Lowenstein’s View: What should Samsung do now?

Samsung Galaxy Note 7 (Samsung)
Galaxy Note 7. Credit: Samsung

Much has been written about how Samsung initially handled the issue of exploding batteries on its Galaxy Note7 devices. Clearly there’s a lot they could have done better in the early moments of the crisis, and there’s no need to re-tread that ground. The company has moved quickly in recent days, working with the CPSC, and has done a pretty remarkable job, from a supply chain perspective, of getting several hundred thousand phones into stores. Most affected customers should have a replacement device within a week or so.  And I’m sure that Samsung will implement some extra level of QA going forward to ensure this doesn’t happen again.

The question is, how damaged is Samsung’s reputation, and what can the company do to repair the damage? I don’t want to sound glib about it, but stuff happens. I see this in the same category as an auto recall, except the somewhat telling fact of our times that a lot of folks could more easily live without their car than their smartphone for a few days.

Once this initial crisis is over, Samsung should move quickly to make things right with customers, and to ensure that this is not a long-term stain on their reputation. We should note that Samsung really has two types of customers: end-users, the folks who use the phones; and wireless operators (MNOs), who are responsible for the bulk of Samsung’s distribution, especially in the U.S. market. Samsung needs to focus on both of these classes of customers.

There are three ‘categories’ of how companies respond to crises such as this: They either:
1) Do the bare minimum, such as what is required by the CPSC
2) Take action to make the make the situation as least negative as possible
3) Are proactive, using this is a moment to do the right thing by their customers and showing they are. This is what good companies do to minimize damage to their brand, or perhaps even improve their reputation.

I’d argue that Samsung is doing categories 1&2 above, but not category 3. Here are my recommendations on what Samsung should do once the immediate crisis is resolved.

  1. Write a Letter to Every Samsung Customer and also post it on the Internet.

Right now, Samsung’s Website has very matter of fact information about the recall. They say using any Note7 sold before September 15 should be powered down and returned.

But Samsung should do more. Apologize for what happened, own up to the mistake, and admit that it could have been handled better at the outset. Say they’re working with people who might have been injured or had property damaged. Indicate that this was a problem on a limited set of devices and that there’s no risk to customers of other Samsung phones. Describe what they’re doing to ensure something like this does not happen again. I think people are relatively forgiving when companies come clean.

  1. Offer compensation to every Galaxy Note7 customer.

This is Samsung’s opportunity to repair its reputation and to build consumer loyalty. Let’s face it: Samsung is not Apple. Apple is the Teflon company—it has messed up too over the years (antennagate, mapgate, some defective devices, etc., though admittedly none of these caused physical injury), but somehow emerges relatively unscathed. Consumers might love Samsung’s products, but they don’t necessarily love Samsung, the company, in the way they do Apple, Amazon, Netflix, and so on.

Samsung should acknowledge that every Galaxy Note7 customer was inconvenienced, some way more than others. For any customer who had to return their phone, Samsung should compensate them for the hassle that this has involved. Right now, wireless carriers are offering a full refund if customers exchange the Note7 for another device. For customers who exchange their device for a replacement Note7, carriers and Samsung are offering a $25 bill credit, which I presume Samsung is paying for. In Verizon’s case, if the customer got a Galaxy Fit 2 or 256 GB SD memory card after they purchased the Note7 (a promotion Verizon was offering), they can keep them at no cost.

This is modest, but not generous compensation for the “hassle factor” involved in dealing with this issue. In addition to the safety concern, this is probably a 10-hour “process” for every Note7 customer, between the initial purchase and configuration, the return, and configuring a new device.

So I think Samsung needs to do more, to acknowledge the inconvenience this has caused. My recommendation is that they should send a $200-300 voucher to every customer who bought a G7 Note, toward the purchase of a Samsung product in the future. No expiration date or fine print. And it should be able to be used for any Samsung product, from fridges to TVs to washing machines. Remember, this is focused on loyalty to Samsung, not just a phone.

  1. Make good with the carriers

Samsung also needs to repair things with its other customers, the carriers. This has been a significant and costly hassle for them. They have been on the front line of customer complaints, especially in the U.S., where most of Samsung’s distribution is through the carriers. This has not been fun for the folks who deal with distribution, the supply chain, and for the people who work in the stores. I’m sure that once the immediate crisis settles down, there will be some intense discussions between senior execs at Samsung and its key operator customers. There might even be lawsuits.

Samsung could be proactive here. How about an overture where they offer some financial compensation to key operator customers, that can be distributed to front-line employees who have been dealing with the issue?

Now, some of you will say, easy for an analyst to sit at his computer and flippantly recommend Samsung write a check for hundreds of millions of dollars. But Samsung is a huge company, it makes a lot of consumer products, and its reputation as a brand is important.

Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem.  Click here to subscribe to his free Lens on Wireless monthly newsletter, follow him on Twitter at @marklowenstein, or contact him at [email protected]

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