Marketing Analysis for Samsung
Marketing Analysis for Samsung
Samsung was founded by Byung-Chull Lee on March 1, 1938, in Taegu, Korea, with 30,000 won. Initially his business focused primarily on trade export, selling dried Korean fish, vegetables, and fruit to Manchuria and Beijing. In little more than a decade, Samsung-which means “three stars” in Korean-would have its own flour mills and confectionery machines, its own manufacturing and sales operations, and ultimately evolve to become the modern global corporation that still bears the same name today.
For over 70 years, Samsung has been dedicated to making a better world through diverse businesses that today span advance technology, semiconductors, skyscraper, plant construction, petrochemical, fashion, medicine, finance, hotels and more. The flagship company, Samsung Electronics, leads the global market in hightech electronics manufacturing and digital media. Samsung move to partner with Google for their Android OS and the recent series of Smartphone has tremendously brought their revenue to greater heights. In 2011, the stellar Samsung GALAXY S II sold more than 10 million units worldwide, achieving the No. 1 global market share for smartphones (2011 Samsung Electronics Annual Report).
Approx 94.5% of Singapore household has a hand phone in 2008. Likely the percentage should be higher now. The functions of a hand phone have evolved greatly in this decade. From means of communication via SMS and calls, hand phone or rather Smartphone serves consumers a far range of functions today. A Smartphone offers more advance computing ability and connectivity then conventional mobile phone. Generally the established Smartphone brands in Singapore are Apple, Samsung, Nokia, HTC & Motorola.
The rapid growth and success of Samsung are the reasons why our group chose this brand. We hope through in-depth research and analysis can we better understand the success factors behind this rapidly sprang brand, particularly in the Smartphone industry.
2. SURVEY RESEARCH
Survey research approach is done via questionnaire targeting general public. It can be used to gather information about people’s knowledge, attitudes, preferences, or buying behaviour for Smartphones. Basha and Harter (1980) state that “a population is any set of persons or objects that possesses at least one common characteristic. Through our survey, we sample a population which we hope can be representative of the Singapore consumers. This approach is selected by the group because it is the most widely used method to collected primary data to meet our research objectives. Through the primary data collected, we hope to draw certain information through analysis on consumer behaviour on the purchase of smartphones.
The purpose of this survey is to understand our responders behaviour and attitude towards smartphone. We segmented the questionnaire into 4Ps namely product, price, place and promotion. We hope that with this survey finding we can better understand the needs of smartphone users, why they will or will not be using and also the reason why others are not using Samsung smartphone and the likelihood of them using Samsung in future. With the findings, we hope to draw conclusive data and make recommendations.
2.2 Contact Method
We personally gave out the survey forms as shown in Appendix 1 to the general public at Ang Mo Kio Hub and Nanyang Polytechnic. We have given out to 41 respondents and used 30 of them for analysis (11 were deemed as void due to insufficient information or non completion)
Sampling Plan & Survey Questions
A segment of the population selected for marketing research to represent the population as a whole. The survey is to be conducted with a sampling size of 30.The questions were limited to 10 to avoid being too lengthy resulting in fatigue respondents. First part of the survey included information pertaining respondents’ background such as gender & age which then we proceed to gathering information like consumer preference. Five point Likert
scale was used to measure few variables.
We will further describe the customer segment for Samsung smartphones using demographic, psychographic and behavioural factors.
3.1 Demographic factors
The targeted segment is for both male and female, probably age between 14 and 55, skewed more towards the Gen Y. The country or area should have good network (Eg: 3G, 4G, wireless connection) to ensure optimal usage of Smartphone features.
3.2 Psychographic factors
There are basically three segments of users broadly in which Samsung wishes to target; entertainment focused, communication-focused and information-centric users.
The entertainment-focused users are generally younger group which see a mobile device as a lifestyle choice, and they’re willing to pay extra for a device that’ll help keep them entertained. Entertainment can also include things like social messaging with friends, facebook and networking. The communication-focused users are extroverts who live to communicate with others. They’re often in people-facing jobs like sales. They’re willing to pay extra for a mobile device that lets them keep up with others in multiple ways. E-mail, SMS, voice, conferencing, video calling — basically, anything communication-related is compelling to them, and they will pay extra for a device that does it well. The information-centric users are more introverted. Rather than focusing on their dialog with others, they tend to do a lot of thinking on their own, and want their mobile device to be a memory supplement and a means to capture new information. They’re willing to pay extra for features that help them capture and remember ideas and information.
3.3 Behavioural factors
Past users of Samsung (Be it handphone or other appliances) will likely purchase Samsung again due to familiarity and if they have had pleasant experience with the phone, the likelihood of repurchase is high.
4. MARKETING MIX
a. 3 Levels of Product
A product is normally defined as the physical items that consumers purchase. But actually the nature of a product can be further explored in 3 levels. They are The Core Product, The Actual Product and The Augmented Product which are further explained in Appendix 3.
Smartphone industry is growing rapidly with many new brands coming in for a slice of market share each fighting towards fulfilling consumer growing wants. Understanding the 3 levels of product can better enable Samsung to position itself.
Based on Kotler’s Three Level of Product Framework, the Samsung smartphone core product is giving consumers tool of communication. Through product differentiation of smartphones, consumers are given a variety of choice for the actual product as illustrated in Appendix 3. Samsung’s strategy will ensure it is already at the finishing line when consumer tastes change hence it produces a wide product range for every taste and demand.
b. Consumer Product
Samsung smartphone is categorised as a Shopping Product. Consumers will compare on the price, style, function, quality and suitability of the smartphone due to the multiple brands and model available in the market. Having achieved unmatched global competitiveness in hardware, Samsung has been focusing on enhancing its software capabilities in user interface, user experience, and design and brand awareness. To remain competitive, Samsung must continuously develop quality and innovative smartphones to stay in the lead.
c. Brand Development Strategy
The most difficult step in developing a marketing plan is normally the process of developing a brand strategy. It’s often the biggest challenge face by most businesses but it is an important step in creating the company identity. In the smartphone market, Samsung branding still falls behind Apple. However Samsung in recent years has been very aggressive and rapidly gaining market share. We will move on to discuss Samsung brand development strategy.
‘While many companies that sponsor events are focused on boosting their brand awareness, Samsung Electronics looks at things a little differently. The Korean giant – a major sponsor of the recent Youth Olympic Games (YOG) –
says that “brand preference” is a better indicator of whether its investment has paid dividends.’ (The Straits Time, 13 Sept 2010)
Samsung sponsorships in Youth Olympic Games (YOG) and the upcoming London 2012 Olympics will certainly provide strong profile and brand power. Through sponsorship in the Olympics, Samsung seeks to, through user experience boost up their brand.
d. Survey Result on Target Segment Perception (Product)
From our survey findings, 94% of the respondents are smartphone users with with 2 respondents one non-smartphone user and one unsure. We have checked with the unsure respondent and respondent was using a smartphone bought to her by her daughter. The strong percentage of smartphone users 94% as per survey results showed a strong And 60% of the respondents responded they are likely to purchase Samsung for their next phone.
a. General Pricing Approach
Price will always be the key concern of consumers’ before making any purchasing decision (Smith and Carsky, 1996). The level of price is found to positively affect behavioral intentions mainly because price establishes image of the brand in the eyes of the consumers (Aaker, 1991). The price set for any product including smartphone is crucial as it directly impacts on consumer purchase.
The company’s range of low- to high-end smartphones caters to almost every budget. Based on client perceived value and market offerings, Samsung adopts a value based pricing strategy. ‘If there is a consumer for it, we will offer the product, says Younghee Lee, senior vice-president of sales and marketing for Samsung’s mobile business.’ (The Business Time, 17 March 2011)
b. Price Compared to Competitors
Samsung stays on a competitive price and with its vast product line; every price range is met with a product. We have used the recent launch of Samsung S3 Smartphone with its competitors as illustrated in Appendix 4. Samsung S3 smartphone is considered the high end product series in the smartphone market and we have chosen close competitors mainly Apple iPhone 4S and HTC One. From the comparison, though Samsung S3 is the latest product launch amongst the three phones, it still stays at a less than $100 price difference with competitors. The price Samsung offers is very close to its competitors giving it an edge over them.
c. Product Mix Pricing Strategies
The product mix is the collection of products and services that a company chooses to offer its market and pricing strategies based on what objectives the company had set for them.
Samsung’s product strategy is to create Android devices across varying price points and flood the market through as many carriers across the world as possible. The original Galaxy S was sold through about 240 different global vendors.
Product-line pricing involve setting price for different products within a product range at different price point is the strategy Samsung applied for smartphone. For example, Samsung had a lot of smartphones products with different design and feature at different prices as shown in Appendix 5. The greater the feature and benefit obtain, the higher the consumer have to pay.
d. Price Adjustment Strategies
A set of strategies used by companies to adjusted their basic prices to account for various customer differences and changing situations. The commonly use strategies are Discount and Allowance Pricing, Segmented Pricing, Psychological Pricing and Promotional Pricing.
In the smartphone industry, discount and allowance pricing adjustment strategy is commonly used. This strategy allows companies to adjust their basic price to reward customers for certain responses, such as early payment of bills, volume purchases, and off-season buying. This strategy can come in many forms.
Seasonal discount is a price reduction to buyers who buy merchandise or services out of season. For example, when Samsung Galaxy S3 is launch, the price of Samsung Galaxy S2 was reduced. In this scenario, older model of smartphone is the same as off season products. Seller will offer discount to encourage the buyer to purchase off older models.
Allowances are another type of reduction from the list price. For example, trade-in allowances are price reductions given for turning in an old item when buying a new one. Trade-in allowances are most common in vendors selling smartphone.
e. Survey Result on Target Segment Perception (Price)
Through our survey findings, most respondents rated price as ‘most important’ factor to consider when buying a smartphone.
An interesting thing to note is 40% of the respondents mentioned they will
pay up to $300 for a smartphone and 30% mentioned they are willing to pay more than $1500 for a smartphone. It is therefore important to draw specific data to understand the needs and wants for those segmented clients.
a. Number of channel levels
Place is also known as channel, distribution or intermediary. It is the mechanism through which goods are moved from the manufacturer to the consumer. We have analysed Samsung smartphone distribution as shown in Appendix 6.
Samsung practises indirect channels using selective distribution. The channel contains one to two intermediary levels. Through the major telcos and authorised dealers, Samsung distribution in Singapore is very intense, and this is exactly what Samsung wants. One can purchase a Samsung Smartphone at every neighbourhood in Singapore. All authorised distributors were given product training & support whenever needed. All telco (SingTel, M1, Starhub) also have dedicated staff to provide training & desk support to consumers should they require assistance on how to use the smartphones.
b. Channel intensity
From the Appendix 6, the distribution channels are intense diverting to over 300 outlets making it easily accessible for consumers. The wide and broad channels are one factor for Samsung success.
c. Number of outlets, location
The outlets for Singapore are estimated to be over 300, with at least one outlet in every neighbourhood and the availability to buy online with free delivery.
d. Survey Result on Target Segment Perception (Place)
From our survey results, 99% of the respondents bought their phone through the various channels with 49% through telco and dealers. Consumers prefer buying phones with contracted lines and this might suggest Samsung can consider giving a better incentive to telcos and dealers to further boost up their sales.
a. Marketing Communications Objectives
Marketing communications objectives is paramount to marketing success. If there is no objective, than there will be no way to measure the marketing success. After all, an objective is the goal intended to attained, which should be attainable and can be measured.
Understanding the Product Life Cycle (as illustrated in Appendix 7) of each product can enable the company to respond with the marcom objectives. Though Samsung started its Smartphone in 2008, in our opinion the stage for Samsung smartphone is at its maturity stage in the Singapore context. During launch of a new smartphone, the objectives will be more informative like:
Telling market about the new product
Explaining how a product works
Suggest new uses for a product
Marketing effort by Samsung is normally conducted for launch of new products. As for their existing products, it is conducted together with their vendors like IT fairs and Electronic fairs. The marketing communication objectives for these efforts will be different from a new launch. The objectives these efforts are:
Encourage brand switching
Persuading customers to purchase now
Build brand preference
Keep product in consumers’ mind
Maintain top of mind awareness
Attractive prices of good products are not enough for a business to generate maximum sales and profits. The benefits of products have to be communicated to customers. In marketing, this is commonly known as “promotion”.
The total marketing communications programme is called “promotion mix”. Elements of promotion mix include Advertising, Sales Promotion, Public Relations, Personal Selling and Direct Marketing.
The elements of promotion mix used by Samsung smartphone are: 1)
Deliver marketer’s message using any paid form of mass media outlets, it involve non-personal presentation and promotion of ideas, goods or services by an identified sponsor. The 3 purpose of advertising are Informative, Persuasive and Reminder.
Samsung has been using all three purposes for their advertising campaign in different occasion. Let’s look into Samsung individual advertising purpose and objectives.
Sales promotions normally refer to encouraging customers to respond or undertake some activity using some form of incentives through special short-term techniques.
Some of the sales promotions technique used by Samsung smart phone is:
a) Joint promotion with Major Telco
Samsung smartphone often had joint promotion with major telco to boost up the sales of the smartphone. For example the promotion that was in the Starhub official site that offers Samsung Galaxy S3 at different price depending on the plan sign up or the Samsung Galaxy S2 at a low price with 2 years plan. (As shown in Appendix 8)
b) Joint Promotion with Major Electronic Mega Store
Samsung always conduct joint promotion with major electronic mega store during ad-hoc promotion fair. Premiums like
additional SD card, screen protector, casing or 0% interest
instalment plan is often used during such fair. This promotion is used to enhance the sales by offering some perks and also to clear stock for the older model smartphone. (As shown in Appendix 9)
Survey Result on Target Segment Perception (Promotion)
Through our survey findings, respondents rated ‘current mobile plan expired’ as the most important factor which influence their purchase of smartphone. This might be an important indicator for Samsung to have intense tie up promotions with the telcos to offer consumers attractive rates for those plans that have expired.
A significant percentage of respondents also mentioned the launch of new smartphone is influential in making the purchase. These are likely the consumers who are willing to pay a premium price for the latest launch of smartphone. Samsung can utilise this and through advertising for example; television commercial, newspaper advertisements, internet announce the new launch in a tasteful manner to attract this segment of consumers.
Constantinides (2006) emphasizes that marketing mix is a framework of the dominant marketing management paradigm to identify market development, environmental changes and trends. Several studies confirm that the 4Ps is indeed the trusted conceptual platform of practitioners dealing with operational marketing issues (Romano and Ratnatunga, 1995; Coviello et al., 2000). The wide acceptance of the 4Ps among field marketers is the result of their profound exposure to this concept during college years, since identifying the 4Ps as the controllable parameters is likely to influence the consumer buying process and decisions (Brassington and Pettitt, 2003; Soekartawi, 2005a).
We conducted the survey to evaluate different segments of customers’ attitude toward 4Ps. It is expected that with this survey findings with the primary data we have collected can we better understand and provide recommendation for Samsung to develop greater understanding of how to serve existing and potential customer based on 4Ps concept for a basis to meet profitability of their business. Through our survey, we realised a very important trend; almost 94% of the respondents carry a smart phone. Assuming the latest data from Singstat stating 95% of Singapore household having a handphone, and with that equate to 94% of them having a Smartphone, the total volume of smartphone market is estimated to be minimum 3-4Million in Singapore alone.
Current users of Samsung are generally satisfied with the features and functions of the phone. However as Samsung faces close competition with its competitors, Samsung needs to continuously come out with new innovation and technology to stay in the lead. As Samsung is in its maturity stage of the product life cycle, Samsung needs to differentiate itself from competitors.
However the tricky part is to position products across different, yet overlapping, market segments. It is important to note, however, that since some consumers may belong to both segments, positioning claims for a product should never conflict. To avoid confusing consumers, it may be necessary to make a broad appeal to both segments and then change the positioning slightly within each segment. As Samsung smartphone do has many variations, approximate 24, the positioning within each range should be unique and clear to consumers.
Overall we feel that Samsung has done well to come this far and stay in the lead. The advantages Samsung has over competitors are the wide distribution channels and the vast product variations. Samsung must continue to ensure its distributors and telcos are given attractive incentives which in turn can bring in non Samsung users. Samsung should also focus on building brand loyalty, which will ensure retain of past and current Samsung consumers. Their primary goal should be to maintain their current market share and extend the product life cycle.
Samsung Electronics 2011 Annual Report accessed on 25 June 2012 http://www.samsung.com/us/aboutsamsung/corporateprofile/download/2011_annual _rpt.pdf
Singapore in figures 2011 http://www.singstat.gov.sg/pubn/reference/sif2012.pdf accessed on 25 June 2012
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