SP14 MKTG 490 CASE ANALYSIS – PRODUCT/BRAND STRATEGY – SAMSUNG ELECTRONICS

Launching high-end technology products: A Samsung case study

Introduction

It is very important that a company develops a coherent marketing strategy for the launch of each individual
product in its portfolio. It is of equal importance that these strategies are compatible and support the firm’s overall
objectives. This case study examines how Samsung develops new high-tech products and brings them to the mass
market on an international level. Although Samsung is a multi-national company with 56 world wide subsidiaries,
this case study concentrates on the UK market. It discusses three very different products and how they require
varying marketing methods and channels to supply three different markets.

Background to Samsung Founded in 1938 in South Korea, Samsung has grown from a modest trading company
to a multi-national conglomerate with an annual turnover in 1997 of nearly $100 billion. Samsung operates in
three major markets - electronics, engineering and chemicals - and employs people in more than 60 countries.
The corporate philosophy is to devote its human resources and technology to the development of a global society
through ever better products and services. Samsung pursues three strategies to achieve its objective of maintaining
global competitiveness.

Quality First
Samsung continuously strives to improve product quality, implementing numerous quality control checks. For
example, workers are allowed to halt production at any time if a fault is identified. The global strength of Samsung
provides flexibility – being a global organisation enables it to find the best sources of raw materials, together with
the best locations in which to manufacture and assemble its products. Samsung has 26 factories across the world,
therefore its global nature has also resulted in an internationally recognisable brand name. Because Samsung
operates in so many product and market areas, it combines all its expertise, technology and facilities in order to
improve product development. This is known as ‘synergy’. Additionally, Samsung is a vertically integrated
company, controlling all phases of the process, from raw materials through to manufacture, retailer and customer.

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 SP14 MKTG 490 CASE ANALYSIS – PRODUCT/BRAND STRATEGY – SAMSUNG ELECTRONICS

Promotion
A common feature of its marketing strategy is promotion, one of the four Ps. Samsung promotes its products in a variety of
ways ranging from attending the relevant trade fairs for each of its products, to providing print brochures, posters and
specification sheets. Information about products is also available on Samsung’s website and via brochure lines. Brochure
lines are 0800 numbers which the public can use to find out more about specific products and at which retail outlets they are
available. Samsung increases general brand awareness through corporate sponsorship, lending its support to the Royal
Windsor Horse Show and the Samsung Open tennis tournament.

All of these methods of promotion are available to support the launch of a specific product. The marketing approach for each
product may vary, however they are coordinated and monitored by the Marcoms division, Samsung’s internal
communications network. Marcoms maintain accurate product and dealer information on a database allowing the employees
of Samsung to monitor what form of promotion is available to what product and who is to be involved.

Samsung has played a leading role in the development of DVD (digital video discs), the revolutionary new format which
provides near studio quality picture and sound reproduction using the latest digital technology. The data capacity of DVD is
up to 26 times greater than that of a CD or CD-ROM, which means flexibility and quality can be vastly improved. Samsung
has included all the most sophisticated features, but at a very keen price. As increasing numbers of electronics companies
have launched DVD models, the average price has fallen consistently and was forecast to fall by 50 per cent during 1999.

The Launch

The launch of new high-tech products is always challenging, particularly when the product is aiming to replace a near
universal product such as the video recorder, but the UK DVD market has made a much stronger start than expected. A
key factor in the popularity of DVD has been the mass availability of software via retail and rental outlets. There are also
problems in the market. One problem is that film producers and distributors want to control the release of home movies.
This is because the films themselves are released at different times around the world. Until now, this has been achieved by
coding the videos or discs so that they can be played only on certain machines in different parts of the world. For
example, discs sold in the USA cannot be played on machines sold in Europe. Non region-specific hardware products
have proved particularly popular, although there may yet be legal implications to this development.

What has Samsung done to market DVD?

As the DVD players and discs are in joint demand, Samsung has been active in forging links with software manufacturers.
The cross fertilisation of information between the two producers has given the retailers, dealers and consumers greater
confidence in the new product. Attempts have been made to develop marketing partnerships with software retailers so that
they stock Samsung DVD players. Most DVD players are distributed through multiple retailer channels.

Extensive above the line marketing has been employed, such as advertising in the specialist and consumer press,
emphasising the benefits of DVD technology. Samsung has tried to encourage journalists in both hardware and software
consumer magazines to run reviews and has placed ‘advertorials’ - editorial advertisements which provide ample
descriptions of all facets of the product. Samsung is also promoting its product by developing sampler discs which are
given away free on the covers of selected film magazines. Consumers are encouraged to take these to a retailer in order to
try them out in a Samsung player. If the consumer subsequently buys a DVD player, he can claim up to six free DVDs
supplied by the software manufacturers.

For net surfers, DVD screen savers are being developed by a marketing consultant. They can be downloaded to a PC from
various film websites. The sites also explain the benefits of DVD technology. Increased publicity has come from cinemas
through staged DVD events. At such events, the major software manufacturers screen the latest blockbusters. The cinemas
screen DVD adverts and distribute promotional information and merchandise.

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 SP14 MKTG 490 CASE ANALYSIS – PRODUCT/BRAND STRATEGY – SAMSUNG ELECTRONICS

TFT Flat Screen Monitors

As one of the largest mass producers of thin-film transistor (TFT) flat screen monitors, Samsung has been able to
control every stage of the development and production process. Based on liquid crystal display (LCD)
technology, these new monitors provide superior image quality, with sharper definition. The biggest
disadvantages of conventional CRT screens are that they take up a great deal of room on any work station and
consume a lot of power. TFT monitors, on the other hand, can be viewed from a wider range of angles and are
both lightweight and space saving, with lower power consumption. They also emit less harmful radiation and
there is a reduced risk of CVS (computer vision syndrome), a condition caused by over-exposure to older CRT
monitors whose performance has not been regulated by the latest safety standards. Symptoms of CVS can include
burning eyes, blurred vision and headaches and may affect up to 15 million people.

Marketing strategy

As TFT monitors are primarily aimed at corporate customers, the marketing strategy adopted by Samsung
necessitates a completely different approach. Samsung has identified a potential market amongst business users,
whose employees might spend long periods of time in front of a computer screen and need a larger display with
better definition. The financial centres in the City have likewise proved an important market. A further group of
customers are high street shops, in particular fashion outlets such as Jigsaw, who have installed Samsung TFTs
at their point of sale terminals. As the customer steps up to the counter, the sales assistant records the sale,
whilst images and details of complementary products are displayed on the screen.

To encourage business users to buy Samsung monitors, a radical marketing strategy has been developed. With
support from Head Office in Korea, a number of initiatives have been introduced to raise brand awareness and
instil good perceptions of the product. An open day and seminar for corporate customers, along with a high
profile press launch were organised. Advertising was carefully targeted at business users, particularly in the
City and in product specific magazines and papers. One-to-one marketing has also been used, mailing
promotional material directly to the customer. The cost of this technology means that TFT LCD monitors are
still more expensive than conventional CRT monitors, although the price is falling steadily as manufacturing
techniques improve and more competitors enter the market.

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 SP14 MKTG 490 CASE ANALYSIS – PRODUCT/BRAND STRATEGY – SAMSUNG ELECTRONICS

Brand building

Samsung is a relative newcomer to the highly competitive world of mobile communications, developing a cellular telecom
system as late as the 1990s. Having established itself in the CDMA markets (including USA and Korea), Samsung has
now decided to use the GSM (Global System for Mobile communications) network to enter the international markets. As
part of the trend towards convergence in the electronics world – bringing computers, entertainment and communications
closer together – Samsung has implemented a brand building exercise, stretching the brand name to take in new products.
Drawing on the expertise and economies of scale from being one of the world’s leading manufacturers of memory chips
and display screens, Samsung will be able to compete with those firms already in the market.

New Product Development

Samsung developed a new product, a slimline phone with an innovative design, which has been deliberately positioned in
the mid to high end of the market. Due to its unique selling point - voice activated, hands free dialling - Samsung’s phones
are specifically targeted at ABC1 businessmen and women, aged between 25 and 44. This is known as market
segmentation or differentiated marketing. The marketing strategy for the mobile phone market is different yet again. The
promotional strategy, designed to increase brand recognition, has involved extensive sponsorship of some of the most
prestigious sporting events broadcast across the globe. Sydney 2000 Olympics and the World Gymnastics Championships
have been selected as platforms from which the Samsung brand name is sported. An extensive mobile phone advertising
campaign on terrestrial TV and in the specialist press was reinforced by an outdoor campaign in the autumn of 1999
involving adverts on the sides of taxis, on buses and on the underground.

Having launched five mobile handsets on the market between 1998 and 1999, Samsung is already working on its strategy
for the new data communications market where consumers will be able to access the Internet and e-mail via mobile
phones. In this time, Samsung acquired a sizeable portion of the market and demonstrated remarkable innovation in
technology and design, as with the wrist phone and the MP3 phone. As mobile phones are usually bought through
specialist retailers or through phone service providers, the channels of distribution also differ from DVD and TFT
monitors. Samsung has made it a priority to establish a solid distribution base by forming strategic trade partnerships with
the core retailers and mobile phone retailers. This base established, the strategy involves extending these networks and
searching for every opportunity to make the products available to the consumer. Point of sale materials and brochures
have been produced for impressive in-store displays and professional training sessions guarantee that retail staff have a
thorough knowledge of the products.

Conclusion
By utilising its global qualities and substantial market knowledge, Samsung has developed three distinct marketing
strategies to launch three equally high-tech, but different, products. Through successful, diverse approaches to individual
markets it has maintained its corporate philosophy - to devote its human resources and technology to the development of a
global society through ever better products and services.