Samsung Leveraging the brand from B2C? to B2B

Samsung is a Korean industrial group with a product portfolio ranging from electronics, finance and construction to other services. It successfully internationalized its business from local to global. Samsung is headquartered in Seoul, South Korea. It is ranked as number 20 of the 100 most valuable brands worldwide carried out by Interbrand in 2005. This is an increase of more than 100% since 2000 with brand value rising from US$5.2 billon up to US$12.5 billion. In 2005 the company had 175,000 employees and an annual turnover of US$43.6 billon. Innovation and premium branding helped Samsung to achieve profits of US$10.5 billion the same year.

Exporting dried fish and vegetables Samsung was founded in 1938 and started large scale manufacturing in the late 1950s in various industries. In 1978, Samsung Semiconductor became a separate entity producing for the domestic market. With the development of a 64K DRAM (Dynamic Random Access Memory) VLSI chip (Very Large Scale Integration electronics chips) it expanded globally. In the financial crisis in 1997, Samsung was facing US$20 billion in debt and had to slim down the company by more than 100 non-essential businesses in a restructuring process. It kept only 47 affiliated companies and strategically re-focused on four technical components: displays, storage media, random access memory (RAM) and processors.

The restructuring process led Samsung also to focus on core businesses. It restructured its business into four strategic business areas – Home Network, Mobile Network, Office Network and Core components – that support network products. Samsung implemented a clear mission and vision across all core businesses:

Vision
“Leading the Digital Convergence Revolution”
Mission
“Digital e-Company”, i.e. a company that leads the digital Convergence Revolution through innovative Digital Products & e-Processes.

Also, Samsung focused on developing pioneering products and technology in semiconductors, telecommunication devices and home appliances field, which on the long-term made Samsung a most competitive total solution provider in digital convergence.

The strategy to develop new markets and new approaches has led Samsung to become a brand-led technology innovator. Its specialty is to focus on its customer needs and to adapt quickly to changes in consumer preferences.

Simultaneously to the reorganization of its business units, Samsung established an intensive internal change management process – where marketing activities were bundled under one Corporate Center. The aim was to implement a holistic marketing strategy instead of individual marketing plans to strengthen its market power and to increase brand strength with high quality and innovative products. Samsung had to face the following challenges: Create one global brand and marketing strategy establishing a clear brand vision and brand values to leverage brand’s success across B2C? and B2B businesses. Concentrate communication from customer to stakeholder perspective as communication to non-customer stakeholder groups becomes more and more important having a strong direct brand impact. Increase communication planning from cost to investment perspective along the entire brand screen. Expand position on chip/semiconductor market via cutting-edge technology and concentrate communication to digital consumers.

Clear Brand Positioning

Samsung’s aim to build a clear brand positioning followed a structured approach. First, Samsung established a brand mission according to the overall mission of the company. The mission reflected the core values of the brand – being close to the customer, consider customer needs and deliver innovative solutions.

Second, Samsung developed a distinctive value proposition to foster its single brand strategy. The value proposition gave further detail on the brand mission and explained how Samsung aimed to concentrate on a clear focus towards customer orientation and its promise to innovate best-in-class technology. Moreover, the value proposition accentuated some emotional aspects the brand wanted to communicate. The increased emotionality was then brought to life in Samsung’s image campaign. Looking back, in the 1990s, Samsung was the brand you bought if you couldn’t afford Sony or Toshiba. But this image should change a lot. The strategy was changed from a low cost and low quality image to a price premium and market leader. Samsung aimed at providing leading-edge, stylish products.

Samsung established its brand as a brand known for the most fun and stylish models ranging from cell phones to flat-panel plasma TVs?. Additionally, Samsung’s ability to produce almost any kind of digital technology products, monitors, MP-3 players, TVs? and printers allowed the company to be mostly independent from main component suppliers.

In a third step, Samsung deepened its single brand strategy via introducing a new corporate identity program. It aimed to strengthen competitiveness by bringing the attitudes and behavior of all employees in line with Samsung’s desired perception by the public. Samsung’s corporate logo was redefined to reflect Samsung’s determination to become a world leader.

The Samsung name was then written in English, expanding its global presence throughout the world. The name was superimposed over a dynamic, new logo design, giving an overall image of dynamic enterprise. The elliptical logo shape symbolized the world moving through space, conveying a distinctive image of innovation and change. The first letter, “S”, and the last letter, “G,” partially break out of the oval to connect the interior with the exterior, showing Samsung’s desire to be one with the world and to serve society as a whole.

The new logo was developed in the Corporate Marketing Center. Brand campaigns were handled from the Headquarters, apart from country specific adaptations and the media mix. Samsung began making a strong push to build a reputation on digital convergence from the late 1990s, using international competitions to gain fast recognition. In 2001 Samsung won the first spot on the IDEA (Industrial Design Excellence Award) list jointly with Apple Computer Co. and was the sole winner in 2002.

The new marketing strategy led to a US$400 million worldwide ad campaign “digitAll-everyone’s invited”. The image campaign became more emotional: For the first time Samsung’s new ad campaign by Berlin Cameron/Red Cell told an emotional story, relating Samsung’s products to every day situations. This was a change from its rather product oriented communication strategy and a move towards the image creation by its products. Samsung established a controlling tool to measure the effectiveness and efficiency of its communication activities and to identify improvement potentials on each step of the customer relationship path. Since Samsung’s concentration on a single brand strategy, the amount of global marketing spending summed up to €2 billion (2004).

Additionally, Samsung created an own universe for its campaign situated in the Time Warner Center in New York and supported by an online-world www.samsungexperience.com.

Excursions: The Samsung Experience is a remarkable 10,000-square-foot interactive emporium of virtual reality experiences and technology. The permanent venue is located on the third floor of The Shops at Columbus Circle in the Time Warner Center. Samsung has created a range of experiences, each of which ties the Samsung brand and technology to the experiences of everyday life. The site features hundreds of Samsung products in unique technology demonstrations such as a virtual world in a 360 degree interactive simulation, a map of the city that can be manipulated with hand gestures, and a digital fashion collection created by one of New York’s hottest designers.

The Samsung Experience is not a store and is always free to visitors. Visitors are invited to relax and learn how the latest devices can enrich their lives. Content from Samsung’s many partners, including MIT Media Lab, Parsons School of Design, Napster, Microsoft, Time Warner, Lincoln Center, and Sprint PCS, helps add to the experience.

“Samsung Experience is digital convergence in its purest form – where you can see, hear, touch and create the art of the possible,” said Dong Jin Oh, CEO of Samsung Electronics North America. “Our hope is that the venue will become a great educational resource, communicating the life-enhancing benefits of digital technology without the pressures of a sales environment.”

Samsung is also pioneering an innovative loaner program. Visitors to the Samsung Experience will be able to take a hard-disk based camcorder with them to shoot video around New York City. Once they return, they can edit the footage at kiosks inside the Experience, burn their movies onto DVDs?, and return home with a digital souvenir. Visitors are also able to use Samsung Napster MP3? players to download songs off Napster to CDs?, and also download ring tones to their cell phones. Images embedded in the venue’s giant interactive map of the city can be transferred to customize postcards and create personalized artwork. Additionally, Samsung will host technology seminars and tutorials at the Samsung Experience, as well as product launches and special events. “Digital technology doesn’t need to be confusing and overwhelming. The Samsung Experience will help people learn how to take control of digital devices and use them to improve the quality of their lives,” said Peter Weedfald, Samsung Electronics North America senior vice president-marketing. “As a digital convergence leader, Samsung is the perfect company to meet this need.”

“This is a major strategic play for Samsung,” said Stephen Baker, NPD Techworld’s Director of Industry Analysis. “By creating a direct consumer presence without relying on resellers, Samsung builds not only brand awareness, but also greater appreciation for digital technology overall. Everyone wins – especially consumers and retailers, who benefit from better understanding of what digital living is all about.” Early in the design and planning process, Samsung recognized that its ultimate brand expression required many pioneers of the digital convergence revolution to achieve a total immersion experience. Samsung enlisted a number of its long-time partners and recruited new converts as well as to collaborate in achieving the “art of the possible.”
“Our products, great as they may be, are just the enabler – ultimately, this is not about products, but about the experience,” said CEO Oh. “Working closely with content providers and other leading digital brands is the most gratifying part of what we’ve accomplished, and enables us to create the deepest, most satisfying expression of the new digital lifestyle.”

Communication to All Stakeholders

For companies operating in the B2B sector a focus in communication on high impact groups is increasingly important to successfully establish brand transfer. That is why, Samsung set up a comprehensive program to ensure consistent communication to all stakeholders considering the different roles of the brand. Samsung identified three high impact groups:

Staff and customer base: brand’s role to build trust and foster identification Target customers / financial community / broad public: brand’s role to build trust platform, to trigger analyst expectations, to build goodwill platform (corporate citizenship) Talents / gatekeepers / opinion leaders: brand’s role to build “preferred employer” position, build goodwill platform

Within this program, Samsung signed a deal in 2000 with Lucent Technologies to supply internet phones and, in 2001, AOL Time Warner and Samsung agreed upon mutually promoting their brands within a strategic marketing agreement.

Since 1998 Samsung has been an official sponsor of the Olympic Games: Nagano (1998), Sydney (2000), Salt Lake City (2002) and continues its sponsorship until 2008. During the Games Samsung provides athletes, organizational staff and journalists with especially developed mobile phones promoting Samsung’s products and delivering its promise of being an innovative and flexible company.

With the Olympic Games Samsung gained quick, cost-effective global exposure. “I convinced the company we had to have a single message,” says Kim. Its brand awareness increased after each Olympics about 2% and had a huge impact on the quick rise of the brand. Brand value increased since 2000 until 2004 about 100%.

For its target customers, Samsung established both in B2C? and B2B the concept of hero products. It means that each Samsung subsidiary has to define at least one hero product, e.g. mobile phone, TV or digital camera, which has – based on local or regional market research – potential to become a blockbuster. Samsung very closely involves its target customers in the development/research process via generating feedback on its B2B online platforms.

Comprehensive Communication Planning

To achieve business impact, a common planning/monitoring across disciplines is needed with a brand management via value creation and innovation rather than simple cost controlling. Samsung, when switching its strategy towards a premium brand, started to move its planning towards communication activities which have impact on each step of the customer relationship path, i.e. from awareness to purchase to loyalty. Two major directions of impact towards high-end distribution channels and an emotional approach for its campaign were Samsung’s strategy. In its latest campaign, Samsung cemented the company’s new up market image by promoting its products in high-end distribution channels.

Expand Position on New Chip / Semiconductor Market

Despite several challenging moments for the semiconductor industry, such as the recession in early 1990s and early 2000, Samsung aggressively increased its investments in the business unlike the rest of the industry which laid-off workers to cut cost. This pre-emptive investment strategy helped Samsung to gain market share and to meet the rapidly growing demand for 4Megabyte chips after 1994 in the global market. Samsung became the number one memory chipmaker in 1993. By pursuing twin goals of leading-edge technology and producing one generation-old products in the niche market of memory chips, Samsung successfully avoided risks of failing in the market. They laid out Flash memory where text, photos, sound and screen can be saved in the small-sized chips. Samsung’s market share of memory chips has been growing continuously from 10.8% in 1993 to 28% in 2004, but it still follows Intel in the non-memory sector.

In 2000, Samsung asserted that digital consumers, a growing importance of business networks and technical devices would create new demands for semiconductors in the future. Samsung recently announced its plans to beat Intel in computer chip sales and to make a better partnership with it at the same time. Synergy effects will be drawn when all three core elements of investment, leading-edge technology and the unique digital products work together within a dynamic business interaction. Samsung’s vice president Yun Jong-yong stated that the company will try to become one of the top 3 electronics firms by 2010 in terms of quality and quantity and will therefore try to raise its brand value and revenues in its semiconductor business over Intel. Despite tough competition Samsung and Intel both plan on building better platforms to improve combined business opportunities.

Samsung is already leading the electronic market in some product segments, such as in the set-top box as leading product in home networking. In late September, 2005, Samsung Electronics announced a US$33 billion. investment to add new production lines in Hwasung, Gyunggi-do by 2012. It will be the largest semiconductor cluster and create about 12,000 jobs. Samsung’s expects to achieve total sales of US$61 billion. when the project is completed.

Fig. 1. Interbrand brand equity development 2001-2005 (indexed; 2001 = 100)

Besides being successful in this particular project Samsung increased its overall brand equity tremendously. Compared with the peers Dell, Panasonic, HP, Motorola and Nokia Samsung double its Interbrand equity. The conclusions we can draw are that Samsung successfully followed a one brand strategy by establishing one global value proposition, one logo and one consistent brand message Samsung communicated the same values across all businesses to all stakeholders, and followed a clear focus towards an emotional approach to increase brand image. Samsung followed also a pre-emptive investment strategy to comply with digital consumers demand and applied communication measures in an effective and efficient manner, and they consistently communicated their promise to offer innovative products perfectly tailored to customer needs.

Fig. 2 The new Samsung logo

Further readings in
Philip Kotler, Waldemar Pförtsch
Business-to-Business Brand Management, Springer Heidelberg, New York 2006