Both Samsung and Lenovo are moving to beat Apple. Lenovo is now ranked as the number one PC maker in the world and is stronger than Apple in China and other emerging markets, while Samsung has passed Apple in phones sales and is likely the firm that keeps Apple’s CEO, Tim Cook, up at night.
These two companies have very different strategies. Samsung focuses on underpricing and out marketing Apple and has much of the power of South Korea behind it and is hitting Apple globally. Lenovo, with far fewer resources, is instead focusing sharply on areas where Apple is weakest and seems to be making better progress in more markets more easily as a result.
While both strategies have merit, it is interesting to note that Lenovo is also doing the best job of protecting its customer base to ensure it doesn’t lose what it has worked so hard to acquire. Samsung, on the other hand, isn’t building loyalty as well and could well find that its gains evaporate in the face of future competition.
The underlying lesson that we are watching play out is the importance of customer loyalty, focus and fighting unfairly. Yes, you read me right, unfairly. Let me explain.
I was reading a novel the other day and the lead character said something to the effect that if you find yourself in a fair fight, someone didn’t do their job. You see, the object in any conflict is not to fight fairly, it is to win and conflicts are generally decided long before the battle is joined (Sun-Tzu). The smart, and still living, combatant generally is not the one who entered a bunch of 50/50 fights, but the person who focused on the ones where he or she had a significant advantage.
This is the strategy that both Lenovo and Samsung are engaged in. They aren’t interested in fighting Apple fairly; they are interested in winning, and both firms are making sure Apple is overmatched.
So while the strategy of creating situations where Apple is at a disadvantage is similar with both companies, their approaches are vastly different, and Lenovo’s appears to be the more strategic.
Samsung is executing a strategy very similar to the one it used against Sony. With Sony, it first partnered on TVs, then after learning how Sony built both the product and its brand, Samsung did much the same. Sony stumbled on the PlayStation 3 and Samsung used that stumble to effectively take the TV market, where Sony had the leading brand “Trinitron,” away from it. Sony didn’t even seem to defend its market; it was so distracted by the red ink, the failing PlayStation 3 and its foolish battle over next-generation HD DVD technology. Samsung first learned how to play the game like Sony played it, waited until Sony stumbled, and then effectively took its place.
Apple has been a variant of this as Samsung and Google first partnered with Apple (Google’s CEO was on its board and Samsung was its largest supplier), they then emulated Apple’s products to a degree where consumers had difficulty telling the difference and offered them at more attractive prices and through more carriers. Once they had sufficient technology leadership, they waited until Apple stumbled with the iPhone 4s and 5 to take market leadership away from it.
During this time, they significantly outspent Apple in marketing (by nearly 5x) and part of that marketing was targeted at actually disparaging Apple’s products. Samsung was also sued by Apple worldwide to varying degrees of success. This is an incredibly expensive strategy and were the government of South Korea not behind the firm, it is likely that Samsung wouldn’t have survived the damage to its parts business, the billions in judgments and legal fees, and the massive sustained marketing program.
But against the most powerful company in the technology market, a head-on assault required all of this to shift the odds in Samsung’s favor and allow it to prevail.
Lenovo lacks Samsung’s resources so it couldn’t take such a direct approach. Instead, it analyzed Apple’s weaknesses and approached the market that way. For instance, Apple is weak in business sales so Lenovo bought the leading business line ,ThinkPad, from IBM and used that as its worldwide weapon.
Apple is weak in emerging markets and in China, so Lenovo utilized its existing sales channels in those regions and focused most of its tablet and smartphone efforts there, providing what was a similar experience to users, but with products tightly targeted and supported according to the economics of those markets. For instance, rather than trying to sell a very expensive product like the iPhone in markets where most can’t afford it, they have crafted less expensive products that do far better.
In marketing, instead of trying to outspend the wealthiest technology company on the planet, they acquired the leading technology marketing expert from HP, David Roman (who is Apple trained), and then rolled campaigns that showcased Lenovo’s unique product advantages. As a result, Apple doesn’t even see Lenovo as much of a threat because, unlike Samsung, it isn’t focused on Apple’s strongholds but on markets and geographies where Apple has fewer, and rather than copying Apples products, it is focused more on creating similar customer loyalty.
In fact, what is really interesting is while Samsung focused on Apple, Lenovo focused on the customers Apple wasn’t serving and for a fraction of Samsung’s cost, it has achieved a similar level of success. Lenovo’s global product president, Peter Hortensius, a legend in the PC market, spoke about this recently in Fast Company.
There is also one other big difference to the two companies’ approaches: Lenovo is focused on partnering with companies like EMC (who leads in customer loyalty efforts) and in increasing customer loyalty; Samsung is still mostly focused on price and doesn’t seem to be able to spell “customer loyalty.” The end result is that Lenovo is far more likely to retain the customers it has captured than Samsung is and this is also a lesson that can be learned from Apple’s success. Building loyalty can pay huge benefits in the long term because they reduce the relative cost of customer acquisition — more customers simply choose not to leave the vendor.
I think Apple may have forgotten this and Samsung, who enjoys relatively low customer loyalty, doesn’t appear to have learned it yet. So, in the end, the positions of the three companies will likely have more to do with how happy they kept their respective customers and there Samsung is still trending to be last.