Samsung Electronics yesterday offered financial incentives for US and South Korea customers who exchange Note 7s for other products or refund them, as the tech giant scrambles to shore up its reputation in the wake of a damaging safety crisis.
The consumer electronics company is also expanding a US recall of the fire-prone model to a total 1.9mn Note 7 phones, which includes the 1mn Galaxy Note 7s it recalled on September 15.
The South Korean giant is in damage-control mode as rivals like Apple Inc and LG Electronics try to steal market share from the global smartphone leader after it was forced to scrap its latest high-end device.
Samsung is boosting its marketing and promotional efforts around other Galaxy-series smartphones to cushion the blow from the demise of the premium Note 7, which it finally abandoned this week after failing to resolve overheating problems which caused some of the phones to ignite.
Samsung said yesterday it is offering up to $100 in bill credit to consumers who exchange their Note 7s for any Samsung smartphone in the US.
US customers who exchange their Note 7s for a refund or other branded smartphone will receive $25 in bill credit.
“We appreciate the patience of our consumers, carriers and retail partners for carrying the burden during these challenging times,” said Tim Baxter, president and chief operating officer, Samsung Electronics America.
“We are committed to doing everything we can to make this right.”
The US Consumer Product Safety Commission said yesterday the Note 7’s “battery can overheat and catch fire, posing serious fire and burn hazard to consumers.” It added that Samsung has received 96 reports of batteries in Note 7 phones overheating in the US, including 23 new reports since the September 15 recall announcement.
In the US, Samsung began sending fireproof boxes and protective gloves to customers returning potentially explosive Note 7s, drawing humorous barbs from social media commentators.
The company has commenced offering similar financial incentives in its home market of South Korea, which it says would compensate consumers for their “big inconvenience.”
After days of heavy losses, Samsung’s shares ended 1.4% higher yesterday while the broader market fell 0.9%.
On Wednesday, the firm slashed its quarterly profit estimate by $2.3bn to reflect the impact of the Note 7 withdrawal, giving some investors hope that the financial cost of the debacle had been largely accounted for.
“We are confident the 3Q 16 re-statement puts to bed the direct financial impact of the Note 7 recall and termination,” UBS said in a report.
“In the near-term, we believe investors will re-focus on shareholders returns ahead of full 3Q results Oct 27th.”
Customers will have plenty of choice in the weeks ahead, with South Korean mobile carriers including SK Telecom planning to take pre-orders for Apple’s iPhone 7 starting yesterday.
LG Electronics also recently launched its V20 smartphone. Many analysts say the real risk to Samsung lies in the reputational damage it suffers in a cut-throat industry rather than financial costs. “Industry experience, such as the decline of Nokia and BlackBerry, shows how successful manufacturers can lose market share particularly quickly in the handset business,” Fitch ratings agency said in a report yesterday.
Moody’s also said in a report that day that the Note woes are “credit negative” and “threaten to have a more lasting negative effect on the Samsung brand and would require significant marketing expense to regain consumer confidence.”
Meanwhile, South Korea’s central bank said the Note 7 failure could undermine economic growth, although it needed more time to assess the effects.