I must say, I’ve never written about Samsung before. Nor I admired their marketing capabilities and branding efforts. The last two commercials with the smartphones and the next big thing did not really click with me and I also don’t see anybody speaking about them after the Super Bowl. But today, I’m not here to criticize Samsung, I’m here to give them the praise they deserve for being one of the most efficient marketing companies in the world by working on a system called “marketing optimization.”
There aren’t many people to not know that Samsung has a huge marketing budget and you might be more inclined to think that they would be exclusively generous with their spending on new markets and products. But you are wrong my friend. They hold onto that budget as if that was the last dime in their pockets. They want to make the very best out of that money. They are not splurging just because they reserve the right to do so, they splurge because they do their math well. Here is how:
Well to build a strong brand, funds must be invested wisely. This is basic knowledge, ROI is important whether you are building a new production plant, entering a new market, getting a new logo or hiring an agency. I will talk about the market expansion side of it today. Lets say you have this beautiful product and a cute brand image from South Korea that you want to expand. Where do you go next? This is a question that requires significant critical thinking and months of project development. For global consumer-products companies like Samsung, this is an every day decision. However, being pervasive does not mean that it’s simple. Samsung also had a hard time to answer this question and this is why they came up with the optimal marketing system.
For example, how do you compare the potential of a vacuum cleaner in Germany to a shampoo in the UK? Even after ensuring the highest ROIs how do you make sure that they get paid what they deserve? What Samsung did with it’s marketing resources over $1 billion is to diligently analyze data from all over the world including many country/category configurations with the purpose to find the highest ROIs. Once the data is complete, what Samsung did was to reallocate funds from low ROI regions to high-ROI ones. This is totally in rapport with the BCG growth-share matrix. Samsung got rid of the dogs while supporting the stars.
This sounds pretty easy right, that is the major challenge. Someone wise once said “simple is the ultimate sophistication” and he is absolutely true. Samsung is using major computer systems backed-up with data adept engineers to understand and evaluate each configuration and rank them according to the proposed ROIs. The product-catagory statistics include penetration rates, market share, profitability competitor dynamics and media costs. Country statistics include population, GDP per-capita, economic indicators as inflation, employment rate, and growth forecasts. All this data is assembled in a system called the M-net and engineers and managers play Sims with it. They simulate a variety of marketing budget allocation scenarios and determine the best ones available.
This is how Samsung understood three major mismatches:
Underinvestment in Europe and China – These regions received 31% of the budget but generated 42% of revenues.
Overinvestment in North America and Russia – These regions received 45% of the budget but generated 35% of revenues.
Overinvestment in three product categories – Mobile phones, vacuum cleaners and air conditioners
The three mismatches above were threatening the rapid future growth of the brand. Hence Samsung decided to reallocate $150 million of its marketing budget from more saturated categories to those offering more unexploited potential.
Samsung still has a long way to go in terms of being a global brand with a loyal customer base which are willing to follow the brand with will and determination. Even though math is important in determining future growth and success, in branding the idea of being cute and approachable, offering sensual and emotional pleasures in addition to functional benefits is key. Glad to see that Samsung seems to be in rapport with this and slowly aligning.