Samsung sales plunge despite rewards aimed at smartphone owners

Samsung has tried to hold on to customers by giving them opportunities to have bragging rights among friends who don't have a high-end Galaxy smartphone.

With smartphone buyers increasingly choosing iPhones or lower-cost options over its devices, Samsung Electronics has been hammered this year.

The latest news on Wednesday showed operating profit fell more than 60% to $3.9 billion in the third quarter compared with the same period last year, its lowest mark since the days of the iPhone 4 in 2011. Shares of the electronics maker have fallen more than 23% during the last three months as the company forecast gloomy days ahead for its smartphone business.

The stumble comes despite the South Korean company’s attempt to do more than any of its competitors to offer freebies to high-end customers in hopes of maintaining their loyalty. Samsung packages free trials and subscriptions to apps and periodicals with some of its phones. Galaxy phone owners can get upgraded to luxury suites at more than 40 venues in the U.S., and users in Asia can get discounts on lodging or food. There’s also been early access to content, such as music and movie clips.

“We want to make sure they love their device, and we’re rewarding their loyalty through elevation of the cultural experiences they’re passionate about,” said Colleen McDuffe, senior director of digital marketing at Samsung Telecommunications America. “We want to make sure Galaxy owners have bragging rights with their group of friends.”


Yet, 27% of people planning to buy an iPhone 6 last month were giving up on their Samsung phone, according to a survey by Digital World Research.

“I was surprised because Samsung has competitive products in the Note 4 and S5, yet Samsung owners were looking to change,” said P.J. McNealy, the research firm’s chief executive. “One interpretation is that the iPhone 6 really is the hot product, the ‘it’ thing, the latest and greatest.”

Despite the weak sales results, Samsung is charging ahead with rewards programs. This summer, McDuffe called Galaxy Owner’s Hub an early success, though she declined to share usage figures. Through the Owner’s Hub app, people who own a Galaxy smartphone can redeem vouchers for concessions, merchandise, seat upgrades and other opportunities at venues run by Anschutz Entertainment Group across the nation.

At soccer matches at the AEG-owned StubHub Center in Los Angeles, the most prized reward -- available only to a handful of people on a first-come basis -- is being able to enjoy the game in a luxury suite with access to a buffet. People are getting to the stadium earlier to take advantage, McDuffe said. Everyone else is left with $5 discounts on food or $10 off merchandise purchases.

“We know that access and getting things first makes people feel good,” McDuffe said. “We also look at how positively people react to partnerships we have, and there’s more social media chatter about it being really cool.”

The partnership with AEG, which finished its rollout this summer, was an outgrowth of one-off specials Samsung had done at events such as the South by Southwest festival, where in March the company brought a fresh battery to Galaxy owners who posted on Twitter with the hashtag "#poweron.” It’s brought similar experiences at Coachella, Comic-Con and Lollapalooza.

“It’s about making the experiences our customers are part of better,” McDuffe said.

AEG’s Nick Baker said the perks for Samsung owners haven’t created angst from owners of competing products, but he’s seen an envy factor at play. On his end, opening doors to premier seats to a new audience is a welcome experiment, he said.


“You’re getting more value for the price of admission; that’s a big component for us,” said Baker, senior vice president for global partnership sales.

Samsung’s other programs include Galaxy Gifts. Through the program, Galaxy S5 owners had hundreds of dollars’ worth of services available to them for free such as a six-month subscription to premium features on the fitness tracking apps MapMyRun and MapMyRide. On the Web, customers who offer feedback can be part of Samsung Nation, entitling them to sweepstakes entries for product giveaways.

In Southeast Asia, the Galaxy Life app has given Galaxy owners the chance to score opportunities as lavish as driving a racecar or learning to fly a plane.

McDuffe said the freebies and exclusives deepen rather than cheapen Samsung’s identity among consumers.


“It’s not a straight discount like a price drop,” she said. “This is truly intended to surprise and delight our customers to fuel their experiences around their passion points.”

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