Samsung: we are done with 'fancy features' and price wars, will focus on profit margins

Samsung: we are done with 'fancy features' and price wars, will focus on profit margins
Samsung has seemingly looked at its top place in terms of mobile market share, and decided that enough is enough. A new strategy, cited by a company exec on the sly, is to maintain about 400 million smartphone shipments per year, and focus on profit margins instead of market share expansion from now on. "We have been seeking growth in terms of shipments for years. Samsung is preparing for the post-smartphone era and that's why our handset unit has identified profitability as a priority over growth," they added.

What this means is that Samsung may still be engaging in lavish marketing campaigns if it has to, but the twofer deals and other cash incentives and promotions it has been doling out may very well be over with. In a nutshell: "Samsung will keep the company-set share according to markets. We will launch promotional campaigns if we have to. But the company will be unlikely to initiate cash-intensive promotions to clear inventory and increase market share," chimed in the source.

Investors have been notified of this latest shift in marketing strategy, and should be happy, as Samsung calculations show that disposing of price-cut exercises to gain market share will up the profit margin of Samsung Mobile from 15.8 to 17% this quarter year-on-year, not bad if you are a stock owner. 

The reasons Samsung does this are twofold. First off, pressure from budget Chinese competitors that sell at or a bit above cost; apparently Samsung plans to cut the number of budget models it offers in order to escape the race-to-the-bottom pricing these carry with them against Chinese makers. Second, according to Samsung's observations, "fancy features" are often met with tepid response nowadays when a $400 phone does 90% of what a $700 one will do. Still, Samsung thinks that it has enough innovation and production chops to stay ahead even without stuffing tens of rarely-used features and hardware options in its phones, or cutting prices to expand, so it expects its business model in the mobile division to stay largely the same.

source: Korea Times via SamMobile

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72 Comments

1. Mreveryphone

Posts: 1821; Member since: Apr 22, 2014

Yep... This was bound to happen when other oem's were providing close to high end performance and build quality at half the price...

34. rocketman1

Posts: 99; Member since: May 07, 2016

Samsung: we are done with 'fancy features' = Samsung: we are done

53. verbalize

Posts: 150; Member since: May 03, 2013

It's funny that all you people cry about how expensive apples prices are. They are the only manufacture that their products hold there value. I buy both Android and Apple products. One for work and other for pleasure. After a few years I sell my phones or tablets and make twice as much in resale with Apple products over android products . That covers the higher price I pay. Most of the android products that I buy only last a year and a half and then has major issues . I have never had any issues with any Apple products. Some of them are 3-4 years old and still work they are new.

54. catze86

Posts: 731; Member since: Dec 07, 2015

Good for you

59. IT-Engineer

Posts: 545; Member since: Feb 26, 2015

Really? That's not what my friend says ( he works at an apple store )

62. catze86

Posts: 731; Member since: Dec 07, 2015

My iPhone cant survive less than two weeks. Because of antennagate.

69. phichart

Posts: 335; Member since: May 03, 2014

after one year later apple has problem as well.. especially the battery!

72. QWERTYphone

Posts: 654; Member since: Sep 22, 2014

F@CK SAMSUNG !!!!

2. NexusX

Posts: 613; Member since: May 16, 2013

haha, by staying ahead, you mean the same or similar processor that powers every android phone in every iteration? the same or older version of Android? the camera with negligible difference? or the same screen resolution that is used by every chinese android phone that costs less than $400? even the $200 budget android phone does 90% of $700 samsung flagship can do. making android phone is a race to the bottom. it all comes down to prices in the end.

8. MrElectrifyer

Posts: 3960; Member since: Oct 21, 2014

"haha, by staying ahead, you mean the same or similar processor that powers every android phone in every iteration? the same or older version of Android? the camera with negligible difference? or the same screen resolution that is used by every chinese android phone that costs less than $400?" More like offering the following to customers: - Top displays available on the market - Innovative camera features like DualPixel sensors that earn it top performance, especially in terms of autofocus speed and low-light. - Added versatility like support for being used under water, and ability to be practically used as digital notepad (the Note line of course) - A feature-packed Android skin that performs smooth - Great battery life - A whole bunch of gifts worth over $500 to further justify the price tag So long as they keep offering all of the above, the price is easily justifiable compared to cheaper competition. No need to join the race to the bottom...

12. DFranch

Posts: 547; Member since: Apr 20, 2012

"the twofer deals and other cash incentives and promotions it has been doling out may very well be over with" It sounds like you can kiss the "gifts worth over $500" good bye.

29. Finalflash

Posts: 4063; Member since: Jul 23, 2013

Not really. I think phonearena, being the masters of bad analysis they are, completely missed the obvious on this one. Samsung is now going to focus more on the high end high margin region and cull their mid to low tier. This means more incentives for the top tier. More deals including 2 for 1 for the flagships. Also, they will focus more on supply chain and software focus for their top end to differentiate.

46. zunaidahmed

Posts: 1183; Member since: Dec 24, 2011

I was saying Samsung was slowly turning into Apple, and they finally admitted they are now starting to do exactly what Apple started do 3 years ago, focus more on profit than "innovation".

51. MrElectrifyer

Posts: 3960; Member since: Oct 21, 2014

Cutting down on number of devices doesn't mean they're cutting on innovation. They'll have to keep innovating to "stay ahead of the competition"...

14. TerryTerius unregistered

You are making the assumption that customers know about (or care) what processor is in a given phone, know that those Chinese companies even exist, or have any clue what the actual camera performance differences are between products. The well informed are in no shape or form reflective of the overall market. That is true for most industries, and doubly so for technology. Techies are not anything like the average consumer. It's a mistake to think most people are going to have any of those things in mind.

17. phonearenarocks

Posts: 606; Member since: Mar 26, 2015

Those people who don't have any of those things in mind, i.e. the average consumer is only going to buy an iPhone. The high end Sammy phones are bought only by Techies.

20. phonearenarocks

Posts: 606; Member since: Mar 26, 2015

The market leader position is Sammy's to loose and with this strategy, it very much looks like it is going to happen one more time, happened once post S3, and now once post S7, if S9 doesn't revive the firm like how S6 did when they were about to languish down, it will be another Nokia.

31. marorun

Posts: 5029; Member since: Mar 30, 2015

Nope sorry iphone are too pricy. Clients go for price. So if those chinese oem start selling in north america ect. Thats will hurt some ;)

64. Napalm_3nema

Posts: 2236; Member since: Jun 14, 2013

Those Chinese OEMs won't be able to sell in the EU and U.S. at the prices they sell for in China and India. Lenovo can because they bought Motorola, but I would bet that Xiaomi, Meizu, and others are not paying to license all the patents that it takes to build a modern smartphone. The minute their low-price devices land on Western shores, lawyers from Microsoft, Apple, Samsung, and others will be waiting to greet them with injunctions for using stolen IP.

63. catze86

Posts: 731; Member since: Dec 07, 2015

Average consumers will buy a dumb phone or Android.

66. Jason2k13

Posts: 1462; Member since: Mar 28, 2013

The majority of people I met who own a high end sammy phone, dont even know how to use half of the features. People who buy iphones, are the same as those who buy samsung high end phones.

71. RoryBreaker

Posts: 218; Member since: Oct 11, 2015

Not true at all. I know MANY people with the Samsung Galaxy line that are no where near "techies" They are people who by based upon what marketing they see & what info they are given when in the store. And can't forget the features. Someone just told me they are buying the S7 just because it takes better pictures.

21. kryme

Posts: 469; Member since: Oct 24, 2013

Yall act like the average customer are dumb and just buy a phone with understanding what it comes with... The average customer are young ppl could easily be 18 to 35 and trust me they know about specs... Techie are those who come on this site to know benchmark of a soc or to know what pixel density a certain size screen has... But the average customer know that 4k>1440p>1080p>720p they know about water proofing etc etc... The average customer would be watching a movie and at the commercial break the see Qualcomm advertising there latest soc and automatically they know what to ask for in wireless store... So please stop acting like the average customer don't have a clue on what they buying ... Remember it's not 1995 were the average person dont have a clue what a computer is

32. marorun

Posts: 5029; Member since: Mar 30, 2015

Most of my customer dont care about screen resolution or type of soc used in phone. They are about durability and price mostly. They are more informed but still not enuf.

36. 0kax0el0

Posts: 238; Member since: Nov 15, 2012

You have a point, an average customer knows that 4k>1080>720, but then they don't know that 720p>1080i. So yes, the common Joe will know that the bigger the number the better, but we know that's far from the truth. But if people were looking at specs the iPhone wouldn't be so popular. People goes to a store looking for a device that fits their taste (size, materials, color, etc...) and their budget. Other factor is previous experience, people won't likely buy a brand they had problems previously. Average customer isn't dumb, but you can say that most people doesn't know what they want, but they do know what they don't want.

55. MFJ

Posts: 22; Member since: Apr 15, 2009

Most people just buy what verizon/att put in front of them. But at my work...with mfg people and warehouse people, they buy whatever the cheapest thing that does the best for them. Very few people have top of the line samsungs or iphones....it's the 5" cheap versions. They look..at least up until the S6... look all the same . It's a Samsung whatever....Only the office higher money makers carry iphones or S6/7's

48. TerryTerius unregistered

I didn't say they don't understand basic things like screen resolution. But they would not be able to tell you the differences between the internals in one phone versus another. Age has little to do with that. Go ask any random person on the street what the differences are between a Snapdragon 820 and a mediatek helio X10. It is extraordinarily unlikely they'll know.

38. TechieXP1969

Posts: 14967; Member since: Sep 25, 2013

There are lots of people interested in such and look like everyday people. Even if the vast majority don't care or it doesn't matter, that doesn't make it any less important. You all should stop trying about YOURSELF, and substituting YOURSELF with words like :"others". You have no idea about other people. You dont know what everyone thinks. And assuming what they think, makes a ass out of you and not of me.

49. TerryTerius unregistered

So you're going to tell me you legitimately believe the average consumer is savvy as to the differences in one chipset versus another? Or that the average European or American is well aware of Meizu or Xiaomi? I'm not saying that nobody has ever heard of Chinese Brands within the west, but I am saying that most people have not. There is a difference between saying majority, and making a blanket statement about everybody. And that is clearly not what I said. I would really like for you to tell me how I'm wrong about that. At no point did I say that there weren't a lot of informed people. But they are not the majority. You are putting a whole lot of words in my mouth.

61. chenski

Posts: 768; Member since: Mar 22, 2015

it doesnt matter, even if everybody are tech savvy and knows all about smartphones, they will still buy different phones, because everybody's definition of best is different, they will just buy what is best for them

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