Samsung bets on digital lifestyle future

After reaching a commanding position in the IT volume segment, Samsung India has now turned its eyes to the digital lifestyle segment and is in the process of unveiling a range of new products to cater to this space. Not only is this a significant shift in strategy, it will also result in changes in sales and service processes and infrastructures, say Rahul Neel Mani and Shipra Arora

Moninder Jain says that Samsung is aiming at repeating its stupendous success in the PC and peripherals space in the digital lifestyle segment

After establishing itself as a leader in the peripherals business with ‘The PC Essentials Company’ tagline, Korean giant Samsung is now going for another image makeover. This time around, the company is getting rid of the PC tag and is calling itself a ‘Digital Lifestyle Company’. This makeover not only includes the launch of a slew of new digital and lifestyle products but a complete overhaul of business strategy, divisional distribution of workload, strengthening of the channel and an even greater focus on the customer.

New destination, new approach

As a result of the shift in positioning, for the first time in the history of the Indian subsidiary there will be a logical division of business units, which might have a significant impact on business strategy. Samsung India Electronics’ IT and Telecom division has decided to divide operations into two different segments—‘volume business’

and ‘value and lifestyle business’. Obviously, a significant level of investment will go into the new positioning, though the company does not want to specify any numbers at the moment.

Until recently, in IT, Samsung was known for what it has been selling in volumes—CRT monitors, hard disc drives and optical storage devices, and this segment was also the company’s cash cow. “These products,” says Moninder Jain, national product head, Value & Lifestyle Biz, Samsung India, “were sold in volumes and mixing them with TFT-LCD monitors, laser printers and newly introduced lifestyle products such as WiFi enabled notebooks, digital cameras and MP3 players would have been a sheer injustice to both.” Therefore the decision to form two different business units within Samsung to cater to two different markets and user segments.

Adds Jain, “The new segment that Samsung is foraying into will carry aspirational value and thus has to be handled differently than volume.” According to Samsung, of the lifestyle products, TFT-LCD monitors and notebook PCs will fall into both the institutional and high-value customer category, whereas MP3 players and digital cameras have been kept in the pure lifestyle category. Printing solutions, including laser-based multi-function devices (MFDs), are in the pure institutional category because of the price tags that these products carry. The Korean giant also has plans to launch a number of pure institutional products, including a range of new NotePCs and printers, to grab a major chunk of this emerging market in India.

“Since Samsung India is in a leading position in all the volume segments that it plays in, the future thrust will be clearly on establishing the new line of business—Value & Lifestyle, without losing any steam on the volume side,” says Jain. “Presently, 80 percent of revenues come from volume and roughly 20 percent from existing value products. In the next two years or so, Samsung expects the latter number to shoot up to around 30-40 percent of its business as the focus shifts towards value and lifestyle. In calendar year 2004, Samsung expects to sell at least 15,000 NotePCs (in a total market of 100,000 units), 50,000 laser printers and 150,000 TFT-LCD screens (total market size of 200,000 TFT-LCD units). These numbers will be a combination of both institutional and retail sales.

The company has set time frames wherein it expects to see significant revenues in each of these areas—two years for TFT-LCDs, two years for laser printers, two years for NotePCs and around three to four years for MP3 players and digital cameras.

Even within the lifestyle space, Samsung is setting up three divisions, based on product categories. The first division will focus on mobility products, including WiFi-enabled notebooks WiFi-enabled printers, and WiFi-enabled digital cameras. The second division will look after ‘pure aspiration value’ products. The products in this category would be distinguished from the others on the basis of their form factors, design and pricing, and would consist of high-end notebook PCs, TFT-LCD monitors, digital cameras and MP3 players. “This product category will be driven by the personal aspiration of individuals and CXOs who aspire to buy high-value products and want to make a statement,” says Jain. The third division will oversee solutions in the convergence space, including colour laser printers, personal laser printers and laser-based MFDs.

Avoiding pitfalls

However, the lifestyle and aspirational segment has its pitfalls too, as many high-end technology firms have discovered to their horror. Many factors play a role when it comes to success in this space, and one can safely say that very few of those factors would ever play a role in the volume business.

To avoid this scenario, Samsung India has carved

out a two-pronged strategy. According to Jain, because of the profile of buyers for its value and lifestyle products, the company will be concentrating on the institutional segment and the retail segment comprising high-value customers. Hence, the company’s selling strategy in the value segment will be centred on the corporate market, targeting institutional sales and CXOs, and the retail market, targeting high-value customers. “As a result, products will be sold through a mix and match of our channel network and retail outlets,” says Jain. And leveraging the commanding presence that the consumer electronics arm of Samsung has in India, these products will also be sold through the sales infrastructure of the consumer electronics business.

In order to strengthen its position in these markets, Samsung has launched two programmes—the Accredited Corporate Reseller Executive (ACE) programme for the corporate market and a retail programme for high-value customers. With most lifestyle products falling into the ‘touch-and-feel’ category, retail will receive a big push. The retail programme involves setting up a strong network of retail outlets, with almost 200 outlets to begin with. This will include some existing Samsung Digital Home (SDH) outlets, a part of the company’s consumer electronics business as well as IT retail showrooms.

On the channel front, Samsung will continue with its present model, with national distributors on top, followed by star partners, VAR partners and resellers. There will be an expansion at the reseller level to cater to the expansion generated by the new product portfolio. This will be supplemented by the setting up of a regional sales team, which is an entirely new development at Samsung India.

Conclusion

One the one hand the digital lifestyle market is maturing; another trend is that most vendors are going all-out to add value to their products rather than depend on price. Of course, prices are coming down too, and one is getting more technology bang for the same buck, as compared to earlier.

In this tough situation, would it be possible for Samsung to realise its dream of becoming the Number 1 digital lifestyle company, especially with powerful competitors with impressive records playing in each of the spaces Samsung is targeting.

Jain is convinced that the company will overcome all hurdles to become a leading player in this space. “We have done it in the PC and peripherals space, and we will repeat the same success in the digital space,” he confidently asserts. He points to some differentiators: Samsung already has a significant number of service experts to cater to new customers who will be buying digital lifestyle products. A central toll-free number will cater to customer grievances.

Also, Samsung is readying itself to launch sub-Rs 70,000 colour lasers, sub-Rs 75,000 laser MFDs and Rs 25,000 sheet-fed MFD products in the Indian market. That proves that the value/price game will also be played out. Besides, Samsung is not ignoring the huge market potential for low-cost budget notebooks and some launches may be on the anvil. “Both ‘above the line’ and ‘below the line’ activities, combined with aggressive marketing and sales efforts will work in favour of Samsung and enable us to win the battle,” concludes Jain.

ACE venture

The Accredited Corporate Reseller Executive (ACE) programme is a new strategy from Samsung to generate corporate/institutional sales. This programme will take the form of an educational exercise for CXOs in their professional capacities. Samsung India is giving a high priority to this programme, which will utilise Samsung’s sales force. “We want to enable top corporates to have a very personalised interface with Samsung. Hence, both proper brand recall and personalised corporate service will be taken care of,” explains Jain. As part of ACE, Samsung will run a specialised IT hardware advisory programme for CXOs. The new regional sales teams will lead ACE programmes in all parts of the country. “Samsung will also be partnering with media companies to hold CXO events in various parts of the country to educate them about optimising hardware usage and lowering the TCO for computer hardware and peripherals. “This is a pure relationship building exercise and should not be misinterpreted as a direct sales pitch,” says Jain.

rahul@expresscomputeronline.com

shipra@expresscomputeronline.com