Friday, May 4, 2018

Samsung needs a brand positioned at low-end so that it can sell affordable products to fiercely compete with Chinese sellers without spoiling the premium image of the Samsung brand

PROBLEM: Samsung is trying to be present in every product segment with the same Samsung brand. Won't work in the long run. Selling both ultra-cheap basic mobile phones and also iPhone-rivaling Galaxy S9 smartphones under the same brand isn't a good idea. The ultra-cheap basic phones spoil the premium image of the Samsung brand. Further, in light of my this prediction, Samsung is continuing to face immense pricing pressure from Chinese smartphone-makers [and the Chinese firms are going to get only better and better].

SAMSUNG'S RESPONSE AND WHY IT WON'T WORK: In response, Samsung is trying various [mostly desperate] tricks, like churning out some models with "alternative" SoCs from MediaTek or Spreadtrum / Unisoc, among other things. While these tricks could/should eventually be successful, such lower-end products will also dilute the overall premium image of the Samsung brand, and this could end up hurting Samsung more than helping it. No owner of a Galaxy S9 will like or accept it if his maid is also talking on her Samsung-branded phone. Or if his driver takes out his J2 Pro from his pocket [with the same usual Samsung ringtone as the one on his S9!]. That's the real issue basically, in frank words. Not only does a rich man want product-exclusivity [S9 gives this, since his maid/driver can't afford a S9], he also wants brand-exclusivity [Samsung brand doesn't give this to him, whereas brands such as Bang & Olufsen and even Sony give this because these latter two brands only play in the high-price space, thus cutting out maids/drivers].

SOLUTION: A good solution [and maybe the only?] to this problem is that Samsung should create a new, separate brand which is positioned in such a way that it can take on the Xiaomis and the Huaweis through fierce pricing and other methods/promotions without negatively touching the flagship Samsung brand. It can do all those things under the banner of this new brand that it can't be seen doing under the main Samsung brand. Crucially, however, the procurement and manufacturing of this new brand should be in the same factories/plants as Samsung-branded products, so that costs remain under control [think of VW producing both Volkswagen and Skoda cars under the same roof, without the buyer knowing about the immense commonalities]. This dual-brand strategy is numerically the lowest-possible case of the multi-brand strategy used by the world's top hotel groups - Hyatt, Radisson, Marriott, Hilton and others. While these hotel chains go to the extreme, with perhaps a dozen or more brands, Samsung can likely solve its problem with just one additional brand.

It should be noted that customer segmentation done by these large hotel groups is done on two levels - brand-level and product-level. For example, if you choose the Hampton by Hilton brand, you've already chosen a rather affordable brand from within the various Hilton brands. You've thus expressed your customer segment on the brand level. Now within a Hampton by Hilton hotel, further fine-level segmentation happens when you choose a room type - King Room, Suite, Twin Room, etc. Similarly, the various smartphone models that Samsung sells can be thought of as produce-level segmentation, whereas the two different brands that Samsung should run will cover the brand-level segmentation.