Samsung is presently the world’s top smartphone maker, by units sold, by some distance. Figures out last week reveal that around 15 million of its latest high-end handset, the Galaxy S7, will have been sold in the second quarter of 2016, up from 10 million in the first quarter. The company’s overall operating profit is the best in two years with a forecast of $7bn (£5.4bn) in Q2, up 17% from the same period last year, while analysts predicted an operating profit of $3.45bn (£2.7bn) for the mobile division.
But while the S7, which was launched in February, will survive being dropped into a sink of water and has a camera that can take pictures in dim light without a flash, Samsung has a problem: there is a limit to the functions it can add to handsets to keep people buying them.
At the same time, it is being challenged by Apple at the premium end, and by companies such as Huawei at the entry level.
“We are facing category barriers, the category is slowing down and people are losing their interest and excitement. Those are the barriers. Complacency is our barrier,” says Younghee ‘YH’ Lee, Samsung’s executive vice-president of global marketing for its mobile communication business – a position she has held for nine years.
This is not to say Samsung is being complacent. It launched its latest phone at Mobile World Congress in February, not via a huge screen beaming out an image to the thousands of assembled journalists, but through through virtual reality (VR) headsets on which the handset magically appeared. Samsung has also introduced the Gear 360, with two lenses capturing a 360-degree field of view, on which it hopes people will shoot film to watch back via VR.
So although the phone remains at the centre of the Samsung ‘universe’, the company knows it is the accompanying products and technologies that it needs to push harder. Lee is open about the general slowdown in smartphone sales, which has been experienced by rivals such as Apple too.
“Our consumers are showing fatigue and slowing down their upgrades, and it’s not easy to differentiate, however we believe the phone is at the centre of everything, together with VR, 360 and the smartwatch. With the Galaxy you can go beyond your normal experiences, so this is what we call the Galaxy ecosystem.”
For the moment, VR is more of an experiment than a source of revenue, but Lee compares its potential to that of the internet, in the sense that she hopes it will be capable of benefiting everyone. “We believe in it, so VR is not only for hardcore gamers or very rich people, it is for everyone. You can [experience] everyday life but better with VR, that’s what we believe.”
The internet of things will give a new lease of life to the smartphone too, says Lee, who
has a background in FMCG marketing. “At Samsung, we have a lot of things to connect: white goods, digital appliances and services, Samsung Pay, and all the wearable things and VR – those will give [people an] endless experience of our smartphones.”
Focus on humans, not on tech
Marketing Week meets Lee at the Samsung Maison, a townhouse the company hired for the duration of this year’s Cannes Lions festival. It is the day before Lee – who has flown in from Seoul – collects the brand’s Creative Marketer of the Year award, a prize that has not been won by an electronics firm since 2000, when Sony took it home.
Samsung won 27 Lions last year, including for ‘Safety Truck’ where a live feed of the road ahead was broadcast onto the back of trucks, allowing for safer overtaking by cars behind;
for ‘Look at Me’, an app designed to help autistic children communicate better; and for ‘Back-up Memory,’ an app for people with Alzheimer’s disease.
This focus on how technology can help people, rather than on the tech itself, has been a step change for Samsung. When Lee joined the company, the business was about engineering and its communication prioritised products.
“It was more futuristic and world-first technology at the time. But now we all talk about how we can change people’s lives for the better through this technology. So it is a huge shift not only for marketers but also for the top management,” she says.
Part of that leadership team is Dongjin ‘DJ’ Koh, the man promoted to the role of president of Samsung’s global mobile division in December 2015. He has said he wants to bring a “venture spirit” into the company, moving from focusing on technology benefits towards phones being a more “life-essential tool”. [Source.]
Lee says: “He has a basic philosophy that is ‘humans first’: my employees, my consumers, my customers. He believes in people, communications and the brand. We are having frequent dialogue about how we can engage the consumer more and deliver our messages and our philosophy; how we can enhance people’s lives. That’s not just for the marketing, he believes in it.”
Further evidence of the humanisation of Samsung’s brand is its upcoming campaign supporting its sponsorship of the Olympic Games, taking place in Rio de Janeiro this summer (see Olympics sponsorship humanises Samsung, below).
Instilling ‘brand’ in engineers
Samsung also bolstered its team with former Coca-Cola marketer Pio Schunker, who reports to Lee and joined in April 2015, as senior vice-president and global head of brand integrated marketing. He tells Marketing Week that Samsung’s way of thinking is one of reinvention. “One of the big philosophies of the company that you hear in the hallways all the time is ‘you can never rest on your laurels’. You have to constantly reinvent, and that goes to reinventing the [smartphone] category.”
But how do executives explain this, and the concept of ‘brand’, to a company full of engineers who may not understand or care for the term?
“Good question,” Lee says, seeming to relish tackling it. “It wasn’t easy. A lot of people still believe that brand is communication, brand is something that talks to consumers. But brand is really the untouchable essence of who we are and why we are. Whatever we say, it is all the result of brand; product itself should talk about brand, design and UX [user experience].
“I know it takes time, and we should be engaged with key stakeholders in the company, but we are going in the right direction, especially with DJ [providing] a big support.”
The elephant in the room is Apple, which has understood the power of brand better than any other electronics company since the launch of the iPhone in 2007 – the year Lee joined Samsung from a senior role at L’Oréal in Korea. So how does she think people see the two brands?
“If you look at our consumer surveys, Samsung is technology and dynamic and fast, and [has the] latest features. [Apple] has more design and more software, more curated, simple. That sort of image is built around consumers.”
Lee wants to use Samsung’s strength in hardware to help it tell a consumer brand story. “Although we are very [much at the] forefront of technology, we are trying to deliver how we tell our story through this openness – inclusion, global, multicultural, fast, dynamic, for you, with a democratised freedom, not really controlling, not really dictating – that’s what we are trying to do.”
With that, she produces a Samsung portable phone charger, which works with Apple products as well as its own, as if to demonstrate the openness the brand wants to achieve compared to its rival.
Its advertising too has moved on from mockery of Apple to brand films that aim to inspire people and – crucially – talk about its products’ benefits to consumers, rather than the technology that enables them.
As Schunker says: “No one understands dual-pixel technology, but [when] you talk to them about a camera that’s not afraid of the dark, [people] actually get it.”
Of course, the rivalry with Apple is always there, and Lee knows that as its competitor only produces smartphones at the premium end of the market, it is sometimes seen as superior.
“Due to that [range of products] maybe people think we are not as premium as somebody [else],” she says, “but again we are the democratic [brand], we want to make sure we are available for everyone. Price shouldn’t be the barrier for people who want to experience these smart devices.”
But Samsung is also working hard on super-premium brands: Lee is wearing a €16,000 (£13,600) limited edition Samsung Gear S2 smartwatch, produced in partnership with Swiss jeweller De Grisogono and complete with more than 120 black and white diamonds. How would a normal person go about buying one?
“It’s not for the normal person,” Lee laughs. “This is a very exclusive, limited-edition version, sold in [Di Grisogono’s] flagships in New York, Dubai, Tokyo and Paris. There is a different group of people who say: ‘I want that’.”
And she will be hoping that ‘I want that’ is something consumers keep saying. “It was technology that was leading us, but nowadays I can say: ‘Is it meaningful to our consumers? Is it something that makes people say wow?’” These are big questions, and Lee has pushed Samsung to act on them.
Olympic sponsorship humanises Samsung
Samsung is marking its sponsorship of the Rio Olympics this summer with a series of ads putting human stories ahead of product features. Rather than sponsoring major athletes, it has chosen to focus on lesser-known sportspeople, to tie in with its strapline: ‘Proud sponsor of those who defy barriers’.
It launched with a short documentary, ‘A Fighting Chance’, at the Tribeca Film Festival in April, directed by Oscar-winning filmmaker Morgan Neville and featuring athletes from Lesotho, Vanuatu and the Dominican Republic.
“This was based on a simple insight that out of 205 countries that compete in the Olympics, there are around 70 who never win medals. So this film was a testament to the spirit that drives people,” explains Samsung mobile’s senior vice-president and global head of brand integrated marketing Pio Schunker.
Schunker spent 10 years at Coca-Cola, before joining Samsung in April 2015, so understands the power of emotion in advertising, talking about finding the ‘heart and soul’ of a brand. The ‘Proud sponsor of those who defy barriers’ line gives a nod to Procter & Gamble’s 2012 Olympics strapline ‘Proud sponsor of mums’, which the FMCG manufacturer has renewed for Rio 2016.
Schunker continues: “It would be easy for us to sponsor the big athletes but we wanted to focus on the parts of the world that don’t [do so well at the Games], but actually there’s a spirit in them that we wanted to celebrate.”
Although the athletes in A Fighting Chance were all provided with training devices and phones, there is no product featured in the documentary. “It is about the spirit of perseverance, of coming back from failure, of trying all the time of going against the odds to win something that you believe in, and it wasn’t meant to be a product placement,” Shunker explains.
The company has also released ‘The Chant’, an ad which follows the progress of 400m runner Margret Rumat Rumat Hassan, part of a team from South Sudan. It is the first time the country, which became independent in 2011, has competed in the Games.
Chant does feature a product – Samsung’s Gear IconX wireless earbuds – through which Hassan hears an ever-increasing crowd of people chanting her name, as she prepares to walk into the Maracanã stadium in Rio.
As well as The Chant, among Samung’s other Olympic ads will be ‘Surfing’ – featuring an Indian boy who has taken up the sport – and ‘Ability’, which will celebrate the Paralympics.
“There will be local retail activations in all the countries that support the Olympics: that very much goes hand in hand with this. We wanted to use the Olympics as a platform to tell our brand story and to reintroduce the global community to the Samsung brand, in a way that they have never been introduced before,” says Schunker.
As part of this, Samsung has created a manifesto for the Games, talking about how the company’s products have defied barriers to provide benefits to consumers, in a similar way to the athletes who “do what can’t be done”, he adds.
Samsung’s Q2 2016 profits, its best quarterly results in two years
Rise in profits from Q2 2015
Analysts’ estimate of mobile division profits in Q2
Estimated combined sales of Galaxy S7 and S7 Edge smartphones in Q2
Source: Samsung, FT