Samsung is the number one brand in our Top 1000 for the sixth year in a row. Nine months ago, that looked nigh on impossible. How has the tech firm retained its supreme status despite facing its worst crisis to date?
Almost a year has passed, and the fallout continues. Check in for a flight at most airports today and still the notices remain prominent. All carry a variation on the same message that first appeared in October 2016: ‘No Samsung Galaxy Note7 allowed on board.’
Such is the mire created by Samsung’s now infamous smartphone.
The chain of events makes for ugly reading. A brand’s flagship product explodes in consumers’ possession. Seeking a quick fix it issues replacements, which also blow up. A global recall and kill-off of all handsets follows, along with a mea culpa for not dealing with the battery issue from the start. Cue endless global headlines and social media feeds slamming the brand. Oh, and an approximate US$5 billion cost. And then, just when the worst seems to have passed, a very senior staff member is arrested on bribery and embezzlement charges.
Any combination of these events would be a critical blow for most brands, let alone all of them at once. And yet, it seems Samsung is not most brands. Despite facing what is the company’s biggest crisis to date, it remains the top ranked brand in this year’s Top 1000 Brands survey, taking the title for the sixth year running.
How is this possible, you ask? While Samsung is not totally in the clear with consumers yet, a confluence of internal and external factors have all played a part in ensuring the brand’s reputation has resolutely endured an abysmal nine months.
Communication and transparency
While former acting head of brand Lee Jae-yong is still awaiting trial for alleged corruption charges, it seems safe to assume that of the two scandals the Note7 is the more major from the view of the consumer, for whom corporate wrongs rarely have a real impact on purchase decision.
Despite this, Samsung managed to make some now renowned mistakes in its initial response to the Note7 crisis. Consumed by attempts to maintain the integrity of its flagship smartphone, the brand got caught “trying to treat the symptom rather than the cause”, as Samir Dixit, APAC managing director of Brand Finance, puts it, leading to the shambolic fiasco of sending out replacements that also exploded rather than diagnosing the battery fault.
SAMSUNG BY THE NUMBERS
48: Years since Samsung was founded
7: Number of years Samsung has held the top spot in Nielsen’s list
4: Number of Asian regions that rank Apple over Samsung (China, Hong Kong, Taiwan, Japan)
US$8.7 billion: Samsung’s reported Q1 operating profit in 2017
2: Number of recalls of the Note7 phone following reports of battery fires and explosions
2.5 million: Note7’s sold when Samsung issued recall
US$5 billion: Reported cost of the recalls
However, once that rather large error was identified, Dixit says Samsung acted swiftly and effectively. “The complete and unconditional withdrawal and subsequent killing of a troubled product was their best strategy, better than any communication,” he tells Campaign Asia-Pacific.
An unmitigated apology followed, which was the first step in Samsung’s highly transparent communications strategy to deal with the Note7 fallout. Instead of appearing defensive and cocooning itself in self-protective statements, Samsung acknowledged its fault and launched a thorough investigation of its manufacturing practices. Most significantly, it kept the public apprised throughout, publishing the investigation results in January.
Marc Sparrow, executive director at Golin, says Samsung “cleverly drew a line under the incident” with a detailed explanation — plus accompanying infographics — illustrating the cause of the explosions. “Not only that, they involved three independent researchers from third-party testing companies in presenting these findings to the wider world,” he explains.
While some of the more technical aspects of the findings may have gone over consumers’ heads, Sparrow says because Samsung demonstrated sincerity in tackling the issue head-on, consumers by and large accepted its explanation and its efforts to address the problem.
A variation on that theme was Samsung’s massive advertising campaign, launched in February, on battery safety and innovation, which Lars Voedisch, founder of PRecious Communications, says was another open communication to consumers.
“They’ve put a lot of effort into sharing what they are doing now to avoid something like this again,” he says, explaining that this helped convince consumers Samsung had learnt from the crisis.
Dixit brings up a more salient communication issue, that with so many airports having continuous announcements about the Note7, consumers perhaps became immune to the message. “Too much communication creates a blind spot, and it worked in Samsung’s favour,” he posits.
On a more pragmatic note, Samsung is also fortunate that, despite the furore, no one was actually seriously hurt by the Note7 defect. Had that happened, Sparrow notes, the brand would be having a very different conversation altogether.
The Galaxy S8
To say the launch of Samsung’s new Galaxy S8 smartphone, and obviously the product itself, needed to be a success might be the biggest understatement ever made in this publication. Luckily for Samsung, it was a resounding success.
The phone itself has drawn plaudits from critics for its innovative design and features, but the launch was much more low-key than others.
Voedisch says that focusing its narrative on safety testing was smart reputation-wise, as “a more cautious attitude sent the message that, at least now, safety comes before sales”.
That it was a more sober yet hotly-anticipated launch played right into Samsung’s hands in terms of its activation strategy, says Dixit. “They managed to drive the launch via the telcos rather than making a big deal of it themselves.”
A negative or even lukewarm reception to the Galaxy S8 would have been disastrous for Samsung. Instead the company saw record pre-orders and sales of the Galaxy S8, which will go a decent way toward plugging the revenue chasm left by the Note7.
Moreover, add a transparent crisis response to a brand new, shiny and lauded piece of tech, and you’ve got a decent chance of shifting the prevailing consumer mindset. “Fundamentally, people’s memories are short-lived,” states Dixit. “And for strong brands with good performance history, they are more forgiving.”
No rival opportunists
Almost as significant as Samsung’s own efforts is the fact that nobody really stepped in to fill the breach left by the brand’s woes. Apple, the nearest contender, certainly picked up some market share as a consequence, but with the iPhone 7 launched just a month before the Note7 crisis, there has been no major new rival product for consumers to switch to.
Intertwined with this is, somewhat obviously, Samsung’s own size, dominance and cavernously deep pockets. As Voedisch asks: “The whole episode had a massive financial impact for Samsung. Could other players shoulder that?”
Dixit goes one step further, saying a similar situation for, say, an Oppo or HTC would have been “a complete disaster”.
Samsung is not completely off the hook, and were a similar type of issue to recur, all bets are off. But its communications strategy, plan of action and new products have come together to leave a prevailing sentiment aptly summed up by Sparrow: “There’s now very much a feeling of normal service being resumed after an uncomfortable blip.”