Samsung Galaxy Note 5

Samsung Galaxy Note 5Samsung pioneered large screen phones. On Friday it launched two new models: the curved screen Galaxy S6 edge+ and the Note 5.

Both phones have premium prices. Spark lists the Note 5 at NZ$1300 and the Galaxy S6 edge+ at NZ$1400. To put these prices in perspective Apple iPhone 6 Plus prices start at NZ$1250.

That’s where Samsung’s problems begin.

Samsung dominated large screen phones

Before Apple launched the iPhone 6 Plus, Samsung dominated the market for large screen phones. While other Android handset makers offered models with 5.5 inch or bigger displays, none had the brand power to challenge Samsung.

Now Samsung faces unprecedented competition across the phone market. If anything life is tougher in the large screen segment where phone makers like Motorola and Xiaomi offer similar models for hundreds of dollars less than Samsung.

There are good enough devices selling for half Samsung’s prices.

Just another Android

Making matters worse, Samsung’s lower priced competitors feature the same Android software. They have much the same capabilities, any software differences are cosmetic. In technology terms, Samsung’s phones are undifferentiated.

This wouldn’t matter if consumers regarded Samsung as a prestige brand. The company spent billions on marketing aiming to build that perception. For a while it looked as if Samsung might succeed. That’s no longer the case. Today Apple is the only phone maker with bankable brand power.

Samsung is caught in a pincer movement between Apple at the high-end and low-cost Android phone makers at the other end. This week’s launches underline that squeeze.

It comes down to price

Short of breakout innovation — Samsung deserves credit for trying in this area — the only plausible move left is to compete on price.

That’s already happening. You may notice Samsung products launch with premium prices, but they are often discounted soon after. Shop around and you can buy a Samsung Galaxy Tab 2 for less than half the launch price.

Meanwhile, Samsung has dropped the price of the Galaxy S6 phone. The phone launched earlier this year. Despite a much-improved design when compared to last year’s S5 it failed to sell as expected. It’s not a flop, but nor is it a success.

Not just price

Samsung isn’t the only phone maker facing these issues. Any Android device maker with premium brand ambitions is in the same trap. One look at the recent financial reports from Samsung, Sony and HTC will tell you no-one is getting good margins from making Android hardware. Moreover, most of them are losing money.

Casual observers fail to understand where Apple fits into this picture. Some think it’s just a matter of superior marketing. It isn’t. Apple spends less on advertising and marketing than Samsung and far less than all the Android brands added together.

Apple’s biggest advantage is that it is the only company making iOS phones. Rounding errors like Windows Phone aside, iOS is the only practical alternative to Android. You may or may not think it superior, what matters more is that it offers a complete, consistent experience.

From Apple’s point of view, no rival can make me-too phones.

Samsung is not Apple

Despite that advantage, Apple doesn’t exist in a vacuüm. It has vulnerabilities, albeit different ones to Samsung. The company would lose sales to a phone maker who offered a similar experience at a lower price.

Samsung must come to terms with not being able to charge Apple-like prices for undifferentiated Android hardware. It can still command a higher price than lesser Android brands, people will pay extra for a quality product from a reliable brand. They just won’t pay double.

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