Executive Summary
In this paper, a detailed marketing plan for Galaxy S6 has been presented. Galaxy S6 is a new smartphone developed by Samsung. Marketing audit indicated that low economic growth in developed countries is likely to reduce the demand for smartphones.
Technological advancements increase competition by allowing firms to differentiate their products. The industry is characterised by intense competition due to high threat of substitution and buyer bargaining power.
Samsung’s strengths include its large market share, strong brand identity, and access to advanced technology. However, its sales are declining. In this respect, the company should focus on product differentiation and market development to increase sales.
Introduction
The purpose of this paper is to present a marketing plan for Samsung’s Galaxy S6. Samsung is one of the leading manufacturer and distributor of high-end smartphones in the world. Although the company is based in South Korea, its products are sold in nearly all countries.
Galaxy S6 is the latest smartphone introduced by the company. It will be launched officially in April 2015. In this respect, the plan will begin with an audit of the business environment. The audit will include a detailed analysis of the smartphone industry, customers, and competitors.
This will be followed by marketing objectives. The last part of the plan will highlight the marketing strategies that will be used to launch the smartphone.
Marketing Audit
External Environment: PESTEL Analysis
Tariff and non-tariff barriers to trade are the main political factors that affect the global smartphone market. High import duty and quantitative trade restrictions are used in countries such as China and Brazil to prevent imported smartphones from outperforming local brands (He 2013, pp. 112-120).
However, South Korea is a member of the World Trade Organisation (WTO). Moreover, it has signed free trade agreements with major markets such as the EU, the US, and China. This will allow Galaxy S6 to avoid market entry barriers.
GDP growth is one of the main economic factors that affect the smartphone market. The world economy grew by only 2.5% and 2.6% in 2013 and 2014 respectively (World Bank 2015, pp. 1-20).
The low growth is attributed to weak economic recovery in the Eurozone, Japan, South America, and some emerging markets such as Russia.
Economic growth is also declining in China, which is the largest smartphone market. GDP growth is expected to improve to 3.3% by 2017 due to declining oil prices (IMF 2015, pp. 10-200). Low economic growth in developed countries will reduce demand for smartphones.
The main social factors that influence the market are education, disposable income, and lifestyle (Johnsons 2012, pp. 17-20). Smartphones are popular among the working class and highly educated individuals who require sophisticated communication devices to enhance their lifestyles.
The youth and adults prefer smartphones for communication, entertainment, and working from remote locations. Smartphones are often purchased by middle and high-income earners because of their high prices.
Hardware and software technologies are important because they determine the quality of smartphones. Companies such as Apple and Samsung have access to superior technologies that enable them to attract customers by producing smartphones with excellent features (McCray, Gonzalez & Darling 2011, pp. 240-255).
Environmental sustainability also determines the competitiveness of smartphones. In developed countries, customers prefer smartphones that can be disposed off safely to protect the environment.
Protection of intellectual property rights is important because it enables smartphone producers to restrict access to their technologies. Ineffective intellectual property laws in some emerging markets such as India, Turkey, and South Africa increase competition by allowing proliferation of counterfeits (Peterson 2012, 12-45).
Industry Analysis: Porter’s Five Forces
The key suppliers in the smartphone industry include producers of components such as microchip, software developers, and contract manufactures. Suppliers have a high bargaining power because they are very few. For instance, Intel is the main supplier of processors (Peterson 2012, 12-45).
The bargaining power of suppliers is also high because their products are highly differentiated. The high bargaining power means that suppliers can easily increase their prices, thereby reducing the competitiveness of smartphone producers.
Users of smartphones are the buyers in the industry. Buyers have a moderate bargaining power. Increased availability of substitutes and price sensitivity increase buyer bargaining power (Edwards 2013, 231-238). However, the industry is also characterised by high brand identity.
Apple and Samsung are able to retain customers mainly because they have strong brand identity. The moderate bargaining power is an advantage since it allows firms to compete based on quality rather than price.
The threat of new entrants is low because of the high cost of joining and operating in the industry. For instance, Apple and Samsung have had to produce their smartphones in China to reduce operating costs (Edwards 2013, 231-238).
The economies of scale and brand identity enjoyed by the incumbents are also entry barriers since they prevent new entrants from gaining market share. Low threat of new entrants is an opportunity to the incumbents to expand their market share by introducing new products.
The main substitutes in the industry include basic phones, feature phones, and tablets. Basic phones are the cheapest. However, they have limited communication and entertainment capabilities. Feature phones have advanced communication capabilities and are cheaper than smartphones (Peterson 2012, 12-45).
Substitutes pose a great threat to the competitiveness of smartphones. This means that smartphone brands whose prices and features do not meet customer expectation are likely to lose market share.
Competitive rivalry is high due to the large number of companies that produce cell phones. Companies such as Lenovo, Xiaomi, LG, and Huawei have introduced very cheap smartphones, thereby increasing price-based competition (Gibbs 2014).
High competitive rivalry will lead to low profits and reduction in market share among companies whose products are inferior.
Competitor Analysis
The main competitors of Samsung include Apple, Xiaomi, LG, and Lenovo. Currently, Samsung has the largest market share (24.7%) in terms of units sold globally (Gibbs 2014).
It is closely followed by Apple (12.3%) and Xiaomi (5.6%) (Gibbs 2014). Apple is the main threat to Samsung since its smartphones are known for superior features that enable them to enjoy strong brand identity in most markets (Apple 2014).
However, Apple’s smartphones are very expensive. LG has failed to outperform Samsung in terms of product quality. However, its smartphones are cheaper than those of Samsung.
Xiaomi has been able to penetrate the market rapidly by selling at very low prices. However, its smartphones lack advanced features and a strong brand identity outside China.
Customer Analysis
Customers in the global smartphone market have varied needs. Smartphone users require effective devices that allow them to multitask while on the move (Edwards 2013, 231-238).
Most customers expect an ideal smartphone to provide several ways of communicating such as sending emails, calling, and using social media. They also require access to information through the internet. This includes ability to store and retrieve large volumes of information or data.
Customers also have varying tastes and preferences. They prefer smartphone brands that offer variety in terms of colour, screen size, memory size, and entertainment features. Price sensitivity tends to be higher in developing than developed countries due to low income levels (Sivakumar 2012, pp. 314-317).
Internal Analysis
Samsung’s sales increased from USD 165 billion in 2011 to USD 229 billion in 2013 as shown in Table 1. This represents a growth of 38%. However, in 2014 sales dropped to USD 206 billion (Samsung 2015). Net profits increased from USD 14 billion in 2011 to USD 30 billion in 2013.
However, profits reduced to USD 23 billion in 2014. Overall, these statistics indicate that the company is profitable and financially stable. Thus, it can finance its marketing plan.
Samsung’s expenditure on research and development increased from USD 11.9 billion in 2012 to USD 15.5 billion in 2014 (Samsung 2015). This represents a 30.2% growth. Increased investment in research and development will enable Samsung to improve the competitiveness of its smartphone.
The company’s sales strategy focuses on expanding market leadership through differentiation. The company obtains market intelligence through big data analytics. This helps it to differentiate its products. The advantage of the marketing strategy is that it improves customer loyalty.
SWOT Analysis
The strengths of Samsung include its strong brand image and large market share. Moreover, the company is profitable and is capable of producing high quality smartphones. Samsung is also able to improve its competitiveness through increased investment in research and development.
The main weakness of the company is its inability to defend its market share. This is reflected in the declining sales. The company has failed to compete based on price, thereby losing market share to its low-cost competitors such as Xiaomi.
The opportunities in the market included the expected increase in economic growth in emerging markets, which will improve the demand for smartphones (Kazmi 2007, p. 59). Increased popularity of smartphones among the youth is also an opportunity for increasing sales.
Samsung faces several threats, which include high competition from Apple and low-cost producers. The Americas and Europe, which account for nearly 46% of Samsung’s sales, are experiencing very slow economic recovery. This will reduce sales.
Marketing Objectives
The first objective is to increase market share by 5% in the next 12 months. The second objective is to increase sales by 7% in the next 12 months. The third objective is to increase brand awareness by 10% in the next 6 months.
The choice of these objectives was informed by the fact that their achievement will result into an increase in revenue and market share.
Marketing Strategy
Strategic Direction
The company will focus on growth by increasing the sales and market share of Galaxy S6. Samsung and its major competitors normally introduce new smartphones within 24 months. In this respect, the company will focus on market penetration since Galaxy S6 is just an improvement on the current Galaxy S5.
This strategy will involve selling the product to current users of Galaxy S5 and earlier versions. As a result, Samsung will avoid losing its customers who are looking for improved smartphones (Thompson, Gamble & Strickland 2006, p. 56). Marketing efforts will also focus on developing new markets by acquiring customers to increase market share.
Segmentation and Targeting
The company will use both behavioral and psychographic segmentation strategies to reach the target customers. In psychographic segmentation, customers are identified based on their interests, personality, activities, and lifestyles (Ranchhod & Marandi 2005, p. 78).
Behavioral segmentation involves identifying customers based on their knowledge, usage, and attitude towards a product. The main market segments include individuals, educational institutions, enterprises, and governments.
In the enterprise market, the company will target companies and business executives who are interested in smartphones that allow them to share information, serve customers, and supervise their colleagues and projects efficiently.
This market is profitable because employees are increasingly working from remote locations due to globalisation. In education, the target customers include students, faculty members, and educational institutions that are interested in providing or accessing learning modules through smartphones.
This segment has been selected because the introduction of online learning is likely to increase the demand for smartphones.
The company will also target government institutions that serve their customers through smartphones. This market is lucrative due to the large expenditure of governments. Among individuals, the target market will include middle and high-income earners since their high purchasing power will translate into high sales and profits.
Positioning
Positioning refers to the unique place that a product relative to its competitors occupies in customers’ minds (Pride 2004, p. 67). Galaxy S6 will be positioned as a premium smartphone that offers superior features. This will involve highlighting the key features that smartphone users value.
These include Galaxy S6’s upscale metal design, finger scanner, and built-in wireless charging capability. The positioning strategy is expected to create the perception that Galaxy S6 is the product that can be trusted by individuals, businesses, and institutions that need the best smartphone experience.
4P’s of Marketing Mix
Product
Galaxy S6 will be launched in various markets with all its features. The product strategy will focus on differentiation based on product quality to overcome competition. This will involve introducing more varieties as brand awareness improves.
Galaxy S6 will be available in a variety of colours, screen size, camera configuration, and body design to satisfy the unique tastes and preferences of customers. The features of the smartphone will be upgraded annually to make it relevant to customers.
This will allow the company to maintain its premium positioning strategy, thereby retaining its customers and increasing sales (Kazmi 2007, p. 90).
Price
Value-based pricing will be used to sell Galaxy S6. This strategy involves setting the price of a product based on the benefits or value that it delivers. Value-based pricing will allow Samsung to sell the smartphone profitably by charging customers for what they receive.
Smartphone customers associate high price with high quality. Thus, they are likely to perceive a significant price decrease as a sign of deteriorating product quality (Amstrong & Kotler 2011, p. 92). In this respect, value-based pricing will improve the competitiveness of Galaxy S6 by reinforcing its premium brand image.
Promotion
The promotional activities that will be used include advertising, public relations, sales promotion, and sponsorship. Advertising will be used to create awareness about the smartphone and its benefits.
The adverts will be posted on popular lifestyle and technology magazines, as well as, TV and radio channels to reach a large number of customers. Social media websites such as Google+, Tweeter, and Facebook will also be used to advertise Galaxy S6.
Public relations will be used to influence the public to develop a positive attitude towards the smartphone to improve market penetration (Czinkota & Ronkainen 2012, p. 110). Sales promotion will involve issuing coupons that will allow customers to save up to 10% of the value of the smartphone to increase sales.
The company will also sponsor one of the top football clubs in the Barclays Premier League. This will improve brand awareness and image.
Place
Galaxy S6 will be distributed using several channels to increase brand visibility and sales. The company’s regional sales offices will select independent distributors to sell the product in various markets.
The distributors will include supermarkets, department stores, and dealers. Telecommunication service providers will also distribute the smartphone.
The advantage of this strategy is that it will allow Samsung to serve distributors’ customers, thereby eliminating the cost of establishing retail outlets (Drummond, Ensor & Ashford 2010, p. 231). Independent distributors also have adequate understanding of local markets, language, and culture.
This will boost sales in foreign markets. Online distribution channels such as Samsung’s sales website and independent online retailers such as eBay, Alibaba.com, and Amazon.com will also distribute the smartphone. These websites are likely to increase sales since they can reach customers in virtually all countries.
Measurement Plan
The success of the marketing plan will be measured in terms of the extent to which the marketing objectives will be achieved. Changes in market share will be calculated every three months for each market. This will shed light on the effectiveness of the selected marketing strategies in various markets.
Sales analysis “will be done for every market and distribution channel” (Kazmi 2007, p. 98). The analysis will provide information concerning the suitability of the selected distribution channels and market segments.
Changes in brand awareness will be measured through monthly online surveys in all markets. The surveys will enable the company to examine the ability of the selected promotional activities to increase brand awareness.
Contingency and Risk Review
The risks that are likely to be encountered include marketing budget constraints, defective products, and low sales. Budget constraints are likely to be experienced due to cost overruns during the implementation of the plan.
A significant budget deficit will derail the implementation process. Defective products are likely to create customer dissatisfaction and tarnish brand image (Hisrich 2000, p. 82). Low sales can also be experienced due to factors such as poor economic growth.
The aforementioned risks will be addressed by implementing the following contingency measures. To begin with, sales and costs will be monitored through monthly evaluations to ensure achievement of the set targets. A contingency fund has also been established to cater for unforeseen cost overruns.
Defective products will be fixed immediately at the store level. Moreover, customers will access online support from the company’s sales website and regional service hubs. If a significant number of Galaxy S6 is defective, the affected units will be recalled from the market and replaced immediately.
Conclusion
The global smartphone market is characterised by high competition. The factors that increase competition include low economic growth in developed countries, product differentiation, high threat of substitution, and high buyer bargaining power.
However, robust economic growth in emerging markets is an opportunity for market expansion. Samsung can overcome the threats in the market by taking advantage of its strengths. These include its large market share, strong brand identity, and significant investment in research and development.
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