Online Extra: Samsung: No Longer Unsung

A shift in advertsing strategies and an emphasis on innovative products have done wonders for the South Korean company's brand value

For decades, Samsung Electronics was known for churning out cheaper alternatives to electronic goods from Japan, in the process becoming the world's largest maker of memory chips. But the South Korean company has been steadily moving up the value scale -- following the path taken decades earlier by Japanese companies -- to the point where its innovative handheld devices and home appliances have allowed the brand to rival the likes of Nokia, Sony, and Philips in price and visibility.

Thanks to the success of its sleek personal digital assistants (PDAs), voice-activated mobile phones doubling as MP3 players, and TVs, the Samsung brand value jumped by 22% this year, to $6.4 billion. It's the only non-Japanese Asian brand to make the Top 100 list, and analysts at consultancy Interbrand, which compiled the list for BusinessWeek, believe there is still abundant untapped potential for the brand.

"They successfully shifted from semiconductors to branded products like mobile phones, came in as a sponsor of the Sydney Olympic Games, and have been running heavy advertising in the U.S.," says Jan Lindemann, Interbrand's global director for brand valuation. "Now they're in consumers' consideration set. After Sony, they have the potential to be the No. 2 brand globally" in consumer electronics, adds Lindemann.

UPMARKET MOVE. Eric Kim, a former Lotus Development executive who is now Samsung's executive vice-president for marketing, says the company has exploited an opening created by "market discontinuity caused by digital technology." In other words, new technology has created new product segments in which consumers are more open to consider different brands. "That transition, and our strategy to move upmarket very aggressively, are the main reasons why our brand improved rapidly," Kim says.

Samsung has made the biggest strides in cellular phones. It gave up low-end mass markets to focus on mid- and upper-tier segments. It underscores the company's departure from an emphasis on quantity towards profitability and cash flow.

In the U.S., the average selling price of Samsung phones is higher than that of Nokia products. It sells a phone allowing users to send e-mail and access English/Korean dictionaries, the Bible, Buddhist songbooks, and electronic games loaded into its memory. The company is also marketing a 50-gram phone -- billed as the world's lightest -- that is worn like a wristwatch and takes voice commands.

Even if some of these products don't attain huge sales volumes, they'll help to burnish the brand as a symbol of cutting-edge innovation. Samsung's success in the U.S. has been greatly aided by a partnership with Sprint PCS, with which it cooperates out of a design and marketing center in Dallas.

"WOW." Samsung is pinning its marketing campaigns around messages summed up by three words: "wow," to suggest the innovation of such products as the voice-activated mobile phones cum MP3 players; "simple," as in ease of use; and "inclusive," a reference to its ability to reach large audiences by offering the best value at affordable prices.

As part of its upscale push, Samsung has ditched Wal-Mart, seeing the retailer as incompatible with its premium image. In the future, the company is more likely to concentrate on specialty retailers like Best Buy and CompUSA. In another key move, Samsung -- which had been using 54 different ad agencies -- consolidated its advertising with Foote, Cone & Belding in the interest of getting out a unified message worldwide.

Samsung moved into Olympics sponsorship starting with last year's Sydney Games, and has raised its ad budget 35% this year, to $400 million -- despite slowing economic growth in most regions where it competes. If rivals cut back their marketing support in the meantime, it could accelerate Samsung's move into the first rank among consumer electronics companies.

By Moon Ihlwan in Seoul, with Gerry Khermouch in New York

— With assistance by Gerry Khermouch

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