How Samsung Broke Away from the Android Pack
The fourth version of the hit Galaxy S smartphone will debut this week at Radio City Music Hall with fanfare usually reserved for the iPhone. What a difference two years make.
As successful as Samsung’s Galaxy S franchise is now, it’s easy to forget the Korean consumer electronics giant’s first attempt at the American smartphone market was met with an apathetic shrug.
The U.S. launch of the first Galaxy S smartphone took place at a gallery on the west side of Manhattan more than two years ago. When it came time for J.K. Shin, head of Samsung’s mobile business, to formally announce the Galaxy S flagship smartphone, a black cloth cover was pulled back to unveil not one, but four different devices with the forgettable names Captivate, Vibrant, Fascinate, and Epic 4G. Samsung had been forced to split its new phone into four distinct lines in order to placate the top four American wireless carriers.
Nonetheless, Shin stayed on message and said, “In the race to redefine the smartphone, the starting gun has just been fired, and the Samsung Galaxy S is already standing at the finishing line.”
Given Samsung’s weak position at the time, his claim sounded more like marketing hot air than a smart prediction. The company had big plans for its smartphones in the U.S., but it was saddled with mediocre products, a muddled message, and four brand names seemingly plucked from the perfume counter.
Fast-forward nearly three years, and Samsung is on top of the cell phone industry. Nearly one out of every three smartphones shipped is made by Samsung, and its Galaxy S3 smartphone has become a true rival to Apple’s iPhone. It was the Galaxy S3, and not the iPhone 5, that was named the product of the year in 2012 by CNET. Long seen as an imitator, some believe it has wrestled the innovator mantle away from Apple.
In two days, Samsung will unveil the fourth iteration of its Galaxy S franchise at glitzy Radio City Music Hall in an event that’s received the mainstream attention usually reserved for a new iPhone.
Through savvy advertising, the continuous improvement of its smartphones, and a steady march to expand distribution and strengthen the Galaxy S name, Samsung has broken from the pack of me-too Android manufacturers. The company has flourished even as others have struggled, now controlling more than a third of the smartphone industry’s profits. (Apple accounts for most of the rest.)
Samsung shipped 63.7 million smartphones in 2012′s fourth quarter, a 76 percent increase over the year-earlier period, according to IDC. Second-place Apple saw a 29 percent increase after shipping 47.8 million smartphones in the same period.
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“The near-term trajectory looks all Samsung,” said Rajeev Chand, an analyst at Rutberg.
That Samsung has pulled this off in so little time and with such an unimpressive start is remarkable. Let’s put it this way: Does anyone remember the Samsung Behold 2?
A modest start
Two and a half years ago, Samsung lacked the clout to insist upon a single smartphone sold broadly across all the U.S. carriers. But it also didn’t want to follow a route similar to one taken by Motorola and tie its fortunes to a single carrier in exchange for marketing and sales support.
As a compromise, Samsung created four variations of its Galaxy S phone. Each would have the same internal guts and similar software, but would have superficial changes and different names. The Galaxy S brand was found on the back of each device.
(Credit: Sarah Tew/CNET)
In return, Samsung received moderate support from the four major national carriers, and managed to get all of them to show up to the event, which is something like getting the owners of the Yankees and the Red Sox in the same room, times two.
–Samsung’s J.K. Shin
While the variations of the Galaxy S phone received decent reviews (read CNET’s reviews of the Captivate, Vibrant, Fascinate, and Epic 4G), they weren’t exactly remarkable. The standout feature was a colorful and bright display, which used a then relatively new technology called Amoled, which stands for active-matrix organic light-emitting diode. They also packed a 1-gigahertz processor, considered top-of-the-line horsepower at the time.
While Samsung’s Shin emphasized three S’s for the Galaxy S — screen, speed, and software — the company fell short when it came to the software. Every manufacturer added their own custom touches to Android, such as new backgrounds, different menus, and animations. While some, such as HTC, provided more screens and offered a clearer user interface with better navigation, Samsung’s own TouchWiz interface at times felt like an unnecessary addition, burdening the phone with unwanted complexity in the navigation and adding unremovable apps.
And in the U.S., Samsung was saddled with those four silly names.
Samsung’s smartphone strategy started to coalesce with the arrival of Galaxy S2. First announced at Mobile World Congress in February 2011, it reached carrier stores in the U.S. that fall.
With the Galaxy S2, Samsung gained more control of branding. While AT&T and T-Mobile retained the name, Sprint insisted on initially calling it the Galaxy S2 Epic 4G Touch, a burdensome name that was eventually shortened to Galaxy S2 4G. Verizon had passed on the phone, instead focusing on its Droid brand and partnership with Motorola.
At the same time, the Galaxy S2 greatly improved upon the original, adding a larger, crisper display into a thinner body, toned down its TouchWiz user interface, and added hubs for music and games.
(Credit: Samsung/Screenshot by CNET)
But it wasn’t until the Galaxy S3 launched last May that Samsung truly broke through. The company was confident enough in the GS3′s appeal to hold its own event in London, days before a major wireless trade show. With the GS3, Samsung received treatment normally reserved for Apple: Every major carrier sold the Galaxy S3 without any changes to its design, software, hardware, or branding.
Samsung was also the beneficiary of good timing. With Motorola agreeing to be acquired by Google, and HTC struggling with brand recognition and its ability to fulfill large orders, the carriers turned to Samsung as the most viable iPhone competitor.
“The carriers threw in heavily with Samsung, much more than any other player,” said Maribel Lopez, an analyst at Lopez Research. “They became the de-facto ‘other’ player.”
Samsung had, in effect, copied Apple’s product launch playbook in ensuring that consumers get a consistent product in the Galaxy S3. And it had one brand to push with its considerable marketing muscle.
Hitting the right chord
Samsung was always willing to spend big to promote the Galaxy S. At the original Galaxy S launch event, Samsung told The Wall Street Journal that it would spend as much on advertising as a carrier would to promote a flagship device. At the time, Verizon Wireless and Motorola were believed to have spent $100 million the year before promoting the original Droid.
While Samsung won’t comment on how much it spends on marketing, the company reportedly spent a jaw-dropping $11 billion on marketing activities last year, according to the Korea Times.
Samsung’s early attempts to break into the U.S. market fell flat, with commercials that talked about how great Samsung and the Galaxy S2 were without really explaining why. The ads were, awkwardly, a bit too Apple-like.
But when Samsung started to take the fight directly to Apple, things got interesting. In late 2011, Samsung released a series of commercials mocking Apple fans waiting in line for the latest iPhone. And when the iPhone 5 came out, they went straight for Apple’s “cool” factor.
One spot featured a Galaxy S3 owner saving a spot in line for an iPhone for his unhip mom and dad.
The campaign’s tagline, “The next big thing is already here,” implied that the iPhone wasn’t it.
Samsung paired the campaign with commercials that highlighted the Galaxy S3′s own features, most notably the S-Beam capability that allowed users to transfer files and data between Galaxy S3s by tapping them together. Some of these features were found in other phones, but no one could beat Samsung in terms of marketing heft.
Samsung’s marketing campaign was successful enough that the company has been able to create a new market for phablets — or mobile devices that look like an oversize smartphone or tiny tablet — in the Galaxy Note. Initially mocked, Samsung has sold 5 million Galaxy Note 2 units in the first two months since its release, and companies such as LG and ZTE have created their own oversize mobile devices.
Now Samsung is targeting business customers with a series of commercials following a startup’s attempt to create fictional mobile game Unicorn Apocalypse (now actually a real, but terrible game) mocking the lone fuddy duddy with a BlackBerry. Peppered in between discussions over whether unicorns triggered an apocalypse and Swedish energy drinks were not-so-subtle messages about the security and productivity benefits of Samsung’s smartphones.
The difference between how Samsung and HTC performed last year best illustrates the power of Samsung’s marketing. HTC had an attractive and critically praised product in the One X, but was completely outgunned in promotion and carrier support. As a result, its phone was largely ignored as Android fans snapped up the Galaxy S3. As Samsung’s profits surged last year, HTC struggled with shrinking sales, with revenue in February falling to its lowest level in three years.
Indeed, Samsung can now claim that Apple is its only real equal in consumer electronics. And with the Galaxy S4 ready to hit stores, Apple should no doubt prepare for the next barbs from the new cool kids of smartphones.