It remains early days, but analysts predict a storm may be brewing at Samsung Electronics. The South Korean chaebol technology giants reported a 60% fall in quarterly profits last week, amid concerns that cheaper, and ever-improving, competitors are gaining ground in the lucrative smartphone market. Market reception for its flagship Galaxy S5 phone has been lukewarm at best, and in China, the world’s biggest smartphone market, Samsung fell to second place in total handset sales for the first time, behind previously lesser-spotted Chinese company Xiaomi.
Company spokesmen blamed the fall in profits on “marketing expenses related to aggressive promotions.” Perhaps herein the problem indeed lies – marketing has never been the Korean company’s strong suit. One recent online advertising campaign sought to mock arch-rivals Apple. The joke, however, was very firmly on Samsung, after Apple announced impressive sales of ten million new iPhone 6 units within three days of general sale, dwarfing that of the Galaxy S5 when it launched in April.
Some commentators interpreted the figures as indicative of Samsung now entering the same cycle of decline as previous market leaders Ericsson, Motorola and Blackberry. That may be premature, but it is clear is that something has to be done to stop the rot.
One analyst, the Market Mogul’s Calvin Williams, said: “Clearly Samsung is caught in an awkward position in the market, with more and more buyers being enticed by the iPhone 6 and 6 Plus’ bigger screens at the top end of the marketplace. At the same time, Samsung’s products are being undercut by cheaper and increasingly better rival players.
“As far as marketing is concerned, clearly their advertising does not resonate with young people as much as Apple’s does. Marketing is often an undervalued weapon – good marketing creates customer loyalty. Samsung often have a tendency to let their products do the talking, but it isn’t working at the moment. ”
Samsung does have form in poorly-received marketing campaigns. Last year, a promotional video featuring what some observers called “possibly the world’s worst actors” had to be pulled from YouTube after it became a laughing stock across social media.
If a marketing rethink isn’t on Samsung’s agenda, then one route out of the woods that Samsung seem to be pursuing is streamlining. Similar to HP’s decision to spin-off its PC and printer arm this month, it seems Samsung has decided to shift its gaze away from the European laptop market, where it trails Apple’s MacBook range, and now the likes of Lenovo, by a significant margin. Whilst Samsung has always been renowned for its product diversity, spanning televisions and white goods, fighting a war on so many fronts is becoming an increasingly tall order, and it is no wonder that Samsung executives have taken the decision to channel their energies into fewer products. Now, perhaps channelling energy into some more effective marketing campaigns would help too.