Industry

Analysis of
Samsung
Smartphon
e
Marketing
Management
Group 5

10th September 2015.

Alok Kumar Nanda

Ankith Passi. R
Mayank Mani
Rajat Kedia
Ritesh Verma
Rubal Bagde

1501065
1501069
1501085
1501094
1501095
1501097

Group 5
Alok Kumar Nanda
Ankith Passi. R
Mayank Mani
Rajat Kedia
Ritesh Verma
Rubal Bagde

1501065
1501069
1501085
1501094
1501095
1501097

Contents
Introduction............................................................................................................... 2
Marketing Objective.................................................................................................... 2
Situation Analysis....................................................................................................... 3
Segmentation and Target Market..................................................................................... 6
POSITIONING.......................................................................................................... 7
Product..................................................................................................................... 9
Premium Segment Pricing Strategy................................................................................10
Place (Distribution)................................................................................................... 11
PROMOTION.......................................................................................................... 12
Conclusion.............................................................................................................. 13

Introduction
Samsung Electronics unveiled Samsung Galaxy S6 and S6 Edge as the successors to the
Galaxy S5 at Mobile World Congress on 1 st March, 2015. The new models sold 6 million
units in the first month but failed to break the record set by the S4 model in the same time
period. Consequently Samsung reported a 4.2% decline in earnings for Q2 2015 as compared
to the same period the previous year. This is the seventh consecutive decline in quarterly
profits for Samsung. Also in the same period Samsung has seen diminishing market share as a
result of strong performance of Apple iPhone 6 and also due to increased activity of
manufacturers like LG, Sony and Motorola in the premium segment.
The reason for the diminishing earnings has been attributed to the sales figure of the S6
series. The price difference between the S6 model and the S6 Edge model is roughly $100.
The management had estimated a demand for the S6 and S6 Edge in the ratio of 4:1. But after
the launch of the product it was ascertained that the actual demand is in the ratio of 1:1. It
resulted in a huge inventory pile up of the base S6 model and a corresponding shortage in the
S6 Edge. There was huge demand for the S6 Edge model but a shortage in the market. As a
result many of the prospective buyers of S6 Edge ended up purchasing the S6 model as a
result causing a reduction of $100 in the earnings per unit sold.

Marketing Objective
To deal with the challenge of diminishing earnings, decreasing market share and rapid
technological changes.
The last real flagship from Samsung that had the potential to be a market leader was the S3. It
was both cutting edge and was full of innovation both on the hardware and the software front.
The subsequent iterations of the flagship model in the form of the S4 and S5 have not been
able to push the boundaries set by the S3 model. The initial excitement for the flagship
models of Samsung has been diminishing over time as the consumers have found the
products to only have some marginal incremental improvements as compared to the S3. This
has resulted in both the diminishing earnings and decreasing market share for Samsung.
In comparison to the previous models the S6 has a high degree of engineering and innovation.
It has a unique design and is loaded with features that make it leaps and bounds ahead of the
previous flagship S5. There was high excitement and demand for the new product but still the

results in terms of revenue and market share have been far from satisfying. The marketing
objective for Samsung shall revolve around addressing the above mentioned issues with the
help of S6.

Situation Analysis
Smartphone industry is a market driven by constant environment changes. The profitability
and efficiency of a company depends on its operations and ability to bring new products to
market earlier than their competitors. Many consumers look for smartphones which can
replace many other electronic devices that they carry (such as watch, pedometer, etc.). Hence
number of features in a smartphone becomes vital for consumers to make purchase decision.
Economic Factors
During the recession, economy had tripped, leading to increase in unemployment and reduced
purchasing power of the customers. The consumer became more and more cautious about
spending their disposable income and their spending on luxury items such as smartphones
declined rapidly. As a result many of the smartphone manufacturers exited the premium
segment resulting in the domination of Samsung and Apple. Post recession, as economy
recovered, consumer fear decreased which stimulated consumer spending. As a result, new
competitors emerged in market, which lead to strong competition for Samsungs premium
smartphone industry. The increased purchasing power of the consumers and also the
availability of a variety of products is resulting in a decreasing trend in the market share of
Samsung worldwide.
Legal Factors
The smartphone industry is governed by number of product regulatory, consumer protection,
environmental & safety laws. Hence companies are required to develop policies to abide by
such regulations. Also, majority of industrys leader hold patents on numerous part of their
smartphones (hardware, software, etc.), which creates potential for infringement lawsuits.
During 2011, Samsung and Apple Inc. were involved in more than 50 infringement lawsuits
against each other across globe over product patent, with billions of dollars in damages being
claimed between both the companies. While Apple Inc. won a ruling in its favour in USA,
Samsung won rulings in South Korea, Japan and the UK. Hence, it is imperative for a
company like Samsung-one of the leaders in smartphone industry, to comply with product
regulations.

Technological Factors
A smartphone industry is characterized by constant changes in technology. For instance, a
wireless equipment manufacturer would like to invest in supplier who is capable of providing
multiple technologies for use in end-products (e.g. a phone which can provide more features
than just handle calls & messages). Since consumers constantly switch to new smartphones,
companies should focus on developing smartphones with innovative features such as faster
network speed handling capacity, waterproof smartphones, capability of recording ultra-high
definition video, noise-cancelling technology, and long battery life. Such innovative devices
is key to a companys market growth.

Porters five Forces

Porters five forces present an analysis of strategies with respect to the five essential
elements:- Supplier Power, Buyer Power, Threat of Substitution, Competitive Rivalry and
Threat of New Entry.

Competitive Rivalry The competitive rivalry is high with lots of high end models

from big players like Apple, Sony, LG, HTC.

Threat of New Entry Threat of new entry is low because of factors such as high
R&D costs for such products, setting up the distribution network and the supply chain

in emerging market like India.

Buyer Power Buyer power is low to medium because the effort and money
involved in buying S6 is significant as this is turning out to be a specialty product
whereas on the other hand, the numerous choices to consumers give them leverage for

switching.
Supplier Power Supplier power is also low to medium as the two most important
parts, the processor and screen are supplied by Samsung itself & with the presence of
a large number of suppliers to Samsung but the difficult to replace an established

supply chain in this market.

Threat of Substitution Threat of substitution for S6 is low because of the
useability, various not so easily replaceable functionalities and dependency of
consumers on S6.

SWOT Analysis

Strengths- Being such a widely accepted smartphone brand it has consolidated its
position in the market because of its following strengths:

Software/technology- Superior technology allows Samsung mobile to better meet the

needs of their customers in ways that competitors cant imitate. Smartphone has

hardware integration with many open source operating integration and software.
Geographical reach- Samsung has the geographical reach, i.e., it has expanded itself

in numerous cities and countries and can be easily available.

Low production costs- Samsung has marginally low production costs as compared to

other companies in the same range.

Highest market share- Samsung has the highest market share in smartphones category

so it is easier for it to promote a new product.

Product portfolio- Samsung has the most diverse product portfolio and provides
numerous options to the consumers.

Weaknesses- Following are the few weaknesses of Samsung :Lacks its own OS- Samsung smartphones lack its own operating system and software
so they have to depend upon others for new software.
Low profit margin-It has a low profit margin as compared to other big players.
Declining R&D- The R&D is constantly designing. So recently it has failed to come
up with any innovative features.
Perception wrt apple- Some customers still perceive Samsung as a cheap substitute of
Apple which affects its brand value.
Opportunities- Analysing the present situation, there are few opportunities for Samsung
to capitalise on. These are:Growing smartphone market- The smartphone market is increasing at a very high rate
and there is still great potential in India.
New market platform- Samsung is still lacking in its online presence and can
efficiently use E-market platforms for its marketing.
Strategic collaborations- Samsung can go for strategic collaborations with other
players and can also look to obtain patents through acquisitions.
Tizen Operating System:- Samsung has been developing the Tizen OS to replace
android and develop its own application environment
Threats- Following are some threats that it is facing or can face in following years:-

Price wars- It faces an intense price war with other big players such as Sony, HTC,

Apple.
Technological change- There is a rapid change in technology going on with respect to

smartphone industry.
Declining margin- The margin on hardware productions is declining at a constant rate

which poses serious threat of maintaining the profit margin.

Counterfeits- There is a rise in counterfeit products which is very cheap as compared
to the originals and affects the overall sale.

Segmentation and Target Market

The market for Samsung Galaxy S6 Edge can be segmented based on demographics. The
segmentation done below is based the amount that people are ready to spend on the purchase
of a smartphone. By segmenting on these lines we also implicitly capture segmentation based
on income, economic situation lifestyle and social class as all of these are reflected on the
amount the customer will be willing to pay. The segmentation is gender neutral.
a. < Rs. 10,000:This is a market segment that is populated with a host of phones providing basic to
moderate features. There is a presence of both keypad and touch based phones. The consumer
is at a tight budget and is generally looking for options where it can get maximum benefits
with minimum outlay. This is generally the entry point for consumers in the smartphone
segment. There is a lot of competition towards the end of the price band. The products in
these categories are highly price sensitive. Margins are very low. Economies of scale is
required to be sustainable. Volume targets for a manufacturer are driven by sales in this
category.
b. Rs. 10,000 to Rs. 20,000:There is a lot of competition in the lower bandwidth of this segment. The customers
get to choose from a variety of heavily feature rich smartphones priced competitively. New
products from Motorola, Asus, Lenovo, Xiaomi, Huawei are competing in this sector. This
segment is already heavily populated. This is a very bottom heavy segment with competition
and also products thinning as we move upwards of the bandwidth. This segment generally
represents the first purchase or first upgradation of the consumer. Samsung has a good
presence in the mid and upper bandwidth of this segment.
c. Rs. 20,000 to Rs. 30,000:As we move up this market segment we find that the number of competitors has
highly reduced. In this segment the products are generally the medium range products of

companies like Samsung, LG, Sony, HTC etc. or the older flagship models of these
companies available at a discounted price. The consumers are generally late entrants.
Samsung has a very strong presence and dominates this sector.
d. >Rs. 35,000:This segment is the profit driver for smartphone manufacturers. There are limited
numbers of manufacturers in this segment and all showcase their flagship products. These
products have a high price tag because it is a showcase of the research, development and
innovation done by the manufacturer. Apple and Samsung dominate this segment. Also the
consumers purchasing in this segment are early movers and innovators. They are prepared to
pay extra money for a new product. The sales volume may be comparatively lower but the
profit margin is significantly higher. The performance of flagship models is also taken as a
bellwether indicator for the future performance of the products and the manufacturer. Also it
is evident that in case a customer is provided with added features he is ready to pay extra and
move upwards in the price band. There is always a demand for new products and also brand
loyalty comes into significance.
This is the segment that Galaxy S6 Edge was launched in and it should continue to
focus on this segment. The customers in this segment are generally people with high net
worth, working professionals and businessman. They are a target customer base which gets
covered by this larger segment. Samsung already has a significant base of loyal customers.
Samsung should look at a concentrated marketing strategy and differentiate it from the
marketing strategy of its other products to create a niche and a novelty factor for this product.

POSITIONING
Positioning Statement:- To cater young professionals, businessmen and high net worth
individuals who need to be updated with ever changing technology, Samsung is the ultimate
solution that gives them user friendly, cost effective, stylish and innovative product to stay
connected with the fast moving world. It makes life easy and more effective.
Value proposition:

Design and Construction:- The design is one of the best. Aluminium cover provides

much more premium look and feel. The sleek and curved edges look classy.
Display:- It has a super AMOLED smartphone display. Independent testing shows
that they are now highly colour-accurate and have outstanding brightness and
contrast.

Performance:- It provides plenty of power for both general processing and for heavy
multitasking when and if required. Samsung has taken an unassailable lead over the

iPhone in multicore performance.

Camera:- It has been equipped with high mega pixel camera and is capable of
shooting images of very high resolution. This is supplemented with optical image

stabilization, a fast autofocus system, and an LED flash.

Ease of use:- The features like wireless charger and sideways touch swipe has been
added which has enhanced the ease of use.

Current scenario- As shown in the perceptual map, right now Samsung is a high
priced, generic inclined smartphone where it faces intense competition with other big players
like Apple, Sony and LG due to which it has got a very limited area to grow. So, the market
growth of Samsung has recently been stagnated.
Future Strategy- The high priced, business oriented segment of the market can be a
better place for Samsung to enter into as there is almost no competition. The decline in the
market share of blackberry and low price of Microsoft phones has provided Samsung a great
segment to position itself into as a market leader. The potential for future growth is also very
high.

Product
The Samsung Galaxy S6 Edge comes under the category of a speciality product. The
consumers are willing to make a special purchase offer. It is evident from the fact that there
are huge number of pre- orders and advance bookings. The customers have strong brand
preference and there is low price sensitivity. As a result it requires a targeted promotion and
also widespread distribution.
S6 edge scores highly in the core customer value provided and the augmented product
sectors. There is an area of improvement in the Actual product sector. There is a need for
improvement in the following areas:a. Product Attributes:The introduction of wireless charging is a good innovation but the addition of
waterproof abilities is a must as it is becoming a standard feature in this segment. The quality
of the product is top-notch but still there are some manufacturing issues with the curved edge.
It is important to solve that problem.
Another development in the high end smartphone segment is that there is a plateau in
the hardware innovation and development. As a result almost all the products in this range
have very similar hardware specifications. So Samsung should look at innovations in the
software sector for differentiation because generally android operating system dominates the
smartphones in this segment. Samsung is going in the right direction in this regard by
investing in Tizen operating system as its future platform. Also the market research shows
that as high as 51% of the respondents are prepared to switch to a new OS if they get all their
desired features.
So until the time Tizen attains its full potential Samsung should look at developing its
own apps for android to give a unique user experience to its customers. Also the feature to
use the curved edge of the smartphone has not been fully exploited. Samsung should look at
making the curved display more functional and also provide more controls and notifications.
If the curved edge feature is optimally utilized it can result as a big differentiator just like the
stylus acted for the Samsung Galaxy Note series.
b. Branding:Branding is one thing that acts as a big differentiator in this segment. Galaxy S series
is a very strong brand in itself but still it is seen by many as a cheaper alternative to Apple. So
Samsung has to put in a lot of effort to change this perception. The previous strategy to
introduce a number of products in various price bands and the decision to launch various
variants of the same product (mini, duos, grand, neo, Etc.) led to confusion in the mind of
customers and cannibalization for Samsung. So to increase the brand value Samsung should
look at reducing the products in the product line. Samsung should project this smartphone as
one that is suitable for businessman. Samsung can go for greater collaboration with Microsoft
Outlook to provide an incentive to its customers.
c. Packaging and Labeling:The packaging and labelling can be used to show the seriousness of Samsung towards
the environment. The packaging should stress upon recycling and also have information
about how much of the material used in the smartphone is sourced from recycled products

and also it can have a value of the carbon footprint of the smartphone. This will send a
positive message to the customers and also help improve the brand perception.
Product Line Decision
Samsung has launched the S6 and S6 Edge as two flagship models. The S6 Edge is
around $100 more expensive than the base version. Samsung should do away with the S6
variant because it is again resulting in duplicity, cannibalisation and confusion in the mind of
the customers. Also Samsung should look at phasing out the previous Galaxy S series
smartphones because that would result in greater visibility and faster market penetration for
the S6 Edge.

Premium Segment Pricing Strategy

Samsung faces tough competition when it comes to premium segment from companies like
Apple and HTC. Samsung has about 46% market share (latest quarter June 2015) followed
aggressively by Apple at about 42%. However these market shares keep on changing as per
the new launches as well as Aggressive Promotion. Hence we suggest a Skimming Pricing
Strategy and a value based approach for the Premium Segment Smartphones
Skimming Pricing Strategy and Value Based Approach:
In this segment we will always follow a value based approach in pricing. This
segment contributes maximum to the bottom line of the Samsung mobiles and hence the
perceived value of the Product is high as Samsung invests heavily on marketing every new
launch in this segment. The idea is to increase the buzz and boost initial sales of the product.
The following are the key takeaways

Price the Product upwards of Rs 50000 for the base version and stretches upto Rs
60000 for the top end.
Pre Book Prices and Retail Prices remain the same for almost 4 months. This will
ensure huge volume as well as exclusivity for the consumers. Also the initial buyers
will have the premium category advantage if the Prices are not dropped during that
time. The companys Profitability is increased as well.
As competition increases from rival launches and the ultra-premium market is
saturated the skimming model comes to play in the form of cashback, discounts and
special payment options like emi, zero down payment and bundled offers
As competition intensifies and the product cycle is about to get over the company
slashes the price to around sub Rs 35,000 levels to cash in aspirant buyers.

BuyBack Model
In order to help high end consumers to switch from one smartphone to another we
will have to launch a buyback scheme for old smartphones and offer them prices higher than
what they would usually estimate. This strategy is to be used after the product has reached the
maturity stage.. By offering them cash back of Rs.12, 000 we would essentially be giving

away the New S6 series phone in the range of 34k-36k. This will have a two fold effect on
the consumer as well as on the Company
Benefits of this additional Pricing Strategy:

Firstly we would have an entire new target SEGMENT opening up if the effective
prices are around 36k. A lot of consumers would be shifting to the new smartphone.
The company would still be keeping the sticker price same, thus the premium
branding is untouched.
The resale value of the old smartphone will result in effective discounts of around
3000 for the company, hence impacting minimum in their profitability.

Place (Distribution)
Target Distribution Market The target market for Samsung Galaxy S6 Edge is gender
neutral higher income group with affluent lifestyle in tier I, II, III and IV cities.
Channel Marketing Concept - Modifying the traditional Channel Marketing Concept, we
see that Samsung Galaxy S6 Edges distribution is mainly concentrated on three fronts
Sales & Service Dealers (Exclusive Stores), Modern Retail and Distribution & E-retailing.
Distribution Strategy According to our market research, we conclude that Samsung
should not limit S6 Edge to one marketing channel or distribution intensity, rather should
indulge in different strategies for different types of retailing. Out of the 214 respondents to
our survey, we found that 98 preferred online purchase, 77 Exclusive stores and only 39 from
Retailers or Distributors.
1. Exclusive Stores With about 36.2% of respondents opting for exclusive stores, this
is a major area that Samsung should look into. The exclusive stores should use an
Intermediary market channel with an exclusive distribution intensity, limiting the
Samsung World stores only to highly densely populated areas in metros and very few
in tier III & IV cities. It will give the customers a feel of uniqueness and will allow
Samsung to concentrate its efforts in the form of offers and trained resources in these
stores.
2. Modern Retail and Distribution The modern retail concept has been on the
decline with only about 18.3% respondents willing to go to third party retailers. The
marketing channel used should again be Intermediary and very diluted form of
intensive distribution concentrating mainly on modern retail like Croma, reliance
digital and Vijay sales. Two reasons, first in Indian market, mass distribution is the

long term strategy for a company which has more than 1 type of target markets and
second, having phones like S6 edge in public display makes an impression of highly
engineered product in peoples minds about Samsung and creates a future potential
consumer when he/she moves into the target segment.
3. E-retailing The initial banning and subsequent losses and market capture by other
brands has forced Samsung to enter into an agreement with Amazon and Snapdeal by
providing exclusive portals for its mobiles. Our research clearly suggests the changing
trends and preferences of the target market to switch to convenient shopping with eretailers with 45.5% respondents preferring e-retailing as buying option. This gives
Samsung the opportunity to indulge in Direct use of marketing channel with Selective
distribution to allow its presence on maximum 3 websites. This saves the interests of
its wide distribution channel and maintains their presence.

PROMOTION
The promotion techniques used by Samsung play a vital role to achieve the market
domination. Presently, market share of Samsung in smart phone sector is 21.4% by the end of
quarter 2 of 2015. It has decreased from 24.8% to 21.4% when compared to 2014 quarter 2.
The marketing communication for the S6 should be based on the PULL strategy. The
promotion strategy should be focused on the innovations and new features of the S6 edge that
will make it more useful for the users. It should also reinforce the image of the S6 Edge as a
smartphone meant business purpose dur to its multitasking abilities, features and premium
looks.
The market survey shows that 39% of the respondents have recollection of the recent
advertising campaign of Samsung. Also from the survey we see that 48.6% and 39.2% of
respondents have a recall of ads seen in television and internet. So renewed efforts should be
given to increase advertisement in these mediums. Extensive promotion in print and media is
also required but its recall is very less. The use of celebrities like Amir Khan also has a
positive impact on the sales and market penetration of the product..
Indirect Marketing: Samsung can also set up charging stations and free internet at
the airports to increase awareness about the brand and its products amongst the consumer.
Test drive of the Galaxy S6 Edge for 30 days for just 1$, is one of the techniques to create
awareness about the brand.
All the above marketing communication tools come together and work for as the Integrated
Marketing Communication for the Brand thus building brand equity.

Conclusion
From the analysis done above one thing becomes very clear and it is that Samsung has to
discontinue the S6 model and focus only on the S6 Edge model. Also Samsung has to reduce
its product line and product offerings to create differentiation and to reduce cannibalization.
The S6 Edge is a huge leap for Samsung in the technology front and hardware front but if it
does not concentrate on positioning the smartphone for the business segment the product may
end up not fulfilling its potential. Also to create a differentiation from other products running
on android OS Samsung has to invest on creating its own app store and also introduce Tizen
in a phased manner. Samsung can regain its market position with the help of S6 Edge but it
requires Samsung to make some tough decisions in the pricing and place and promotion
section. If Samsung is able to make these changes the S6 Edge will end up beating the
records set by the S3 model and help Samsung regain its position and also hopefully surge
beyond Apple.

Figures and Exhibits

Figure 1

Figure 2

Figure 3

Figure 4

References

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