Samsung is the leading smartphone manufacturer with a 22.3% global market share. It focuses on differentiation by offering high-quality products with innovative features at lower prices than competitors like Apple. Samsung targets various customer segments including professionals, young people, and average consumers. Its marketing strategy involves product differentiation, competitive pricing, extensive advertising, and online and retail sales channels. After almost going bankrupt pursuing a cost leadership strategy, Samsung shifted to focus on both differentiation and cost leadership through vertical integration. This combined strategy allows it to deliver unique products at lower prices than competitors.
2. 1
Table of Content
Page
1. Analysis on customers 2
1.1 What is the company’s value proposition? 2
1.2 What is the size of the market? 2
1.3 Who are their customers and what needs do they have? 3
1.4 What target groups do the company control? 4
1.5 What segments can be distinguished? 4
2. Marketing strategies of the company 4
2.1 Porter’s generic strategy (1980) or any other appropriate strategy 4
2.2 Segmentation 5
2.3 Positioning 6
2.4 Marketing mix 6
2.4.1 Product decisions 6
2.4.2 Pricing mix 6
2.4.3 Promotional mix 6
2.4.4 Place mix 7
End Word 7
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Introduction
In a globalized market, the Korean company Samsung Electronics focusing on electronic appliances,
faces more and more competition and has to steadily increase their performances in order to keep up with
the newest trends and technologies. Furthermore, Samsung’s customers nowadays have higher
expectations to the company regarding e.g. sustainability and environmental-friendly production but also
product excellence and technological advance. Which value does Samsung add to attract customers and
what is their marketing strategy? In order to answer these questions, this assignment aims to analyse
Samsung’s engagements towards customers on a deeper level and find out how their marketing strategy
can be defined, narrowing it down to only Samsung’s smartphones.
1. Analysis on customers
1.1 What is the company’s value proposition?
According to an article found on Gartner’s website (2016), Samsung is ranked leader in terms of market
share for smartphones in 2016. Reaching a striking market share of 22.3 worldwide, the company largely
surpasses its main competitor Apple which has a share of only 12.9 percent. Following on this,
understanding how Samsung grew such a high share on the current smartphone market is simple when
looking at its value proposition. The Korean company focuses on selling their customer a product of
excellence which exceeds quality and technological standards. Compared to their competitor Apple,
Samsung offers more special features to their phones for inferior prices: the most expensive phone
Samsung offers at the moment can be bought on their website for approximately 880 Euros, whereas most
iPhones exceed the price of 1000 Euros when bought new. Furthermore, Samsung keeps up with the latest
technologies while offering their customers additional facilities such as the possibility to increase memory
storage or to exchange the phones battery when needed. Surpassing all expectations Samsung also
improved the design of their most recent Galaxy phones which had previously been a strength of their
competitor Apple by introducing the Galaxy S7 edge. This model especially demonstrates Samsung’s
improvements on design in order to offer excellence on all fields a phone has to offer and getting out of
Apples shadow regarding the phone’s elegance and casing.
1.2 What is the size of the market?
The company selling its phones all over the globe, it is difficult to define the actual size of the market. As
mentioned above Samsung’s market share currently adds up to 22.3 percent and therefore makes up a
large part of the smartphone market. Referring to the following statistic, the smartphone market is
estimated to grow bigger every year which means that an increasing amount of the world’s population
will make use of a smartphone. As seen on the chart, the units of smartphones shipped increased by
approximately 200 million units adding up to the previous year. Even though the exact size of the market
cannot be identified, an estimated 43% percent of the globes population uses or possesses a smartphone
(TechInsider, 2016). What does this mean for Samsung? As smartphone sales are estimated to rise, the
size of the market will most likely increase in the future, especially tasking into account developing
countries like Brazil. If Samsung emphasizes on adapting to these emerging markets, this new larger
market can then be supplied by Samsung in order for the company to increase its market share and
revenues at a global scale.
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Figure 1 - Over 1.5 billion smart phones to ship worldwide in 2016 (Judge, 2016)
1.3 Who are their customers and what needs do they have?
As the leading brand in smartphones, Samsung has various groups of customers from which some are
more relevant than others. So-called “buffs” for example, are customers which can be seen as innovators
or early adopters and show high interest in Samsung’s newest releases. They are easily enthused by
innovative technologies like Smartwatches or special add-ons and are important to the company since
they show less price-sensitivity. Following this scheme, high earners and professionals are part of
Samsung’s customers since they often are capable to spend more on quality products and might even buy
further products to connect with their phone like laptops or tablets. Finally, Samsung has lately also been
focusing on another group of customers who has particularly emerged as being part of the leading
purchasing powers: in an article published on Mobile Today this February, Samsung is said to have
launched special phone features like the virtual reality lens to attract young customers. Samsung has
witnessed an increase of teenagers buying smartphones and spending their money on recent mobile trends
and therefore also adapts to these expectations. In other words, Samsung comes up with new apps and
camera filters especially young people tend to use and also launched new colours and designs to their
Smartwatch series by the beginning of this year (Samsung, 2016). Following professionals needs,
Samsung has already launched apps such as mobile Banking and stocks some time ago but keeps
developing their program in order to offer the best experience possible. By introducing the wireless
charger, the company again made a step to facilitate the routine of e.g. business clients who travel a lot
and therefore benefit from this new appliance. Paying close attention to their customers and establishing a
trust-based relationship with them, Samsung is able to continuously adapt their devices to customer needs
even if these customers tend to show different characteristics.
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1.4 What target groups do the company control?
As afore mentioned, Samsung already supplies many business people and professionals but also
individuals from which an important part is the young generation. The target groups are attracted by
distinguishing from competitors like Apple. Especially by launching the Galaxy S7 edge, Samsung gained
many new customers and could according to Forbes magazine (2016) “re-establish itself as the top
smartphone manufacturer in the world”. Consequently, Samsung could even expand their target groups to
so called Others who represent average citizens that mostly don’t have high salaries but perceive
Samsung phones as having a higher value than others on the market.
1.5 What segments can be distinguished?
First of all, Samsung clearly does demographic segmentation, aiming at different age groups or income
classes. Furthermore, the level of education plays an important role for the customer segmentation since
the education of the customer will affect his buying behaviour. Adding to demographic segmentation,
Samsung also includes psychographic distinction by which personal factors have to be taken into account.
Lifestyle e.g. plays an important role in terms of interest of the customer: appliances that measure
heartbeat or step count will in this case be used by sports interested people, whereas quality speakers are
required for music fans. Elaborating further, Samsung also considers behavioural segmentation, which
focuses on questions as how often the customer uses his device or which Apps he tends to use more.
Lastly, the Korean company also implements geographic segmentation in terms of language or cultural
barriers. The phone itself will remain the same in this case but the program can vary from the Asian to the
American market for example. Concluding, Samsung makes use of several segmentation methods in order
to adapt best to all their customers’ needs and give each of them a feeling of being individually taken care
of which contributes to them having the largest in the smartphone market.
2. Marketing strategies of Samsung
2.1 Samsung’s appliance of Porter’s Generic Strategies
Competitive and strategic advantage is obtained by following only one of Porter’s Generic Strategies, an
idea created by business professor and strategist Michael Porter in his in 1985 released book,
“Competitive Advantage” (Dr. Douglas Hawks). These strategies are:
1. Differentiation
2. Overall cost leadership
3. Focus
4. Combined cost leadership and differentiation strategy
A company could use the differentiation strategy focuses on offering unique benefits over its competitors,
and thereby differentiates itself from another company. A company could also go for the cost leadership
or low cost strategy. With this strategy, a company offers comparable goods or services, comparable to
their competitors, for a lower price (Dr. Douglas Hawks).
For Samsung, cost leadership, where the company pursues cost reduction from experience, capacity
utilization, linkages, degree of integration and many other cost drivers (Hooley, Piercy and Nicouland,
2013) was experienced mainly prior to the Asian Financial Crisis of 1997, where Samsung almost became
bankrupt. This situation changed when Eric Kim became chief marketing officer, reforming the company,
and changing its strategy from cost leadership to differentiation (Mitchell T, 2010). After Eric Kim
became chief, Samsung’s design staff had been tripled to 400 globally (Singhania,2006). Because of these
6. 5
changes in the company’s strategy, Samsung Electronics has emerged as one of the main players in every
market the company operates in. As an example, Samsung’s Galaxy Tab is considered to be the only
substantial competition to Apple’s iPad (John Dudovskiy, 2012).
Now that Differentiation is such a big focus of Samsung, the company still has focus on Cost leadership
as well, by pursuing ‘vertical integration’, which is a strategy used by manufacturers to gain more control
over the production chain, instead of outsourcing various processes in the production chain to different
suppliers (The Economist, 2009). By manufacturing its own major components of its mobile devices,
Samsung achieves its cost leadership, and therefore reduces cost (Syed Rashik). This can make Samsung
an attractive manufacturer, because it delivers a cost efficient product, which offers unique benefits over
products manufactured by its competitors.
Because Samsung has a focus on both differentiation and cost leadership, there can be concluded that the
company has a combined cost leadership and differentiation strategy, that focuses on delivering a product
which offers unique benefits over products manufactured by its competitors, at a lower price than for
example Apple.
2.2 Segmentation
Samsung is targeting the customer market by dividing it into different segments and offering each
segment different products based on their common characteristics. The market is divided into Geographic,
Demographic, Psychographic and Behavioral segmentation. Companies use segmentation to reduce risk
in deciding where, when, how and to whom a product or service will be marketed. Additionally,
companies use segmentation to increase marketing efficiency by directing effort specifically towards a
designated segment, in a way that matches with the segment’s characteristics (Kotler, 2016).
Samsung’s Geographic Segmentation has divided the Asian market into geographical regions such as
north, south, east and west, as well as targeting different Asian countries in a different way, by dividing
those countries as for example, the Chinese market (Momin Mukit)
The company its Demographic Segmentation is focused on males and females, where age does not really
matter, but most of its users are people between 13 and 60 years of age. Samsung’s products are offered
with different features to different people, based on their income level, which results in Samsung being
for everyone. (Samsung Electronics, Ashgar, Mukit). Also, Samsung has divided customers according to
their occupations, such as students, businessmen, or regular employees (Momin Mukit.
As for Samsung’s Psychographic Segmentation, customers are classified on different levels, based on
their lifestyles and personalities, for example an ambitious, sports loving customer (Ashgar, Mukit).
Lastly, Samsung’s Behavioral Segmentation targets the consumer based upon what benefits they seek in
Samsung Electronics, for example excellent quality and a beautiful design. Additionally, Samsung has
knowledge of the user status of its target customer with the goal to better be able to offer its product.
Therefore, customers are divided into ex-users, potential users, first time users and regular uses. With this
information Samsung can target customers based upon their loyalty (Mukit).
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2.3 Samsung’s positioning
In 2015 and 2016, Samsung embodies innovative technologies, combined with style, aimed at the young
professional, with its edge design, and new premium feel to its flagship phone, the Samsung Galaxy s7
Edge (Sumaiya Mahmud, 2015). With this new positioning of Samsung, the company differentiates itself
from its prior Cost leadership structure, where it delivered cheaper and technologically strong products
without an emphasis on design. An important factor of Apple’s success over Samsung, was Apple’s
design on its iPhone. Now that Samsung puts more emphasis on design, the company can compete with
Apple in a more effective way (The week, 2016). For example, the Samsung Galaxy s7 Edge, Samsung’s
2016 flagship smartphone and the Apple iPhone 7, Apple’s flagship 2016 smartphone, being considered
the two best phones on the market based on looks and performance. (The week, 2016). Other important
factors for Samsung’s positioning are innovative product features, value for money, integral parts of
family, healthy living and energy efficiency hence cost saving (Momin Mukit).
2.4 Marketing Mix
2.4.1 Product Decisions
Samsung’s products in its marketing mix consist of Tablets, mobile phones, televisions, cameras,
refrigerators, air conditioners, washing machines, microwaves and IT products. Samsung has the benefit
that it is a trusted company, due to its performance in the last few years. Also, Samsung is known for
giving very fast service to its customers for any of its products. Therefore, in Samsung’s marketing mix,
the product portfolio is a strong point (Katzmaier 2011, Bhasin 2016).
2.4.2 Pricing Mix
Because of Samsung’s presence in so many different product categories, the company follows a variety of
pricing strategies. The pricing strategies can be divided to match the product that it is used for. One of
these strategies is ‘Skimming Price’. With this strategy, Samsung brings a new product to the market, for
example the Samsung Galaxy s7 Edge, Samsung’s flagship smartphone with innovative technology. At
first, Samsung uses Skimming prices for the product, wherein it tries to get a high value in the start,
before competitors catch up to the product. Once the product is outdated or a competitor has released a
similar product, prices immediately drop (Bhasin, 2016). Additionally, Samsung uses competitive pricing
for products other than smartphones, for example Televisions, refrigerators and other home appliance
products. Because Samsung is not as good as for example LG in home appliances, Samsung needs to beat
the competitor with competitive pricing (Bhasin, 2016).
2.4.3 Promotional Mix
In terms of promotion, Samsung makes strong use of advertisements. Whether if it is online promotion,
banners or via television; the company creates adds in which their product centers the attention and sends
a clear message to all potential buyers. Furthermore, Samsung benefits from so called word-of-mouth
promotion which means that Samsung customers recommend their purchase to friends and family,
therefore raising interest for other people to invest in Samsung devices.
Via Internet communication, people all over the world can give feedback in a split second and trigger
public relations which also promote the brand. But public relations can also include fairs which Samsung
attends in order to introduce products or e.g. certain sponsorships Samsung gets involved in so as to
indirectly benefit from promotion.
8. 7
2.4.4 Place Mix
Focusing on placement, Samsung is present in various fields such as retail shops which are one of the
major places of distribution. Adding to this, there also are web shops from which Samsung's own is the
main one: these platforms allow potential customers to identify which product they are interested in and
get an overview of the devices' capabilities before having the possibility to order it directly from the
website. This convenient method turns out to be very effective to increase sales since a recent study
undertaken by comScore and UPS has shown that 51% of shoppers nowadays make their purchases
online. Samsung also has a call center where purchasing a phone is also possible, this distribution method
is though getting less popular as online sales increase (Madeline Farber, 2016).
End word
In this Essay, Samsung Electronics’, narrowed down to Samsung’s smartphones, the company’s customer
analysis, and marketing strategies were discussed. Both authors of the essay learned a lot about the way a
large company like Samsung operates, and hope they were able to inform the reader about Samsung’s
way of working. With the rise of Samsung, the question is; will the company be able to defeat its
competitors, fulfill its goal to conquer all markets and become market leader in everything they do?
9. 8
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