How Samsung Can Repair Its Reputation with Consumers

Posted on: October 13th, 2016 by ABC News No Comments

Samsung(NEW YORK) — Bad news can make for the best memes.

In recent weeks, various internet users have compared Samsung’s fire-prone Note7 smartphone to a hand grenade, pretended it was a bomb in need of disposal, and placed it in an ice bucket.

While the jokes and memes are meant to be humorous, they underscore consumers’ concerns with the safety of Samsung devices.

Since its debut on Aug. 19, the Note7 has been a living nightmare for the Korean company.

Following a confusing, informal “product exchange,” the company exchanged faulty devices for replacements through a government-sanctioned recall. When the replacements were reported to overheat, the company faced a “worst-case scenario”: end all production of the Note7.

Investors have raised some alarm about how the company’s reputation could take a hit from the botched Note7 roll-out and recalls.

Credit Suisse analysts Keon Han and Sang Uk Kim wrote in a research note to clients that “trust in the Samsung product by its major distributors took a knock,” which allowed “competitors to potentially gain market share.”

As the company careened from the “product exchange” to the government recall to finally admitting weeks later that the replacement devices were potentially dangerous as well, “perception that the initial problem was not understood/resolved is now emerging,” Han and Kim wrote.

“It is easy to overlook the first recall, but much more difficult to overlook the second,” they noted.

The good news, perhaps, for Samsung is that — unlike some competitors — it doesn’t produce a single smartphone model, and killing the Note7 early may have been the right move.

“It was the black death for Samsung,” Eric Schiffer, a brand strategy expert and chairman of Reputation Management Consultants, told ABC News. “They needed to amputate it at the Note7 level because it would have killed the body. I think they made a tough but really smart choice.”

In the short term, “what Samsung needs to do is to prevent the negative perception shifting from the specific Galaxy Note7 model to the overall Samsung brand,” Anindya Ghose, director of the Center for Business Analytics at New York University, told ABC News.

“This is important now because in the Android world, Samsung now has a powerful competitor – Google Pixel, in addition to existing firms like HTC, Micromax, LG, Xiaomi and Huawei,” he added.

The true damage to Samsung’s brand isn’t yet clear.

Ghose said that to restore trust with consumers, the company would have to recall all of the defective phones (a process it has started), pinpoint the cause of the problem, fully reimburse consumers and convince its business partners “to give it another shot with the next set of product releases.”

To accomplish this, Schiffer recommends that company executives start talking directly to consumers to allay concerns.

“I think the CEO needs to get front facing and talking about the decision,” he explained. “You want a genuine human communication, one in which it talks about the importance of the relationship — the long-term relationship — and talking about doing the right thing for consumers.”

This will be needed if the company hopes to extinguish the Note7’s bad reputation before it spreads to the company’s other models — particularly the Galaxy S8, which is expected to launch early next year.

With the plug pulled on the Note7, Schiffer said, Samsung “can focus on the next model which will likely be the most inspected piece of technology in the history of smartphones. They’ll have every expert under the sun look at that thing.”
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