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Sintra Barrath |Jennifer Cowie | Chris Dillon | John Dunne |Troy Johnston | Sean Musgrove

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SAMSUNG

SAMSUNG YP-P2 MP3 PLAYER

Table of Contents

Executive summary………………………………………....2

Situation analysis

Industry………………………………………………...3

Company……………………………………………….3

Product………………………………………………...4

Competitive…………………………………………....4

Consumer……………………………………………...5

Macro-environmental………………………………...5

Problems and opportunities analysis……………………..7

Research problem statement……………………………....8

Bibliography………………………………………………..9

Appendix…………………………………………………...10

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Executive Summary

The introduction of the Mp3 player, also known as a DAP (digital audio player), less than a decade ago has revolutionized the way consumers listen to music. Listeners can now hold thousands of songs all accessible with a touch in the palm of their hand. Originally created to store, organize and play audio files, most MP3 players are now equipped with image viewing and video playing technology.

Samsung has recently unveiled the P2, “the audio enthusiast’s dream product. It boats numerous features that make it superior to other products currently on the market. The P2 comes standard with a nine band EQ, FM radio, Bluetooth connectivity, customizable interface, and digital recording and playback options.

A Lack of clearly defined marketing strategy and brand awareness has delayed the success of the P2. However, Samsung has the opportunity to create fresh brand associations and a favorable brand image in the consumers mind.

In order to properly market the P2, research is needed to determine what features are most important to our target consumer. Highlighting those features in our advertising campaign will increase sales and product knowledge. The message Samsung wants to sell is that their products are superior in quality, innovative in design and technologically more advanced than anything else available.

The research conducted will ask consumers about the most valuable product attributes they’d like to see in the product category. Samsung will also investigate product differentiation among consumers, the value of Wi-Fi in a mobile media device, and consumer insight to the brand and the P2.

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Situation Analysis

Industry Analysis

Product Category — Multimedia and Mp3 market

The Samsung YP-P2 is somewhat clouded in terms of its product category. Where as most of its features would firmly put it in the Mp3 category, some features like video playback through WMV files, a Digital video recorder, digital photo support through JPEG files and Digital Photo playback, Bluetooth connectivity all suggest that it more suitably fits into the immerging market of multimedia players — the most notable of these being the iPod touch. However as this is a subset of a the Mp3 market, either would be good representations. What is important to note is that the Samsung YP-P2 is not in the same category as “stand alone Mp3 players.” 19

Market Growth trend and Market Size—

The market of Mp3 players has grown exponentially sense their mainstream introduction in 1999 “and a mass market supplier situation by 2001.”1 However, today the market appears to be entering into a maturity stage. For most of its history, the Mp3 market has relied on first-time buyers to supply the majority of its growth. And though unit sales are still slightly growing, dollar sales prices have dropped due to the “converging” mobile phone or Smartphone as well as other music and video playing phones. This puts devices like Apple’s iPhone in position to cut into major portions of the Mp3 player and multimedia player markets—some of which has already taken place. In 2007, the U.S. Mp3 market grew to about 5.6 billion in sales. The market has grown by 23 times since its introduction in 2002. 2005 marked the height of the growth in the industry with an increase of 217.3 % in sales. By 2006, that number was only 27%, and in 2007 it contracted by -2.7%.2 In terms of dollars made, the market has most certainly begun to plateau. 20

Company Analysis

Since its start up in 1936 by Byung-Chull Lee, Samsung has grown into a leading consumer electronic company. Today Samsung has infiltrated several technology markets while advancing most notably with its flagship brand Samsung Electronics. The company goal is to become the leader of the digital convergence revolution.1

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Competing globally, Samsung can be considered the vanguard of the nation of its origin-South Korea. At the end of fiscal year 2007, Samsung Electronics revenue reached $105.2 billion with a net income of $8.4 billion.2 Samsung Electronics employs approximately 138,000 people in 124 offices in 56 countries.3 Engaged in many industries, Samsung has been shown the greatest success in the consumer electronics market, specializing in the production of digital TVs, memory chips, mobile phones, and LCDs. 4

Product Analysis

Samsung has chosen to position their product based on several platforms of performance. They stress the capabilities of the P2 that set it apart from other touch screen Mp3 players. The P2 comes standard with Bluetooth capability. This capability allows the user to use a wireless headset up to a distance of 38.2 ft and also enables the user to answer their cell phone wirelessly using just the P2. The P2 is also lighter and faster, weighing 2.88 ounces and boasting a playback rate of 30 frames per second on the 3-inch screen. Also mentioned in the P2’s advertisement is that it is multi-format friendly, capable of playing Mp3, WMA, WMA-DRM, MPEG4, and WMV9 files.

The brand personality can be summed up in three words: “Compact, Fresh and Innovative.” These three qualities describe the three components that consumers are looking for in an Mp3 player. The new P2 is very compact with a measurement of 3.94x2.05x0.39 inches and a weight of 2.88 ounces, making it smaller than the iPod touch, which is the market leader. The P2 is innovative with faster loading speeds, Bluetooth capability, and multiple format capability. The P2 is fresh with a new sleek design and a choice of three snazzy colors (black, white, and burgundy). The current P2 strategy centers on the new technological capabilities, size, clarity, and sleekness of the product.

The P2 is sold directly through Samsung and also through several retailers- Bestbuy, Circuit City, and major website retailers such as Amazon.com. The average price for the new P2 is as follows: 4GB, $179.99; 8GB $229.99. The P2 package includes an USB connector cable, a rechargeable battery with a life of up to 30 hours, and music management software. (See Image 1 in Appendix) The promotions used so far are limited to one TV slot that mimics the iPod touch ad, by demonstrating all the cool features of the P2.

Competitive Analysis

The Samsung P2 Mp3 player is in the mobile media player product category (sub category: PCJ and Mp3). These devices store, play, and organize music and video files. Some of the P2's major direct competitors include Apple, Microsoft, Scandisk, Nokia, LG, Creative Labs, Phillips, Motorola, Nokia, Sony, Archos, Toshiba, AT&T, Pioneer, Insignia, Alpine Electronics and Sansa; All are mobile media player manufacturers.5 The mobile phone market is expanding rapidly to include many of the features offered with products like the P2. Mobile phones now indirectly compete with Samsung's P2-Y2 product.

Other indirect competitors include XM and Sirius satellite radio services. The market leader, Apple, is the P2's biggest competitor in the United States. Apple's brand positioning for consumers is the “top-of-the-line” in portable media players. Their products are premium priced and have a reliable reputation. New products are immediately embraced, and do not need much

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trial before they are accepted. Apple has built the strongest platform for these devices.Samsung's communication strategy is expanding beyond solely product highlights to

pushing corporate social responsibility and the philosophy of the company.6 The P2 has a low market share in a saturated market for portable music players and product awareness needs to be higher in the category. Media spending for Samsung wireless phones was $45 million in 2006. Competitive spending in the product category is significantly higher in other brands. 7

Consumer Analysis

The market for Mp3 players can be separated into two age groups: adults 18-29 and adults 30-49. While both usually come from a higher-income household (34% of $75,000+ households own Mp3 players) and can live anywhere from an average sized town to a large city; their buying traits differ dramatically.

Adults aged 18 to 29 represent the largest group of consumers. Thirty-one percent of this group owns a Mp3 player and likely own more than one portable electronic device8. They are active, optimistic, and demand access to media at anytime. These consumers are commonly motivated by achievement and usually have a busy, goal-directed lifestyle. Image is important to them. They favor established, premium products and are interested in time saving devices given their hectic schedules9. Usually the earliest adopters of technology, these consumers make multi-tasking a part of their life. MP3 players are used almost anywhere: the aisles of a grocery store or the desk of an office; for the workout at the gym or for the bus ride home.

Twenty-six percent of adults aged 30-49 own a MP3 player. These consumers are more impressed with practicality than extra features. They are mature, reflective, and well-educated people who value order, knowledge, and responsibility. They are information seekers who value durability and functionality in products over styling and newness10. They usually pride themselves in their work and view listening to their MP3 players as a chance to relax. Business trips or family trips, public transport or private transport; MP3 players are used to make the most out of the mundane.

Macro-Environmental Analysis

Mp3 players are a unique consumer electronic in that (1) they are easy to use and therefore span all age groups and (2) ownership is now within reach of almost all economic classes because the price of Mp3 players is dropping steadily. As a result, “one in five Americans ages 12 and older owns a portable Mp3 player.”11

New technology requires consumers to be educated. Much like cell phones, Mp3 player have their rules of etiquette. 12 The Mp3 player has caused problems in the public schooling system where students used them to cheat. As a result, certain districts have ruled to ban them from school grounds. 13

Historically speaking, with the development of any new technology there comes a battle over who owns the rights to it. Thomson Consumer Electronics claims to control Mp3 licensing of the MPEG-1/2 Layer 3 patents in many countries, including the United States, Japan, Canada

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and some in the European Union. 14 The Fraunhofer Institute has strictly enforced their right to the patent; they claim that unlicensed products "infringe the patent rights of Fraunhofer and THOMSON. To make, sell and/or distribute products using the [MPEG Layer-3] standard and thus our patents, you need to obtain a license… from us.” 15

Another copyright issue arising from the popularity of Mp3 players is illegal music downloading, also known as pirating. “Since September 2003, the US recording industry has brought copyright infringement lawsuits against over 5,700 alleged illegal file sharers. There have been hundreds of settlements to date, averaging several thousand US dollars each.” 16

With the US in an economic slump and the ever-increasing price of oil, consumers have less disposable income to spend on personal electronics. Another sales deterrent would be that Mp3 players carry a high risk of becoming outdated within a year or two of purchase. Reportedly, “Mp3 players cycle new products into the market at a rate of 12-18 months.” 17

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Problems and Opportunities Analysis

Problems Opportunities

Samsung is competing in an already oversaturated market that is shrinking.

Y2-P2 falls in between two product categories- stand alone Mp3 players (smaller, cheaper) and Smart phones. Multi-media players fall into the middle ground and are being “sorted out” into the other categories.

Mp3 players are in the maturity phase of their product life cycle, which makes introducing new products more difficult and more likely to fail.

Samsung has weak brand recognition in the Mp3 player category. The company is more often associated with cell phones.

Product flaws: lacks Wi-Fi (which is important to our consumer who wants information quickly and at their convenience)

Current state of the economy: Consumers have less disposable income to spend on personal electronics.

Creating and selling a Samsung sponsored version of iTunes, designing the compatible computer software. The P2 currently uses Rhapsody.

The P2 is more competitively and reasonably priced than the iPod.

Samsung has substantial marketing power, capital and other resources, especially worldwide.

Product features: superior audio quality, FM radio, digital recording, customizable interface, Bluetooth technology (USP), more compact for mobile consumers

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Research Problem Statement

Samsung has introduced a state-of-the-art multimedia player equipped with technology, like Bluetooth, that enables it to directly compete with category leaders like the Apple iPod Touch. However, Samsung has not effectively marketed this product and consumers are uneducated on the product features. The Y2-P2 offers listeners superior audio quality, a customizable interface, Bluetooth connectivity, FM radio, and nine-band EQ- all together making it a better buy. In addition to lack of consumer knowledge, another challenge Samsung faces is the lack of brand awareness, especially within the category.

In order to increase sales and ensure the success of Y2, Samsung needs to promote features that are important to consumers. Research must be conducted to find out what product features are most valuable to the consumer and what features they would pay for.

1http://www.lexisnexis.com.lp.hscl.ufl.edu/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4099705248&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4099705251&cisb=22_T4099705250&treeMax=true&treeWidth=0&csi=220620&docNo=22 “About Us.” SAMSUNG Group.< http://www.samsung.com/us/aboutsamsung/>3http://www.lexisnexis.com.lp.hscl.ufl.edu/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4099723778&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4099723781&cisb=22_T4099723780&treeMax=true&treeWidth=0&csi=220620&docNo=204 “About Us.” SAMSUNG Group.< http://www.samsung.com/us/aboutsamsung/>5 Mintel Reports, Portable Media Devices-US-December 2007. 6 Samsung Annual Report, 2007.7 Mintel Reports, Portable Media Devices-US-December 2007. 8 Gallup. <www.gallup.com/poll/20593/Americans-Inventory-Thier-Gadgets.aspx>9 Marketing Journal, Berkowitz, Hartley, Kerin, Rudelius. <www.macdailynews.com/index.php/weblog/comments//11672>10 Marketing Journal, Berkowitz, Hartley, Kerin, Rudelius. <www.macdailynews.com/index.php/weblog/comments//11672>11 Kleinschmit, Matt. “Portable MP3 Ownership Reaches New High.” Tempo. 2 June 2006. <http://www.ipsos-na.com/news/pressrelease.cfm?id=3124>12 Mason, Margaret. “iPod Etiquette.” 27 October 2006. <http://www.themorningnews.org/archives/the_thoughtful_user_guide/ipod_etiquette.php>13 Associated Press. “Schools ban iPods to prevent cheating.” 30 April 2007. <http://www.foxnews.com/story/0,2933,268903,00.html>14 “mp3licensing.com. “ <http://www.mp3licensing.com/>15 “Early MP3 Patent Enforcement- Chilling Effects Clearinghouse.” 1 September 1998. <http://www.chillingeffects.org/patent/notice.cgi?NoticeID=464>16“NEWS- Record industry steps up action against illegal music file sharing and urges people to buy legally online.” 7 October 2004. < http://www.ifpi.org/content/section_news/20041007.html>17 DeBoer, Clint. “MP3 Obsolete Already?” 16 June 2008. <http://www.audioholics.com/news/industry-news/mp3-obsolete-already>19“ The Future of Digital Entertainment,” October 2005, http://www.bi-interactive.com/index.aspx?StoryID=213451&ReportID=275&Lang=en&MainPage=renderIntro20 “Mp3 Players,” June 2008, http://academic.mintel.com.lp.hscl.ufl.edu/sinatra/oxygen_academic/search_results/show&/display/id=296665/display/id=362278#hit1

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Other information that would be valuable to Samsung would be the following: How do consumers differentiate the Y2-P2 from other MP3 players? How important is Wi-Fi to our target market? Will consumers utilize the FM radio or is that an obsolete feature? How do consumers feel- about the product, about the brand?

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Appendix

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Image 2

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Bibliography

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