Can Samsung Rebuild The Trust That's Lost?

by Sohini Bagchi    Oct 26, 2016

Brand reputation is hard won but easily lost. The adage holds true especially in this age of Internet and social media, where any negative report can spread like wildfire. In this context, Samsung’s Galaxy Note 7 debacle is nothing short of devastating. Samsung lost a lot of money and much of brand loyalty. [Read the full story here]

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While the South Korean smartphone company is now making every bit to win back the loyalty of its customers after the heat of Galaxy Note 7 explosions, the damage has already been done.

A recent customer poll on Galaxy Note 7 recall by Branding Brand on whether customers are loyal to Samsung suggested over one-third of the current Samsung customers believe they will not buy another smartphone from this brand. Out of a survey of 1,000 one third or 34 percent is a big number and shows a sheer lack of confidence of customers in the brand that consistently stood number one in brand and customer loyalty surveys in recent years.

This is not the problem with Samsung alone. Negative press and impaired customer perception, as was observed in case of Target, Sony, Toyota, Nestle [Maggi] and FedEx among others, took a lot of time and effort for these brands to win back the trust.

A recent survey released jointly by the World Economic Forum and the Fleishman-Hillard public relations firm confirms, three-fifths of CEOs said they believed corporate brand and reputation represented more than 40 percent of their company’s market capitalization. In other words, strong brand reputational value equals greater profits.

In Samsung’s case, while the company’s initial recall was well received, a second recall of replacement units raises questions about its judgment and ability to release a safe product. From a sales perspective alone, the loss of the Note 7 could cost $2.75 billion, according to Macquarie Research. [Read the full story here]

“The big cost will be how it hurts the brand,” said Simon Blanchard, assistant professor of marketing at Georgetown’s McDonough School of Business. “It’s going to follow them for quite a while and may even extend to Samsung’s massive line of products, from refrigerators to televisions to washing machines.”

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Samsung will have a long way to go to win back the public’s trust. Winning back the trust of the roughly 1 million customers who bought a Note 7 to trade in their phones is not easy – for the company is expected to go beyond simply offering a replacement for its phones; ensuring each of its customers is ‘satisfied’ and ‘convinced’.

As a CNET article noted, Samsung will have to work hard to erase the memory of this incident, and it will likely have to endure some questions about the safety of future products. And more than ever, it needs a breakthrough device.

Smartphone analyst Avi Greengart, believes that the best way to get rid of this is to kill the Note brand. “Samsung will have to cut its losses and wipe the Note brand off its slate,” he said, adding that as the Note brand is tarnished beyond repair, even a Note 8 [though Samsung will say ‘This one doesn't explode!’] cannot save it completely.

Meanwhile, Samsung’s competitors are swarming. Apple has just refreshed its iPhone line and we can expect more coming from the Cupertino based major this month. Companies like Xiaomi, HTC, Huawei, OnePlus and Motorola may also push this opportunity to try to push cheaper and seemingly better phones to Samsung consumers.

As Rosi McMurray, executive director of strategy, The Brand Union rightly said, “Perhaps the most salient factor for the most successful brands is the promise of consistent quality. Whether it’s a business or a consumer making a purchasing decision, they want to be sure in this world of endless choice that their decision is the right one.