Recalls can have damaging effects on a brand. Investors predicted that Samsung would learn this firsthand after recalling its Note 7 smartphone in October 2016. Many consumers lost trust in the brand, and Samsung has spent millions of dollars trying to alleviate the damage. Check out how Samsung handled the recall and what this means for future smartphone sales.
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Situation: Samsung Recalls the Galaxy Note 7
Samsung launched the Galaxy Note 7 on August 19, 2016. Two months later, consumers were shocked when Samsung had to recall the smartphones. In some cases, the battery could get so hot that the Note 7 would explode. Consumers reported several instances of this to Samsung, ultimately prompting the recall. The company instructed consumers to power down their phones and replace them immediately due to the potential for danger, and commercal airlines even banned the Note 7.
According to Time, Samsung received 92 reports of batteries overheating in the U.S. Twenty-six of these reports cited burns, and 55 cited property damage. These reports led the brand to recall 2.5 million Note 7 smartphones in 10 worldwide markets. After the recall, Samsung’s market value plummeted as investors reacted.
Approach: Samsung Attempts Brand Damage Control
After the Note 7 recall, BGR.com reported that 40 percent of Samsung phone owners said they won’t buy another Samsung phone in the future. Branding Brand CEO Chris Mason said, “Samsung consumers say battery life is a key to their loyalty with the brand; however it’s the same reason for the drop in confidence.”
To combat damage from the recall, Samsung has incentivized its customers to stay with the brand by offering steep discounts on other Samsung smartphone models, such as the Galaxy S7. Some customers have turned to Apple and other smartphone brands because of the massive recall on the Note 7. It’s still possible for Samsung to retain market share, however, especially since customers can choose from plenty of other Samsung smartphones.
CNBC reported that Samsung only lost about 15 percent of its customers to Apple and other brands immediately following the Note 7 recall, despite what surveys predicted consumers would do. The company continues to recover, and market value has started to rise again. This is good news for both Samsung and the South Korean economy.
Impact and Advantage
The South Korean economy has felt the effects of the Note 7 recall, as Samsung generates 20 percent of the nation’s $527 billion in annual exports. The company is a household name, as Samsung sponsors hospitals, universities, hotels, credit cards, and appliances. Samsung also provides thousands of jobs across South Korea. The company is critical to South Korea’s growing economy, and the recall has had a major impact on the country.
Only time will tell if Samsung can make a full comeback after the Note 7 recall. After all, the brand has been a leader in smartphones for nearly a decade. Since Samsung predicts a $3 billion hit to its brand, however, this episode will probably go down as the costliest safety recall in history.[/show_to]
