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Samsung Plays the Grey Game to Attack Parallel Imports

Samsung Galaxy Note 3Samsung Galaxy Note 3 (Photo credit: Janitors)

There has been some recent debate about Samsung and their approach to regionally locking handsets, starting with the Galaxy Note3. It's a very interesting situation, and one that will impact grey marketers and their customers more than those who sell and buy in market. But the real story is not the region locking. It's about the lack of transparency by Samsung and what they are attempting to do which is to protect their "customer" and their customer isn't the consumer. 

The fact is this is about protecting the distributors and dealers who legitimately buy devices from Samsung, forking over hard cash, putting staff and promotion behind the sales of product in the legitimate market the device was sold into and to protect against what is called product diversion.  It's also about protecting the carriers from having devices that can be bought elsewhere, without contract and put on their network, but without the long term predictability of how long the customer will stay with them which is why the carriers get behind any product. It's another creative way to help those carriers who buy hundreds of thousands of units so they can keep the customer "locked to them" without the customer being locked to the device if they want to change devices the way some people change shoes.

Spinning the story by using FUD was what Samsung did. Put fear into the public's mind via the media. Get the media to first amplify that fear via the approach of having to always tell what's new and shiny. Show your customers what you're doing to protect them, then when the bloggers figure out the truth they will send the message out that helps drive the sales in market while keeping those out of market (anti-diversion tactic) from buying the devices but tell enough that makes the in market end user comfortable. 

Next comes the real sneaky angle. Some blogger will come up with the idea that the grey marketers will find "agents" in the local market to "activate" the phone in market with a local SIM meaning a pre-paid SIM should work. The phone will be "activated" in the "region" it's designed to be "activated" in, then repacked, and shipped to be sold out of market so in the end Samsung's regions end up exactly where they were before, but the speed at which the devices end up out of market will be slowed down, giving each country or region a bit more time to sell the Galaxy Note3 faster.

For Samsung this allows them to say to their in country distributors that they are doing something about it, when in reality it's all window dressing because the smartphones are being be manufactured to save costs as "worldphones" with frequency bands that work everywhere (though not always with the fastest speeds possible for all yet) so the reality is, with a bit of patience you can figure out how to get the phone you need for where you'll be if your a savvy consumer.

So let's now attack the story and coverage for merits or lack there of using the 4 P's of Marketing:

1. Place-The story is not about region locking per se, but about protecting distribution which is place.

2. Price-The story is not about region locking per se, but about protecting margins and keeping price points where they should be in market because the grey marketers love to play the currency game as much as they do selling the products.

3. Promotion-The story not about region locking per se, but about drawing attention to the products in market, and to force the customer into thinking they need to buy locally. That's promotion via the media which costs less than buying ads, and which helps reinforce in store promotion which Samsung has to pay for via what is called price and positioning, and which usually includes things like payment terms and dating (when the retailer has to pay, how much they have to pay, quantity discounts, etc.) as well as price protection terms so as the prices fall the retailer can lower prices and not take a loss.

4. Product-The story is not about region locking per se, but about drawing attention to the product being available for sale. 
The reality is there are statutory laws designed to prevent this from happening in the USA and elsewhere know as parallel import laws which like patents and trademarks are designed to prevent infringement of the distribution kind. But, unless the customs agents inspecting the cargo coming into the country know that the distributor isn't the offical importer, the products get in the country.

Of course the way around that is to take possession of the goods in the country you purchase them in, because they are for personal use, sell them first in the "region" they were intended to be sold in to the customer who wants them, and when they reach the other country to where they are being imported, they are now personal property.
The stone cold reality is that the Internet has made the world a very small place, and standards have in many ways weakened protectionist efforts so to take steps to curb the enthusiasm around something good, brands turn to spin, hype, FUD and obfuscation to try to keep the status quo. And that's the difference between a good brand and an great brand.

Compare Samsung to Apple. Apple sells unlocked devices directly to consumers through the Apple stores ONLY. If you want one, you buy it direct from Apple, and so does or did HTC. But Samsung doesn't really sell direct, they rely on the channels to drive their sales, and that's what this is all about.

Distribution and protecting the channel.

Don't be fooled by the hype, FUD or obfuscation. Buy the phone you want, but be prepared to have to do some extra work if you want the phone that you can't buy direct from the manufacturer to be the phone you want.

Oh, and to the issue of pricing. Apple already figured that out too long ago. Just look at the prices in various contries and you'll see that their pricing holds steady and costs more outside of the USA than it does here. They already did the math, and last time I checked keep selling more, and growing more everywhere, and they don't seem to have a grey market problem.


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