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Samsung can’t buy love but maybe it can charge a premium

by Nigel Hollis | March 12, 2014

In a recent post on iMedia Connection, Millward Brown Optimor’s Pandora Lycouri and Dmitri Seredenko conclude that Samsung can’t buy love. In “Can Samsung Buy Love?” they contend that simply outspending Apple is not going to overturn the strong emotional connection with users that Apple has earned through consistent innovation and iconic style. Maybe not, but it might help Samsung charge a price premium over other brands.

Love or price

I have recently spent some time exploring how some brands manage to charge a price premium. Premium is the ability to command a price premium in any product category; it is not the same as luxury. Luxury brands practice an extreme form of premium marketing and additionally leverage the power of scarcity. Limited supply helps convey a perception of exclusivity.

In the course of my exploration, I have spent some time exploring the mobile phone category in the USA using BrandZ data and Euromonitor. Given the fast-paced nature of the market it is the marketing equivalent of studying how fruit flies evolve. Brands enter the market with something new, they evolve to fend off competition and then, like as not, die. Anyone remember Palm? 

The fascinating thing about the entry of the Apple iPhone to the category was the way the brand immediately supported a price premium over the available brands because it was clearly seen to be different from them. Functionally and from a design viewpoint, it was unlike anything else and so it commanded a price point unlike anything else. This was apparent in our data from 2008 onwards even though the brand took a while to establish widespread salience.

At the time of the iPhone launch, Motorola and Samsung were the two largest brands by market share, but our data suggests that Motorola was more likely to be perceived as different. That, however, did not last long. By 2009, neither brand was perceived to be well-differentiated (Samsung never had been) and Motorola was beginning to suffer. The brand has never really recovered. 

By contrast, Samsung has strengthened its brand significantly since 2009. The launch of the Galaxy in June 2010 was the turning point. The new smartphone challenged people’s perceptions of what Samsung was all about. Since then, the perception that the brand is setting the trends and has something unique to offer has improved each year as new models are introduced. In 2009, Samsung was more meaningful and salient than average. In 2013, it was more meaningful, different and salient.

The end result is that while Samsung may not quite match Apple for emotional appeal, our Premium score - a measure of the degree to which people believe it is worth paying the price they perceive the brand to charge relative to category alternatives – indicates that the brand is far better positioned to command a price premium than it once was.

The big question is will Samsung choose to leverage the perception that it has something different to offer into higher pricing or additional volume? What do you think? Please share your thoughts. 

4 comments

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  1. penny, June 23, 2014

    This is an interesting post and question. Looking at market share and product range, Samsung are playing the volume game. Samsung now have high Australian and global market share (higher than Apple) based on a wide range of models and prices from cheap and simple and up.

    Samsung also attract tech-heads for running on Android - which is much more open and flexible than Apple iOS. Tech-heads are important as influencers - they are the people, family / friends turn to, to ask which phone to get.

    I think its quite possible Samsung launch a high-end differentiated phone at a price premium to build and keep a position as technology leader (even if they don't sell many), but I would be surprised if they did this across their range. Unless Samsung can build the emotional appeal of an Apple, Samsung would simply be opening themselves up to being out-competed by an HTC etc.. etc... And not everyone wants a phone they are in love with. And in the global market, achieving volume is still a pretty darn good generator of profit.  

  2. Joakim Vars Nilsen, June 23, 2014
    It would be a though strategic decision for them, but the question is if they are able to deliver on it. This kind of statement demands more effort than simply raising the price in my opinion. 
  3. Ramesh, June 23, 2014

    I believe Samsung would try to find a fine balance between the two:

    1. Charge premium for their flagship models (Galaxy S and note). However, keeping a visible distance from apple pricing.

    2. And play the volume game with the entry and mid range smart phones - by leveraging a rub off from the flagship models and parent brand perceptions.

    If Apple is to be credited for revolutionizing telephony by introducing smart phone. Samsung will be for democratizing samrtphone. Making it accessible!

  4. Kathryn Kure, June 23, 2014

    Why would Samsung think of changing horses mid-stream? Particularly since the original smartphone market is increasingly saturated and the market is moving to first-time users, who can't afford to pay a premium price. Their big competition is in these markets, with those pumping out ever cheaper entry-level smartphones.  I vote that they will go for volume.

    It's not so much about the phone anymore as about the entire system on which and within which it operates - by which I mean also the operating system, interoperability, technology getting out the way - enabling you to do what you want easily and effortlessly ... and the data underlying in particular applications like mapping and context-specific and/or local information, that counts.

    I have a Samsung, iterations 2, 3, 4 and will probably get 5 (even more megapixels  in the camera - and water/drop proof) but would swap out in a heart-beat for any other Android phone that was cheaper and had the same functionality.

    Most of what I consider indispensable have little to do directly with the physical phone apart from the camera: Instant Upload, Auto Awesome, algorithms that automatically sort my photos and place the best in a highlights section, automatic enhancements, automatic resizing of photos for email, blog, G+, photo sphere, picture editing, ... Google maps. Basically, apart from ease of typing I don't need another computer anymore. I do pretty much everything on my phone.

    If Samsung changed from Android I'd immediately start seeking for an alternative phone. But to think of one without the other is a bit like studying the wife only and expecting to understand the full dynamics of a marriage.

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