Will Samsung’s credibility burn out faster than its new Note 7 has?
Make no mistake about it, Samsung has quickly emerged as 2016’s crisis brand of the year.
Burnt Galaxy Note 7
In fact, it has suffered a double crisis – a repeat serving its own making – by lurching from one major damage limitation exercise to an even bigger one with its handling of the Galaxy Note 7 fiasco.
The situation is set to be discussed in many a PR seminar, on various training courses and in business schools as a classic public relations fail. It has been as incendiary as the devices themselves. For now, move over Volkswagen.
Brand damaged? Check. Customers alienated? Check. Share price damaged? Check.
Reuters in Seoul has reported the latest product recall could leave a $17bn black hole in the company’s accounts. Although Samsung could absorb this, its wider impact is far greater.
The good yardstick of a challenging crisis is when stakeholders who aren’t your consumers begin commenting on the problem with the product they don’t have.
There have been incidents of airlines telling Samsung users to turn off their phones throughout the duration of the journey. Pilots and air crew are therefore more than happy for Apple users to be using the latest iPhone in flight mode, but users of the Note 7 are eyed with scepticism.
Samsung has worked hard to build its image and brand loyalty in a crowded space. But it has work to do. And there is increased competition in its market, with new tablets being made available. Crisis management is all about the speed and decisive nature of actions which protect not just stakeholders.
And in truth, Samsung did well to react quickly back in September when it was first discovered there was a major problem with the new Note 7’s batteries.
It communicated quickly as it issued a recall. It said it had unearthed the problem. It was keen to protect consumers.
But the new batches of phones were faulty and the original crisis plan was blown out of the water. Samsung has been criticised for being slow to react second time around.
It needs to lance the boil very quickly. First of all, Samsung needs to spare no expense communicating with every single customer who bought the Galaxy Note 7 (there are only a handful in the UK as the recall came just before the launch here).
It needs to quickly seize control of the narrative, tell consumers how this happened and take a view on which head should roll and how quickly. Samsung will know more than anyone how fickle the smart phone market can be. It also has the wider credibility of its other, vast array of products, such as TVs, to protect.
At a time when corporate Japan is also working hard to build its global image, Samsung has a wider role to play. Samsung should be quickly looking to offer compensation as well as sincere apologies. It needs to start its brand rebuild now – and its measure to consigning the product to the rubbish bin for good is the first step.
As Stephen Robb, a partner at law firm Weightmans told Reuters: "The (Note 7) unit is forever going to be tarnished and the danger is that the brand becomes irretrievably damaged as well.
"They need to be writing to every customer with an apology and some form of 'compensation'... It will clearly be costly for the company but the alternative is to end up going the way of Nokia and Blackberry."
But the brand rebuild has inevitable litigation also to deal with, particularly in the litigious US where there were 92 reports of batteries overheating, 26 reports of burns and 55 reports of property damage.
The corporate communications team at Samsung needs to act swiftly in advising the vast teams of lawyers that this is not a fight which can be won. Any claims need to be dealt with quickly and efficiently to avoid yet another repeat performance of the crisis in the public eye.
Neil McLeod is a crisis management expert at PR agency PHA Media