Samsung Is Desperately Trying to Contain Its Brand Fallout

By Markets

Can you guess which Galaxy device is this? If not, that's a problem for Samsung. Image source: Samsung.

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Strong brands can turn out to be a double-edged sword when things go sideways. That's the lesson that Samsung (NASDAQOTH: SSNLF) is grappling with right now, even as the South Korean conglomerate has its hands full with the logistics of a global recall for its Galaxy Note 7. Over the years, Samsung has invested tens of millions of dollars into marketing. The world of advertising is similar to the world of politics: Money matters. A lot.

A Galaxy phone by any other name would not be as flammable

The company has built up its Galaxy brand, differentiating its devices from the rest of the Android camp. Over time, it expanded the lineup into different sub-brands, each catering to specific use cases such as the recent Galaxy S7 Active that is intended for -- you guessed it -- physically active users. There are literally dozens of other examples.

The trouble now is that the Galaxy brand is significantly tarnished, and many average consumers may not be able to distinguish among all the different sub-brands, particularly in the face of all the negative publicity. It doesn't help that many of these models often share the same numerical generation in the model name. People keep seeing explosive headlines about a Samsung phone with "Galaxy" and "7" in the name. That may concern customers who own a Galaxy S7 or a Galaxy S7 Edge.

Some Galaxies are safe

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In an effort to proactively contain the brand fallout, Samsung has begun sending push notifications to customers that own these other seemingly related but safe devices. For example, a TechnoBuffalo staff member received the following message: "Your Galaxy S7 is not an affected device. The Galaxy S7 is not subject to recall. You can continue to use your device normally."

It's not clear if Galaxy S7 Edge owners are receiving the same message. In contrast, Galaxy Note 7 owners are receiving messages urging them to return and exchange their devices. All Galaxy Note 7 customers should heed these warnings considering the safety concerns associated with a carrying a device in your pocket that risks spontaneously combusting.

How much is your loyalty worth?

Samsung is willing to pay for loyalty, too, as it is now offering $75 if customers opt to trade in their fiery devices for a different Samsung model. That's on top of a $25 bill credit that some carriers are offering for the exchange, which brings the total rebate to $100. But that $25 is available even if customers switch to another brand, so Samsung is really trying to buy loyalty for just $75.

Loyalty is a rare commodity within the Android camp, as there are plenty of other Android phones that are just as good -- if not better -- than Galaxy devices. The peace of mind of buying a non-exploding phone should be worth more than $75.

Time may not heal all wounds

There's already evidence that the Galaxy brand is suffering. Business Insider reports that YouGov BrandIndex is already seeing measurable declines in two important brand metrics. The number of people that recommend the brand to friends and family has gotten crushed over the past couple of months, while purchase intent has simultaneously trended lower among respondents.

The real question will be whether or not Samsung can salvage the Galaxy brand that it has worked so hard to create, which only time can answer.

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Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.