Consumer electronics

Samsung's success shows the value of brands even in a world of new digital gadgets

At last, weekend's consumer-electronics show in Las Vegas, digital convergence arrived with a vengeance. Among the avalanche of new products were lots of mobile phones. Those fitted with digital cameras and camcorders are hardly new, but they now take even better pictures. Others can be used to play three-dimensional video games, download movies, watch live TV (and record it during an incoming call), operate home-security systems and listen to music files downloaded from the internet. More marvels are on the way. In the midst of this frenzy of new and unfamiliar gizmos, product features would seem to count for everything. But companies in the hypercompetitive electronics industry are discovering something unexpected, and curious: brands matter almost as much as dazzling new technology.
One of the clearest demonstrations of this is South Korea's Samsung Electronics, which made a big splash this year in Las Vegas. Samsung was once best known for making things like cheap microwave ovens. In the past few years it has transformed itself into one of the "coolest" brands around, and is successfully selling stylish flat-screen TVs, digital cameras and mobile phones. After a record-breaking year, it is poised to overtake Motorola as the world's second-biggest maker of mobile phones. And it is snapping at the heels of Japan's Sony for leadership in the consumer-electronics business.
This would have seemed inconceivable a decade ago. But Samsung has proved that a combination of clever brand-building and well-designed, innovative products can work miracles. In such a competitive market, a brand without good products will quickly fade. But the real surprise is that the opposite is also true. The market is crowded with firms with a few snazzy products, but weak brands. To thrive and grow on the scale Samsung has achieved requires a strong brand, as well as innovative products.
Years ago, when products did not change much and companies largely stuck to their knitting, American and European consumers faithfully bought cameras from Kodak, televisions from RCA and radios from Bush, because those brands represented a guarantee of quality. Then the Japanese got better at what they made. Now the South Koreans are doing the same. And yet with many American and European electronics companies making their gadgets in the same places, even sometimes the same factories, as their Asian competitors, the geography of production has become less important. Many consumers are now looking for a guide through a bewildering array of choices. A strong brand offers such guidance.

Apple bites
Moreover, digital convergence allows a company with a strong brand in one area to move more easily into another. Hence Sony invented portable music with the Walkman, but was slow to come up with a digital replacement. It lost its lead-not to another consumer-electronics maker, but to Apple, the Californian computer firm which has had a huge hit with its iPod. Now that the iPod has introduced the Apple brand to lots more people-including many who use PCs running Microsoft's Windows operating system-Apple has announced new low-cost versions of both its iPod and its Macintosh computers in an attempt to exploit its brand and reach further beyond its computing niche.
In addition to the traditional promise of quality, a strong brand also offers consumers at least some hope that complex new products made by the same company will work together. Firms ignore this hope at their peril. This is one reason why Sony, Apple and Samsung have all opened "brand showrooms" where customers are encouraged to try out their wares. Although many shoppers now use the internet to make price and product comparisons, many still also want to touch the real thing before they part with their cash. In addition, the showrooms help people understand how these new products work. Some of them, you may have noticed, come with instruction books bigger than the product.
Indeed Philips, one of Europe's oldest electronics suppliers, is trying to regain market share lost to Asian rivals by re-branding itself around the idea of "sense and simplicity", promising that everything it produces, from heart defibrillators to coffee machines, will be both highly advanced and very straightforward to use. That is a tall order. But if Philips can fulfil this promise, it could prove a winning branding strategy. And as Philips has already discovered to its cost, even when it comes to high-tech wizardry, brands still matter. Just ask Samsung.