

Marketing budgets The Galaxy S III was once again the game changer and thanks to innovative software features more than anything, sold by bucket loads. This was supported by an aggressive marketing strategy where Samsung spent very heavily on ads that poked fun at competitors like Apple and bringing on board mega stars to build the Galaxy brand. The media spend was always 360 degrees. According to Ritesh Singh, who was part of the media agency handling Samsung and leading digital practice this was the time Samsung really picked on the digital boom and currently, CEO of #ARM Worldwide, a Digital Consulting Company, “It was around the time of SIII that there was a tremendous pressure from the marketing team in Seoul to capture the digital buzz. A lot of focus as a result was on things like Social Media, attempts to go viral, online media spends etc. “

The best example of this was when Apple announced the iPhone 5, and barely two hours later Samsung began drafting print, video and digital ads. Just a week later, when the iPhone went on sale, the commercial titled ‘fanboys’ went up which basically showed Apple fans queuing up to get the latest iPhone. The video was the most viral video of 2012 and garnered more than 70 Million views. The effect of this? Samsung went on to sell its highest number of Galaxy device in the week post the launch of its biggest competitor, the iPhone.

Todd Pandleton, the CMO of Samsung’s US Mobile division said: “We knew this was going to be a big moment in time, when consumers are really paying attention, We wanted to take that opportunity and all that energy and make it Samsung’s moment.”

2. Huge Spends on Marketing

However, this kind of buzz did not come cheap and it was reported that in the first three quarters of 2012, Samsung spent over $349 Million marketing the device in the US alone, which is $158 Million than the 191 Million they had spent in the entire of 2011. These are huge numbers. Yes, to make all this possible, Samsung has had to expand it’s supply chain and the 220,000 employees in R&D does not come cheap, but that marketing budget is perhaps equal to the net worth of some of the smaller players in the industry which is a scary thought. The story of spending big on marketing continued in 2013, but with a change. According to the same industry expert, “add in the fact that there was a huge market volume to be consumed in India thanks to certain big players evacuating their place thanks to strange decisions and strategies, it made sense for Samsung to spend the huge volume that they did“

Market share

By September 2013 it was reported that Samsung had spent over $14 Billion in marketing their products all over the world. What this sort of aggressive marketing does is that it totally imprints the brand to the users mind, and no wonder Galaxy and Samsung, the two brands names are virtually known to just about every single person in their target audience. The change in strategy though, was most visible in the marketing numbers of Samsung in Korea. The net spends on the advertisements saw a fall from $1.63 Billion to about $661 Million while they spent heavily, as much as $889 Million on sales promotion. While the digital spends continue to be dominant in US, India market still remains more video sensitive.  Aman Malhotra, the lead for Digital for Samsung Mobile told us, “Samsung US is heavily digital dependent, in India Samsung is still predominantly dependent on TV “ without revealing any numbers.

Marketing Budget

The key take away from this is, Samsung has worked out on rebates, discounts and other such ticks to get the customers buying the products, and not sure if they anticipated, but a big daddy swept the floor away with perhaps even more aggressive marketing in India.

Despite these huge discounts, the sales numbers of the Samsung Galaxy S IV were a tad lower than that of Apple’s iPhone 5s/5c given the aggressive approach of Apple in India and their innovative buy back and buy and try schemes. Ritesh went on to say, “To some extent, I believe they did not anticipate what Apple did, who basically beat them at their own game. While they were busy battling the Micromaxes and Lavas of India, Apple came in to show India is an invaluable market to them and this was a shocker to the hierarchy too and reflected in sales. Given the whole Touch ID that the iPhone 5s bought, which was a groundbreaking feature plus the buybacks, you knew Samsung was in for a tough end to 2013“

3. A Dynamic and Everchanging Strategy

The change in strategy and focus on rebates and discounts are indicative of the fact that maybe the audience feels it seen all the innovation from Samsung already, and in order to drive sales, incentives are the only way out. When the S V was released, you knew, the device was an incremental update and nothing more. In fact, there have been suggestions made that the device was launched at MWC 2014 instead of a standalone Samsung event to shift the focus away from lack of innovation as they did not have much to show off.

Unpacked

It is not the best looking smartphone on the planet, perhaps not the most powerful either, and certainly does not has the most fluid experience thanks to Touchwiz, yet this device will be perhaps in the top two or three of the most sold Android phone in the annual sales report. Why? Simply cause it is Samsung, there are bound to be sales offers, there are bound to be great ads and with the competition really not having the sort of resources to compete with this sort of marketing, it’s a win yet again for the Korean giants at least more than competition. Just to put into perspective, Samsung’s yearly marketing budget is more than what Google paid for the net purchase of Motorola and three times the total market value of their competitors HTC.

4. The Ellen DeGeneres Tweet was like a Diwali Bomb; It made lot of noise, but apart from a moment’s brilliance nothing else may come out long term

Just about everyone in the world who knows how the world of Digital Marketing functions knows the reality behind the viral Tweet of Ellen DeGeneres from the Oscars. The tweet tat broke the record for most number of RTs in the world was well, planned and staged. Not just this, Samsung reportedly spent more than $20 Million on ads to be played in the breaks of the Oscars and also took to the event to launch the first commercial of the Galaxy S V. According to the report in WSJ, a deal was cracked between Samsung, Ellen and ABC. WSJ states: “While the stunt felt spontaneous, it wasn’t entirely unplanned. As part of its sponsorship and ad pact for the Oscars with ABC, the TV network airing the show, Samsung and its media buying firm Starcom MediaVest negotiated to have its Galaxy smartphone integrated into the show, according to two people familiar with the matter“.

Ellen Tweet

It has been reported that in the rehearsals leading up to the big event Ellen was taught how to use the device as she wanted to click selfies at the event and Samsung had chalked a deal which saw her use their device promising it good airtime.  The tweet was retweeted over 3 Million times and no doubt it created massive waves, sort of that a champion marketer like Samsung can only pull off. It is impossible to imagine that at one point of the show, Samsung global Twitter account was receiving more than 900 mentions a minute. That, there is buzz! Despite plenty of people picking on the fact that the host Ellen DeGeneres was quick to go back and pick her iPhone for further tweets post her stunt with Samsung was over, Kontera, a Social Media Tracking company said that about 23% of the content around the selfie act was positive, 69% neutral and about 8% negative which are great stats.

Aman Malhotra wanted to sit on the fence when we quizzed him about the impact this sort of act would have on the volume of sales, cause that is what is the whole game here about. He said, “It (the tweet) generated good buzz for the brand, will it translate into sales remains to be seen in the future “

Will this strategy pay fruits in the long term?

But, will this strategy last? This is where things get interesting. We have seen time and again and history has it, that if you sit on your laurels, this industry whirls past you, just ask Nokia or BlackBerry, who once were the leaders in marketing and products once and now have lost the volumes not because of their marketing but poor product strategies. It has happened to the likes of IBM, Dell and countless others. And Samsung is not immune to it. Pretty sure, their aggressive marketing will help them sail along smooth for another year or maybe two, but beyond that they seriously will have ego dig their cells of innovation and R&D. Given the competition is gradually rising on the horizon, thanks to resurgent players and some new entrants.

Vendor Data

Ritesh makes a wonderful point when we asked him what would be the next big trend for companies to follow. He said, “The focus must now shift towards retail development and building relations, after all, you are only as strong as your distributors or retailers network. Just about everyone including newer players in the market and Samsung will be focusing on retail relations. And no, this is not about the battle with Chinese or Taiwanese companies trying to make India their next hub, which they well, might, but a very common lesson from history that if you sit on your laurels, you are bound to get pushed over”.

SalesShare

Samsung cannot afford to rest for too long. But, with the vast sums of resources at their disposal, you still got to believe if Samsung would want to, there would be no stopping them from coming out with a Samsung Galaxy S VI or even S VII that could well be a game changer yet again and not just be a marketing driven device.

 *All sources of data images acknowledged duly with their watermarks kept as it is

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