Samsung's marketing dollars

Wednesday 13 March 2013 | 10:34 CET | Background

Samsung is the biggest smartphone maker in the world and was recently also confirmed the biggest seller in the quickly growing Chinese market. The Korean company is competing successfully against Apple, while also knocking Nokia from its top spot in the mobile market. Samsung is profiting not only from its broad portfolio of devices, which address nearly every thinkable market segment, but also from a great deal of spending on marketing.

Nokia benefits from USD 250 million in platform support payments from Microsoft each quarter. These are expected to help Nokia in the development and promotion of Windows Phone, Microsoft's mobile operating system which is struggling to get off the ground. In 2012 the software giant spent around USD 400 million on the promotion of Windows Phone and the Lumia 900 from Nokia. In addition, US operator AT&T reportedly spent some USD 150 million on the Windows smartphone.

Nokia spent a total USD 1.8 billion in 2012 on marketing and sales, down 12 percent from 2011, according to its annual filing with the SEC.

More money on marketing than R&D

In the end, USD 550 million could not do much up against the high-end Galaxy models from Samsung and the new iPhone. While Apple works at a relative distance enticing consumers to buy the iPhone, Samsung works in every possible channel to position itself as a major player on the smartphone market.

And this costs money. Samsung spent a total KRW 12.9 trillion, or around USD 11 billion, on marketing last year. That's almost ten times more than the KRW 1 trillion the Korean company spent on research and development. The KRW 13 trillion is equal to 6.5 percent of Samsung's total revenues in 2012 (KRW 200 trillion). Compared to 2005, Samsung's marketing budget has grown seven-fold. These figures were reported by the Korea Times, after seeing documents on the marketing blitz by Samsung.

Marketing spend by Samsung, compared to competitors (Source: Korea Times)

According to the paper, Samsung's marketing took off from 2008. At that time the iPhone, released a year earlier, had broken open the smartphone market, and Android was emerging as a counterweight. Numerous handset makers were glad to take advantage of Google’s open source mobile operating system and did good business with the resulting products. In the following years, Android partners such as HTC and Samsung climbed the ranks, while the previous trendsetters Nokia and Research In Motion (BlackBerry) slowly saw their market shares erode.

According to Garter, Nokia still had around 40 percent of the world smartphone market at the end of 2008, and Samsung was at just 4.2 percent. At the same time, the data showed that Samsung had grown 138 percent from the previous year, while Nokia’s market share had fallen almost 17 percent. In 2008 Samsung increased its marketing spend by 6 percent as a percentage of total revenues.

The increased marketing in 2008 was tied as much to beating Sony on the TV market in 2007 as the potential Samsung saw in the emerging smartphone market, according to the Korea Times.

"Next big thing"

In April 2009 Samsung launched its first Android smartphone, the Galaxy S. This laid the groundwork for the company's rapid ascent, which accelerated from around mid-2011 thanks to the Galaxy SII, launched at the Mobile World Congress in February that year.

The Galaxy SII was Samsung's first frontal attack on Apple. In a new marketing campaign, Samsung claimed the "the next big thing" was not an Apple smartphone, but a Samsung smartphone. Samsung continued last year with a marketing budget of KRW 12.9 trillon, benefiting the Galaxy S3 as well as the Galaxy Note 2.

The same as last year, Samsung has decided this year to present its latest flagship device, the Galaxy SIV, at its own event, planned for 14 March in New York. Samsung has been able to differentiate itself from the mass of other Android suppliers and become the world's largest smartphone maker. Needless to say, the company will defend the position with all the resources it can.

Samsung will more than ever focus on the innovations in its devices to entice consumers to continue buying its smartphones, as there is little else, apart from the appearance of the phone, to distinguish mobile devices on the market today. Among the specifications of the Galaxy SIV already leaked are an eight-core processor, flexible display, wireless charging and technology using eye movements to control the device. 


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