Samsung's damage control act

The way the chaebol handled the Note 7 episode has some key lessons for brands facing a crisis

If you are a brand manager facing a crisis, the best way forward is to think like the Boy Scouts of America: “Be prepared”. Especially in a world of 24/7 media, where Facebook and Twitter have ensured you often find out about a problem from a customer or a client post, being ready with a blueprint to take up a challenge might mean the difference between success and failure, between survival and demise. In short, the key to maintaining consumer trust.

Samsung’s fight during and in the aftermath of the Note 7 crisis is a textbook example of how a brand can survive a serious threat to its existence following that simple “Boy Scouts” formula, instead of becoming the next Blockbuster or Kodak. While the chaebol appeared flat-footed in the early days of the crisis, as safety concerns took centre stage, it swung into action and quickly went about refunding buyers. Alongside, the company brought in three independent quality-control and supply-chain analysis firms to help it in its formal investigation into the Note 7 fiasco. In a report released early this week, the company detailed flaws in battery design and manufacturing that it believes caused the crisis. It said it took full legal responsibility for the episode and vowed to ensure such a thing doesn’t recur.

Even as, globally, brand Samsung moved quickly to contain the crisis by engaging with various stakeholders, back home in India the impact was limited as it had only announced the launch and not released the Galaxy Note 7 in the market. To maintain a degree of positivity and deflect any negative impact that the crisis could have had in its performance in India, Samsung was quick to turn the spotlight on its other product portfolio offerings (like TV) and its corporate social responsibility (CSR) activities. Ranjivjit Singh, chief marketing officer, Samsung India, says, “Since we could not offer the Note 7 to our customers who were eagerly waiting for it, we gave them the option of the Galaxy S7 and S7 Edge and it has become even more popular in the premium smartphones segment.”

It was important for Samsung to recognise there was a problem. Pradeep K Chintagunta, professor of marketing, Booth School of Business, University of Chicago, says acknowledging a problem immediately is an important first step. There are other instances — such as the Intel Pentium flaw — where the firm was slow in recognising that its chips had a problem and had to pay a bigger price. “I do not think the crisis kills Samsung’s credibility in the long run. A lot is riding on the next generation of products to come out of the company. As long as they innovate and are more careful with design and testing, they should be in better shape.”

Ambi M G Parameswaran, brand strategist and founder, Brand-Building, points to the complex branding structure of Samsung to help understand the impact of the latest crisis. Samsung is the master mother brand, over the big sub-brand, Galaxy. Under Galaxy is the sub-sub-brand Note. Fortunately for Samsung, the media and other opinion makers kept harping on Note 7 and not the brand Galaxy or Samsung. “This has probably been a master public relations management exercise by Samsung and executed very well by the teams in charge. The complex brand architecture has come to their aid in some way. The insulation of the Samsung mother brand has helped the brand to continue shipping great products.” 

Indeed, Samsung’s market share in India did not get affected by the global crisis. Its market share in the mobile space has gone up from 41 per cent in 2015 to 46.9 per cent in 2016. Says Sridhar Ramanujam, CEO, Brand-Comm, “The brand has the breadth and the versatility to bounce back. Moreover, for the Indian market, the crisis was something that happened somewhere else. Since it did not affect us directly, the consumer believes they can put the episode behind them and move on.”

The brand’s market share has not been hit much also because high-end phones form a relatively smaller share of the Samsung smartphone shipments in India, says Jaipal Singh, lead analyst, IDC. “On top of that, it offered freebies to the customers who had booked the Note 7 and were ready to switch to S7 Edge, a readily available Samsung flagship phone. It smartly directed the marketing spend on S7 Edge to maintain the sales in the premium segment.”

Singh says that another key India-centric innovation in 2016 from the brand was the smart convertible 5 in 1 refrigerator with freezers that can be converted into a fridge at the touch of a button. Samsung also introduced a washing machine with ACTIVWash+ technology featuring a unique wash tub where consumers can soak, scrub and wash clothes at one place. To strengthen brand presence, in 2016 Samsung launched 535 service vans to ensure timely service. The addition of 250 service points and over 250 resident engineers takes its network to over 3,000 across 6,000 talukas. Samsung also announced the expansion of its Noida plant with an investment of Rs 1,970 crore, further strengthening its position in India.

While Samsung claims the focus on other categories and CSR was coincidental, they helped to take the focus away from the “bad news” and reiterate its commitment to bring bleeding edge products into India.

FIREFIGHTING AFTER FIASCO

• The company brought in three independent quality-control and supply-chain analysis firms to help it in its formal investigation into Note 7 crisis

• In India, Samsung was quick to turn the spotlight on its other product portfolio offerings and CSR activities

• It took steps to keep the buzz alive around the brand; touted Galaxy S7 and S7 Edge as “made for India” products