In September we released a first look at the brand strength erosion Samsung experienced as a result of the Galaxy Note 7 battery fires. At that time we noted an immediate 3% decrease in brand preference for Samsung smart phones which foreshadowed an over 10% drop in unit sales. This result came to fruition with an estimated 13.5% decrease in quarterly smart phone shipments from the prior year contributing to a 30% reduction in quarterly corporate profit. It is worth noting that this reduction in profit was despite the growing shipments in television screens anticipated by improvements in Samsung brand preference within that product category.
Now the question turns to how long this downturn will continue. The trend to date isn’t promising with a modest recovery started in September completely stalling in October.
Normally when a brand experiences a product recall they will see a significant, accelerating rebound in preference within two months. But that pattern in not manifesting here. This suggests that consumers are viewing this not as a simple product recall but rather as a fundamental issue with the brand itself.
Samsung’s management team may have already intuited that this situation is different from a typical product recall. Just this week they released full page apologies in the Wall Street Journal, The New York Times, and The Washington Post. This is a tactic more commonly used by companies involved in misconduct scandals. Recent examples include Wells Fargo’s apology for illicitly opening over two million accounts and Volkswagen’s admission of fraudulent emissions testing. That Samsung would take such dramatic action suggests an understanding of the seriousness of the brand issue they face.
Image Source: Twitter/Rurick Bradbury
But how can Samsung ensure that this outreach will be successful in repairing their relationship with the public? The first step, assuming that the battery technology issue itself has been resolved, is to verify that this message is reaching the audiences where the greatest loss in brand preference occurred. While declines have been seen across all demographic groups as the below table shows some have seen especially strong declines when compared to the overall population. Redoubling efforts to reach these groups could pay especially large dividends.
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