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American University of Sharjah

Fall 2013

MKT 401

Term Paper 1

Samsung SmartTV

Mohsin Imran| 40292

Ahmad Inchassi| 39522

Hiba Al Alami| 38871

Lana Jarrah| 39577

Mariam Al Aqili| 41809

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Table of Contents

Introduction 3

Product Class Diagram 4

Reasoning 5

Predicted Trends 6

Implications 9

Conclusion 18

References 19

Appendix A 23

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Introduction

The Samsung Group is a multinational conglomerate corporation with headquarters in

South Korea. It is the world's largest information technology company that manufactures and

sells electronic components, from home appliances, smart phones, tablets, TVs, and

semiconductors. The majority of consumers purchase Samsung's products for its innovative

and top quality products and for its well-recognized brand. This helps increase Samsung’s

revenues and market share, and enables it to compete against well know and strong

competitors.

In this term paper, the relevant market that will be analyzed is the TV market

connected to the Internet . The relevent market is defined at the sub-sub-sub product form

level that expands into smart TVs and regular TVs. Several predicted trends within the time

frame of the next 3 years will be discussed, and their impact on primary demand, selective

demand, market measurement, and segmentation will be analyzed. Evaluation of primary and

selective demand in the market, its market measurments in the TV industry, and segmentation

of the relevant market as of now is discussed in Appendix A.

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Product Class Diagram

Entertainment (USA)

Indoor

Electronic

Connected to Internet

TVs

Regular Smart

Requires Controller

LG Smart TV

Panasonic Smart Viera

Apple TV

Does Not Require

Controller

Samsung Smart TV

Sony Smart TV

Toshiba Smart TV

PCs Tablets

Not Connected to Internet

TVs Radios

Non-Electronic

Board/Card Games

Bowling Shopping Parties

Outdoor

Sports Concerts Carnivals Beaches Parks

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Reasoning

The relevant market has been defined at the sub-sub-sub product form level of TVs

that are connected to the Internet, with the focus being the US. The Samsung SmartTVs

generally provide the same benefits and advantages as other TVs that are connected to the

Internet. Virtually all TVs that can be connected to the Internet can be used to watch and

browse content online, can be used for online and offline gaming, and can be used to view

pictures and videos offline, in addition to many other benefits. In 2012, 66 million units of

Smart TVs were shipped worldwide, and they made up 27% of the total market for TVs

(Wallenstein, 2013). In the US market, the amount of TV sets that can be connected to the

Internet doubled over the past year, and has now reached 25%. Furthermore, it is predicted

that the market share for Smart TVs will reach 50% by 2015 (Wallenstein, 2013). Therefore,

Samsung SmartTVs can directly compete with these other TVs that are connected to the

Internet, and we believe there is a large degree of substitutability between them. For this

reason, the relevant market has been defined at the sub-sub-sub product form level of TVs

that are connected to the Internet.

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Predicted Trends

There are a number of trends that are most likely to take place in the coming 3 years that will

have a significant impact on the relevant market and the primary and selective demand.

Economic

According to Hargreaves (2013), the US economy is slowly but surely improving, and

it is coming out of its recession. The nation’s GDP has increased at a 2.5% annual rate

according to the Bureau of Economic Analysis. This increase is largely due to an increase in

consumer spending, exports, and real estate spending. Therefore, it can be predicted that

consumers will have more buying power and will be willing to spend money on expensive

products, such as smart TVs. It has been forecasted that the economy will grow by 3% in

2014, and that consumer spending, which makes up 70% of the US commercial activity and

production, will grow by 2.6% (Kamalick, 2013). This significant growth will cause an

increase in consumer spending; combined with increased ease of use and awareness of

products in the relevant market, this will have a positive effect on primary and selective

demand, as well as other areas of the relevant market.

Technological

The most significant change that is likely to take place in the coming few years is a

technological change. Technology is advancing at an alarmingly fast pace in this day and age,

and many products are becoming obsolete due to this change. In addition, many new products

are emerging, creating new product categories. The development in technology is making it

easier and simpler to carry out tasks such as syncing smartphones or tablets to TVs. Another

example of technological development is the increase in availability of real time or on

demand features. It is becoming easier and more common for consumers in the US to access

shows or movies anytime they want through the likes of Hulu and Netflix (Drell, 2011). In

the context of the relevant market, advancement in technology means that it will be easier to

sync information, apps, and devices between smart TVs, smartphones, and tablets, which will

facilitate the use of smart TVs. According to Greg Satell (2013) from Forbes online news, the

anticipated change in the trend is the “The Web of Things”, which means that everything that

the human being will interact in the future will become computerized; such as houses,

automated cars and many more. These trends will allow two-way communication between

humans and computers or gadgets. What is also very beneficial is that the gadgets and

computed products will use environmentally friendly elements to produce the products. This

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indicates that there will be an increase in demand for the products of the relevant market.

Whereas it is highly likely that there will be an increase in the use and demand for smart TVs,

3 years is not a large enough time frame for smart TVs to completely replace regular TVs; the

reason for this being that not all users will have caught on to the smart TV trend yet. TVs

tend to have a longer lifecycle than other devices, because they are more expensive and more

difficult to replace. For this reason, many consumers that have recently purchased regular

TVs will not be willing to switch to a smart TV so soon. However, the increasing popularity

of Smart TVs and the advance in technology is sure to have an impact on several aspects of

the relevant market.

Demographic

According to Joel Kotkin (2010) from the Smithsonian magazine, the United States is

expected to have an increase in the older population. 13% of the US population is 65 and

above and it is expected the percentage to increase by more then 20% by 2050. However, this

growth may take a while; by 2016, 15% of the US population will be 65 and over, 58% will

be between the ages of 20 and 64, and 25% will be under 20 (Hollman, 2006). This could

potentially cause a decrease for the demand of the products of the relevant market. The

reason for this is that since technology is developing, the older population may not be as well

informed as to how to use the products, and this may interfere with their experiences and

value received from the products. Since technology is moving at a rapid pace, it may be

difficult for the older generation to keep up with the developments. New products or new

ways of communicating and using products may prove difficult for the older population to

learn how to use. This issue cannot be readily solved with providing consumers with proper

information and guidance for the use of the products, although that will help to a certain

extent. As people get older, they tend to be more reluctant to try new ways of doing things as

they are accustomed to old habits, and so teaching them to use the new products will be

difficult.

Educational

Because of the advance in technology development, people are learning how to use

technology more and more. The use of advanced forms of technology is being introduced into

many fields in the US, including the workplace and educational institutions. 600 districts

across the US implemented the use of the Apple iPad in 2011 (Koebler, 2011). In addition,

according to the US Census Bureau, the number of people that are attaining higher levels of

education is increasing over time (2013). This means that consumers will be more educated,

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and therefore will have less of a problem figuring out how to operate the new and advanced

technologies of the products in the relevant market, therefore increasing demand for these

products. Since the impacts of this trend contradict with those of the previous trend, it may be

that these two trends occurring together will balance each other out and not have much of an

impact over the next 3 years.

Competition

Samsung SmartTV does have a few competitors, namely LG and Sony. Currently,

Samsung leads the market with 26% market share (Smith, 2013). The reasons for this lead are

its slick user interface, availability of apps, high quality displays, voice control features, and

the lack of a need of a remote control to operate (Skipworth, 2013). Samsung will be able to

maintain its position as the market leader within the next three years, because it is working

hard to keep its competitive advantage as an early mover in the smart TV industry. It is

investing in its software development and adding premium features. Sony, on the other hand,

is focusing more on the design of its smart TV, yet also has an advantage of integrating its

TV sets and PlayStation consoles. However, Sony has recently suffered a $2.2 billion loss in

market value, and so this may hinder its ability to compete with Samsung (Compos, 2013).

The benefits that LG’s smart TV offers are not quite on the same level of Samsung, although

they are not far behind. However, Samsung’s competitive advantage ensures that LG does not

pose that large a threat to the company (Skipworth, 2013). Within the next three years,

competition may increase, but not to the extent that it will severely affect Samsung.

Suppliers

Samsung’s investment in the development of its smart TV will definitely pay off in

the next few years. The development of its software is allowing third-party developers to

create applications specifically for Samsung’s TV sets, resulting in 1,400 smart TV apps

currently available (Compos, 2013). This means that the supply of applications for

Samsung’s smart TV will significantly increase in the coming three years. In addition to this,

on-demand video streaming companies are becoming more and more competitive in the U.S.

Hulu, Netflix, and Amazon Prime are each doing their best to outdo each other and providing

exclusive content to their subscribers (Compos, 2013).

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Implications

Product Market Structure and Relevant Market

While there are several trends that will affect primary and selective demand, it can be

predicted that there will be little, if any, change in the product market structure and relevant

market. The reason for this is that 3 years is too short a time frame for any major changes to

take place. As explained above, it is highly unlikely for the sub-sub-sub level of smart TVs to

completely take over and phase out regular TVs, and so this means that there will be no

change in the relevant market. In addition, the substitutes and alternatives for smart TVs will

remain the same, as it is highly unlikely for any new product to be introduced that will

dramatically change the product market structure. For these reasons, it can be said that the

trends will have little or no impact on the product market structure or relevant market in the

coming 3 years.

Primary Demand

1- Buyer Identification:

A. Buyer Characteristics:

Demographics

There will be a slight change in the demographics part in 3 years. Operating the smart

TV would become much easier and more comfortable to use due to advancement in

technology, as people will be more aware of it. In addition, the younger generation is

becoming more qualified and knowledgeable of how to operate the product, and the older

population still is not as familiar with the use of the product. These two factors will balance

each other out and will not create a major impact on demographics, as our target age group is

25-54 years. However, the older population learning how to use technology can increase the

age gap we are targeting to 25-65 years for smart TVs. Hence, this might change the age

group from 25-54 years to 25-65 or even 25-70. In addition, third- party developers will

create applications that will interest the younger generation, which would fall into the age

group of 14-21.

Lifestyle

Since the time span is for only 3 years, there will not be much change in lifestyle, as it

takes time for lifestyles to change. People will be slowly adapting to advancement in

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technology. However, the younger generation is becoming more qualified, and this can

actually increase the usage of technology related products and gadgets, as they will be eager

to learn more and spend more time on it.

Location

Since our target is only the major cities in USA there won’t be a change in regards to

the location for the next 3 years.

B. Buying Centre:

The time span of 3 years will only affect the Influencer and the gate keeper when it

comes to buying centre. Technology will make the “influence” component stronger. There

will be more advertising, more peer pressure, and family pressure as more and more people

would own a smart TV. Influencers as well as buyers will also be stronger because of their

competitive edge, which will be due to the development of software that allows third-party

developers to create applications specifically for Samsung SmartTV sets. This will lead to

greater peer pressure and family pressure to purchase the SmartTV. Gatekeepers would be

also influenced as retailers would be more knowledgeable about what they are selling and

may convince the buyers. An advancement in technology overall can increase the market

share as Samsung is the leader in the industry of technology. Consumers being more educated

can make them more knowledgeable about the product, as they will better be able to

understand the benefits of the product and how it can satisfy their needs. This can positively

impact the “decision maker” and the “buyer” component of the buying centre.

C. Customer Turnover:

There would a change in the customer turnover in the next 3 years due to technology.

More people will be purchasing Smart TVs, as it would be more convenient for the customers

to use. For example, in the next 3 years technology would be used more extensively than it is

now, making people more familiar, which will overall make them more interested to purchase

more technological products. According to research, “Smart TV can become a home gym

complete with personal trainer, a very local lecture hall, a gigantic jukebox, and a large-as-

life videophone” (Steele, 2013). This is clearly an example how such applications can

become a “need” and can make life much comfortable and easier. For example, one does

need to travel all the way to the gym and hire a personal trainer. People learning how to use

technology and people attaining higher levels of education are a positive sign for customer

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turnover for smart TVs. Smart TVs do require some understanding of technology, which

makes educated people more favorable for usage. Hence, for the next 3 years an increase in

the sales of smart TVs can be expected, as people will be eager to purchase smart TVs and

utilize their extra features rather than purchasing a normal television. Therefore, it can be

predicted that, due to the aforementioned trends, more people will be entering the relevant

market in the next 3 years.

2- Factors Affecting Willingness to Buy:

A. Related Products/Services:

Smart TVs will still be a combination of traditional TV content with Internet, but due

to the advancement in technology, people will be able to download or purchase their favorite

shows. With the use of smart TVs, marketers will also be able to track customers’ favorite

shows if they have the ability to download or purchase them. This would make it easier to

target customers based on their favorite shows or ads. The movies, ads, and drama shows,

will still be saved in the TV’s hard drive, which is implemented into the TV (Smart TV,

2013). It is said that the technology in three years will become even better than it is now,

such as the quality of the TV’s definition, the online features, excellent touchpad remote

control, faster Wi-Fi connection, and better voice recognition. In three years, navigating

through the content of smart TVs will be much easier than it is now (techradar.TVs, 2013).

Thus, the willingness to buy the Samsung SmartTV will increase in three years. Also,

according to Compos, demand for Samsung’s SmartTV will increase in the coming years.

Furthermore, there will be high demand for on-demand video. (Compos, 2013).

B. Usage Problems:

Product Feature Problems

It can be predicted that in the next three years not many changes will occur in product

features since many would still consider Smart TVs to not be that smart an idea, because

people will still be using other products to watch their shows or play games; they will not be

using the programs that are already embedded in the TV. But there will be one change, which

is that people will be able to download or purchase the shows they want to watch, since in

three years there will be an increase in the speed of the Internet connection due to

technological advancements.

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Usage Limitation Due to Age

Based on the predicted trends, the age group of 65 and plus would increase from 13%

(currently) to 20% in 2050. This indicates that more than 20% of the population will be at

least 65 years old and more. This indicates that will be more likely to be less educated in

modern technology, which is the core value of Samsung SmartTV. This will limit their ability

to use smart TVs to their full potential, which will harm the market for Samsung due to

decreased product value and image.

C. Value or Experience Compatibility:

Samsung SmartTVs are connected to the Internet; they do not interfere with the

experience of customers in a negative aspect, but increase them since they are customizable.

Also, customers will have an option of downloading and purchasing their shows, which

would mean that the experiences provided are compatible with customers’ needs and wants,

especially since more applications and features will be available.

D. Perceived Risk:

Security Risk

There will still be risks associated with TVs in comparison to regular products, but

not as much as there is now, due to the increase in technology. Three years is not enough to

conduct or test this, so according ReVuln, “some smart TVs are vulnerable to hacking”,

because to open a certain application the smart TVs would require consumers to log into their

accounts. This would then make it easier for marketers to hack into customers’ smart TV

accounts or emails, and research what the customers enjoy watching. This way, they can

target customers by personalizing advertisements or potential dramas, series or movies to

purchase. Also, there is potential for hackers to steal customers’ identities (Armerding, 2012).

Economic/Financial Risk

The cost of the Internet in the US is predicted to decrease in the near future, as there

will be advancement in the technology sector; the Internet is predicted to be faster and

cheaper than it is now. This also provides another reason as to why to smart TVs will be less

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expensive in the future; because the cost of production will be much cheaper, thus decreasing

the retail price of smart TVs.

Physical Risk/ Social Risk

In the next three years, it can be predicted that the main factor of physical risk, which

is obesity, will not change, because people will still sit in front of their smart TVs and watch

their shows rather than walk outdoors. This will also still cause a social risk, because people

are less likely to socialize with their friends, neighbors or other people in general. However,

there may be advancement in social networking; when the potential customer purchases a

smart TV, they can download or purchase a social network application in which they can

communicate with other people, friends and family, due to the advancement of technology.

3- Factors Affecting Ability to Buy:

A. Cost:

In the next three years, Smart TV prices are expected to be more competitive,

especially when all brands start focusing on Smart TVs rather than regular ones. Furthermore,

people will get used to the idea of having an Internet connected TV that mixes, to a certain

extent, the features of a handheld tablet and a regular TV. The cost will slightly decrease in

the next three years, making it more affordable for probable customers. There were no solid

forecasts available on the price expectations in the future, but it is expected to decrease by an

estimated 10-20%, just like any product in the next three years. Currently, the Smart TV

product life cycle is in the introduction phase; in the next three years, it will be in the growth

phase and new competitors will enter the market and put pressure on price. According to

Plummer (2013), LG will launch a smart TV in 2015 at prices starting from $800, which will

put pressure on Samsung smart TVs. However, the price will not decrease by a large amount,

as companies will still have ways to differentiate themselves and their products, making the

price factor and the bargaining power of buyers less effective. Samsung will do this through

launching new applications on its smart TVs through its suppliers (Compos, 2013).

B. Packaging/size factors:

Smart TVs are already available in different sizes ranging from 50" to 84" to suit

customer needs. There will be no legal or societal issue towards the packaging and size in the

next three years. Since smart TVs are expensive, it is more likely that elder couples would be

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able to buy it in the US. They would tend to focus more on larger TVs such as the 60", as it

would be easier to view and follow fast paced shows. It is less likely that Samsung will

manufacture a Smart TV that is larger than 84" or smaller than 50" inch in the next three

years.

C. Spatial Availability:

Smart TV production companies are careful in terms of offering a lot of Smart TVs as

they might not be a top seller because of electronic, price, or usage issues. Besides, they

know that only innovative customers will buy it at this stage. Since most businesses follow

the phase shift plan, companies will start gradually decreasing their production quantities of

regular TVs and focus more on smart TVs in the next three years. This is because smart TVs

will become user-friendlier and will gain the trust of consumers. To add to this, since

economic and technological levels in the US are improving, people will have the purchasing

power and the technological knowledge to be able to buy smart TVs. They will be available

in all the electronics shops, as they want to be the first to serve customers.

Selective Demand

When it comes to selective demand, or demand for a particular product or brand, there are

two important factors to consider.

1- Decision Making Process

In the next 3 years, there are several external changes and trends that could impact

the relevant market and customers’ decision-making process. Technology changes

enormously each year, it is expected to enhance the easy access of all the functions of a smart

TV. Consumers can easily attach and connect any device to a smart TV, such as, a laptop,

sound system, a memory card, USB device, DVD player, VCR, and a smart phone. In

addition, customers will be able to download any application needed through the ‘Play Store’

provided by Samsung SmartTV. Before a customer buys a product, they go through a process

in order to pick the right product that has the right specifications, features and benefits that

the customer requires. 3 years from now, customers will be aware of the availability of smart

TVs, since several competitors will be providing the same product. Because of the change in

demographics, the older population of the U.S. will increase in number; they will not be as

informed of how to use the SmartTV. Since the SmartTV falls under the category of TVs,

consumers are more or less familiar with the category. They have an idea of the basic

expectations they have for a TV, and they have a general idea of which brands satisfy and

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meet these expectations. Therefore, they do not have to go through an extensive searching

process. In this case, the older generation will make the decision of whether they should buy

the product or not depending on the features, which will mostly be used by their children.

In addition, another external change that might occur is the increase of education

among the U.S citizens. Unlike the elders, customers between 20 and 40 years old will be

more educated, which gives them the urge to know more about the new products that are

technologically enhanced. Therefore, the decision making process for the younger generation

will be less extensive, whereas older customers may need to gather more information to

compensate for their lack of knowledge of updated technology. Another trend that might

occur is competition in the SmartTV industry, where customers will have several brands to

choose from. Samsung is expected to become the market leader within the coming few years,

and so its reputation will increase, and customers will definitely choose the most wanted and

trusted brand in the smart TV industry. In addition, Samsung supplies the best quality to its

customers in order to satisfy them. In the upcoming years, Samsung will be able to supply

more features and desired functions to customers, as suppliers like Hulu, Netflix and Amazon

would want to provide their applications and content to Samsung, which will make the

decision making process easier.

2- Determinant Attributes

3 years from now, consumers will be able to make quicker and wiser decisions of

which products they want to buy. All the information they need to know about the product is

available to them, and they also have several competitors to choose from for the same

product. Because of the several expected trends discussed earlier, it is easier for them to

determine which attribute of a product they need the most, and make their decision

accordingly. According to the relevant market for this project, consumers will tend to buy

such TVs for several attributes. These attributes can differ from consumer to consumer, such

as convenience (functions), value of the product (prices), performance of the product, and to

follow up with the technological trends. Because of the increase of economic performance in

the next 3 years, customers will be more willing to buy SmartTVs than before; this could be

one of the attributes. In this case, price will not be an issue, so it is an irrelevant attribute.

Size could be also an irrelevant attribute because customers have different ranges of sizes to

choose from, for example, from 19 to 64 inches (Samsung, 2013). Another attribute that

might get customers to want to buy a SmartTV could be its multiple functions and features.

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Customers will be more educated and will have a clearer idea of how to use the functions of a

SmartTV. They will also like to buy a SmartTV because they would find whatever they need

and want in one product, such as browsing, communicating, entertaining, and much more by

simply downloading applications from ‘Play Store’. The functions of a SmartTV would be a

determinant attribute for customers, because they are perceived to be of high importance and

high variation among alternatives (Table 1). Customers will be more knowledgeable about

the different features that each of the competitors offer, so it will be easier for them to choose

from the different competitors of SmartTVs. A customer who already uses Samsung products

will more likely buy a Samsung SmartTV, because they will be able to connect their smart

phone to the TV easily, projecting it to a wider screen. In addition to the SmartTV functions,

customers will be switching channels with their own will/ hands, as they do not need to be

concerned about the remote control being missing or the unavailability of batteries in them.

In the upcoming years functions of the SmartTV will increase, and with that customers want

to use the features using high Internet speed. High speed of Internet is placed as the defensive

attribute, because it is an important attribute that customers look for in products such as

SmartTVs. High speed of Internet should be available in order for Samsung to provide

customers with high value of performance of its product. Furthermore, image is placed as an

optional attribute, because Samsung’s brand image stands out over its competitors since it is

expected to become the market leades; Samsung customers will be willing to buy its products

for its brand image and brand name.

Perceived Variation among Alternatives

Low High

Irrelevant Attribute

(Size)

Optional Attribute

(Image)

Defensive Attribute

(Speed of internet)

Determinant Attribute

(convenience/Functions)

Perceived Importance

Low

High

(Table 1)

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Market Measurement

In the next three years, the absolute market potential will increase because the number

of Smart TV users will increase. This is because the companies will focus more on smart TV

production, so people who are looking for a new TV will have fewer options for regular TVs.

Moreover, because of fast paced lifestyles, people would want to try new products that their

innovative peers own. Relatively, more people would be able to buy it when the price

decreases slightly. Regarding industry sales, more people will be able to buy it and more

competitors will enter the market, hence it will increase by a significant amount. Samsung

will have a greater market share by that time, which will cause sales to increase. This will be

the case because Samsung was one of the early producers of the smart TV. By that time, it

would have accumulated good customer reviews because of its good quality and a larger base

of customers, which will eventually lead to customer loyalty, brand awareness, and

recognition. Therefore, absolute market potential, industry sales, and company sales will

increase. This will lead to a decrease in the primary demand gap and a decrease in the

selective demand gap because the rate of company sales is greater than that of the industry

sales.

Segmentation

According to Malcolm Wright in his article “The dubious assumptions of

segmentation and targeting” (1996), market segmentation cannot be forced if there is nothing

to segment. After studying the future trends and the market of the US three years from now, it

has been concluded that there will not be any significant changes in the market. However,

there will be a few changes in the market, so segmentation must be done based on

demographics and geographics, so that ways to improve the Smart TV products, profits, and

customer traffic can be identified. After the market has been segmented based on region and

population size, the top 10 most populated cites can be specified.

The predicted trends will have an impact on the market in three years, although they

will not be drastic since the time frame is short. Some examples of minor increases or

decreases include the usage of the smart TVs increasing due to the advancement of

technology. Overall, no significant changes shall occur within three years.

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Conclusion

In the next three years, companies will stop producing regular TV's and start focusing

on the new trend of smart TVs. It can be expected that the demand for smart TVs, specifically

Samsung SmartTVs, will increase gradually. This is because of various trends, which are

economical, technological, competition, demographics, education and suppliers. Economic

recovery in the US along with advancements in technology will allow the older generation to

have higher purchasing power and knowledge to buy and use smart TVs with high speed

Internet connection. When the product life cycle reaches its growth level, competitors will

start bombarding in. However, Samsung will be able to differentiate itself through its brand

name and specialized applications that it will get through its suppliers. Therefore, the prices

of smart TVs will slightly decrease, as the greatest market share is in the hands of Samsung.

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Appendix A

Primary Demand

1- Buyer Identification:

A. Buyer Characteristics:

Demographics

Demographics can be defined as “studies of a population based on factors such as age,

race, sex, economic status, level of education, income level and employment, among

others” (Demographics, 2013). Since the product in question is smart TVs, it will not be

gender specific. According to Ad Age digital “demographics increasingly drive pricing in

online video—especially when they're the 18-to-34” (Neff, 2013). However, the specific age

group that would actually purchase a smart TV would fall in between the ages of 25-54.This

would include newly single people, married couples, and settled families that are either

looking for a new television or switching into a new era of televisions. According to United

States Census Bureau, 33.8 % of the population falls in this category (Age and Sex, 2011).

This clearly indicates this group can be considered a profitable target.

Lifestyles

Lifestyle can be defined as the “way a person lives, or their routine” (Neff, 2013).

Nowadays it is very common to own a television, as they are not expensive. According to

Social Media “As many as 80% of people multitask on a mobile device while watching TV”

(Fox, 2011). People have multi task because of the overall growth of smart phones and

tablets; they can actually play games, check their emails, or browse the Internet while

watching television. This is what the smart TV can actually do; it can connect your various

electronic devices together. According to Smart TV Trends “it will be possible to connect

your devices together to provide an integrated experience” (Lantz, 2013). This can

complement the TV experience rather than competing it for attention.

Location

The general location would be the US. Since it consists of 50 states, the states with a

higher population of the age group 25-54 years old will be specifically considered. This

includes California, Texas, New York, Florida and Illinois, as shown in the graph below

(Population Estimates, 2011).

24

B. Buying Center:

Decision Makers: End-user

Influencers: Advertisers, retailers, peer pressure, and family members. For

example, if the child pressurizes their parents into buy the Samsung SmartTV

for their video games

Buyer or End-users: End user or gift giver

BUYING CENTRE FOR SAMSUNG SMART TVs

Buying Center

Influencers

Adverters

Retailers

Peer Pressure

Family Members

Buyers

End-users

Gift Giver

Decision Makers

End-user

7,384,340

5,613,460

3,484,800 2,949,310

2,588,020

2,502,030

2,366,690

2,359,160

2,326,840

2,215,650

TV homes 2013

New York

Los Angeles

Chicago

Philadelphia

Dallas

San Francisco

Boston

25

C. Customer Turnover:

Customer turnover is the change in the size of the relevant market due to changes in

buyers’ characteristics. People are moving into the relevant market. According to research,

“Growth will be driven by consumers' desire to access the Internet content via their TVs, and

by TV manufacturers seeking to produce value-added products and entering the apps market”

(World Usage Patterns, 2013). In other words, as connectivity among people through

advancements in Internet service availability increases, more and more people want to access

Internet content from an increasing number of devices, the Smart TV being no exception.

According to Smart TV Trends “By the end of 2012, there will be more than 100 million

consumers globally who on a daily basis use Smart TV applications” (Lantz, 2013). Statistics

clearly indicate that the US will also be part of that 100 million club.

2- Factors Affecting Willingness to Buy:

A. Related Products/Services:

Smart TV is a combination of traditional TV content with a combining of Internet.

Many marketer and services track what are the customers’ favorite shows, so it is easier to

target them. Furthermore, remind the customers about favorite shows (Smart TV, 2013). For

consumers to purchase a Smart TV is to provide access to user-generated content meaning

that it is either saved in the hard drive or it is placed in the cloud storage (Smart TV, 2013).

Furthermore, it all depends on the quality of the TV such as, it should contain Wireless Wi-Fi,

high definition, voice recognition and it should perfume its duties, which is airing the drama

or news or movie with quality and punctuality. The new Smart Hub allows you to seamlessly

navigate through live TV, movies, streaming content, social networks, apps and more so that

customer can enjoy everything they are seeking in one place (Samsung, 2013).

B. Usage Problems:

Product Features

Some customers may prefer certain TVs to others, depending on their performance

and the degree to which the products are compatible with the customer’s lifestyle. According

to Lee Bell from The Inquirer (2013), Smart TV is not a smart idea, because he only uses the

Smart TV to watch TV programs, and does not use the Internet because it is much slower in

comparison to his smart phone or tablets. If customers do not have much knowledge on how

26

to use the Smart TV to their full potential, then they would not be able to gain the maximum

benefit from what TV providing the customers. This would lead to a decrease in the

customer’s satisfaction and perception of the product itself.

C. Value or Experience Compatibility:

In general, TVs connected to the Internet do not interfere with the experience, as they

are customizable, and therefore can be compatible with customers’ needs.

D. Perceived Risk:

Physical Risk

TVs have such astonishing features that allow customers to navigate through the

Internet or watch their shows online. Even though there are many benefits, there are some

negative effects, which include the customers to gain weight due to customers not burning

calories. By only customers sitting in front of the TV they burn a maximum of 68 calories.

Also customers waste so much of their time by just sitting in front of the TV, because they

are not able to keep track of time (The Disadvantage of Watching Television, 2008).

Security Risk

There are higher risks associated with TVs than regular products. According to the

researchers from the security consultancy ReVuln, “some smart TVs are vulnerable to

hacking”, because smart TVs require people to log into their email and other accounts. It

makes it much easier for researchers to hack into customers’ smart TV accounts and view

what the customers are watching and personalize advertisements for each individual. Also,

there is a high chance of someone stealing the customer’s identity (Armerding, 2012).

Economic/Financial Risk

The cost of the Internet is said to be high-slow to normal speed at $20-$30 for

100mbps (Mitchell, 2013). This also indicates that TVs that carry Wi-Fi connections tend to

be more expensive than regular products, since the cost of the Internet must be taken into

consideration.

Physical/Social Risk

27

Researchers have stated that one of the main factors of customers (of all diverse ages)

being overweight is due to them sitting in front of their TVs (The Disadvantage of Watching

Television, 2008). This indicates that the customers are being less active, which leads to

customers going out less often. Overweight people tend to be less confident, and so they do

not socialize due to their insecurities about their physical appearances, and so this is a large

social risk (Rose India, Disadvantage of Obesity).

3- Factors Affecting Ability to Buy:

A. Cost:

For many consumers in the market, cost can be a very important factor in making a

purchase decision. Consumers evaluate the product's value through comparing its benefits

and costs. TV prices are decided based on demand, competition, and the features in it. The

cost of a "LED smart HDTV" in the US market is higher relative to the normal TV. To

illustrate, a 60'' Samsung Smart LED-LCD 3D HDTV costs $4,200 on the Samsung Website,

while a normal Samsung 60'' TV costs $1,300. However, a 60'' Sharp Smart TV only costs

$1,300 (Amazon, 2013). 60'' Smart TV prices are highly dependent on the brand itself, as

they can range from less than $1,300 up to $4,200.

B. Packaging/Size:

Customers may prefer to buy different sizes of TVs depending on how often they plan

to use it, what they will use it for, where they will put it, the size of the room it will be put in,

and the number of people that are going to use it. To illustrate, a single person looking to buy

a TV to watch the news and a few shows for short amount of time will not need a very big

TV. On the other hand, a person who has a big living room and plans to use the TV for

watching games, movies or social networking with a group needs a larger one. As of now,

TVs comes with different sizes ranging from 30'' - 85'' to fit the needs of different customers.

C. Availability:

TVs have been in the market for decades, and more than 20 different brands such as

LG, Sony, Sharp, Samsung, and Panasonic offer them. They are available in most electronic

shops and hypermarkets. Moreover, they can be found through different online retailers such

as eBay.

Selective Demand

28

When it comes to selective demand, or demand for a particular product or brand, there are

two important factors to consider.

1- Decision Making Process

The first factor is the decision making process. This process describes the steps that

consumers go through when purchasing a product. In the case of the Samsung SmartTV,

consumers go through a limited problem solving process. This type of process requires a

certain degree of problem solving, as it requires a fair amount of information search in terms

of the features and benefits provided by the product. Since the SmartTV falls under the

category of TVs, consumers are more or less familiar with the category. Because of this

familiarity, consumers understand the basics of what a TV provides. They have an idea of the

basic expectations they have for a TV, and they have a general idea of which brands satisify

and meet these expectations. Therefore, they do not have to go through an extensive

searching process. However, the functions and features of smart TVs are relatively new in the

market, and most consumers may not be that familiar with them. Therefore, consumers-

especially consumers that are not tech-savvy- will have to put in the extra effort and gather

more information regarding the different brands models of smart TVs before making a

purchase decision. This is important for Samsung to know, as this means that the company

must ensure that it provides sufficient information about its product for consumers to have

access to, as this will aid them and facilitate their information search and decision making

process.

2- Determinant Attributes

Consumers choose and buy certain products in order to benefit from a specific

product of a particular brand. Consumers buy products or services according to their primary

attributes, such as quality, service and value (price), whereas determinant attributes are

attributes of a product that are most important in the decision making process. Consumers

tend to have several attributes that they look for in a product, and each attribute has its

importance in consumer’s preferences and needs in a product. In this case, consumers

consider a specific attribute in order to determine their choice between each competitors’

offerings. According to the relevant market for this project, consumers tend to buy such TVs

for several attributes. These attributes can differ from consumer to consumer, such as

convenience (features), value of the product (prices), performance of the product, and to

follow up with the technological trends. TVs that can be connected to the Internet could be

29

regular or smart TVs. These TVs provide consumers with easy access to information, to

online chat and communication, to online shopping to social networking and entertainment.

Consumers can use a determinant attribute diagram that can help them characterize their

attributes according to the perceived variation of attributes, which are irrelevant attributes and

optional attributes, and the perceived importance of attributes, which are defensive attributes

and determinant attributes (Table 1). When an attribute lies on a high-perceived variation and

high-perceived importance to a consumer, then it is a determinant attribute. This process

helps consumers determine which attribute lies on which level of importance. For example, if

a consumer wants to buy a multi-functional device, this can be considered an optional

attribute; a personal computer, a tablet, a smart phone or a smart TV would satisfy the need.

Depending on the level of importance and the variation between alternatives, the consumer

will pick the most determinant attribute. With the case of smart TVs, an irrelevant attribute

may be the color of the TV, as it is not of much significance. There is no clear optional

attribute offered by the brand that makes it stand out amongst its competitors; as of now there

is not much competition going on in the relevant market. A determinant attribute may be the

price of the product. If the product is priced above the consumer’s budget, they may opt for a

competitor’s product. Finally, a defensive attribute may be the features and applications

offered by the brand, as this is essential for all brands to have in order for consumers to be

satisfied with the performance of the smart TV.

Perceived Variation among Alternatives

Low High

Irrelevant Attribute

(color)

Optional Attribute

Defensive Attribute

(Features/Applications)

Determinant Attribute

(Price/Value)

Perceived Importance

Low

High

(Table 1)

30

Market Measurement

It is necessary to gather information on the current numbers of TVs currently in the

market. This information will bring out any selective or primary demand gaps in the market,

which will then give Samsung an idea of how to go about growing its market share or the

demand for the relevant market, which is TVs in general. According to a report by Nielsen

(2013) there are 114,173,690 TV Homes in the USA in 2013. Since this number has

decreased by 475,620 from the previous year, it is evident that the USA market has not

reached its full potential in terms of the TV industry. This number has decreased because

consumers are opting to use their smartphones and other devices such as tablets to satisfy

their needs (Drell, 2011). This indicates a primary demand gap, which can be closed by

getting consumers to buy more TVs. Samsung has been doing great in the smart TV sector

since its launching. Since the launch of Samsung SmartTV in 2011, Samsung has been

enjoying the largest market share in the World, specifically in the US among other

competitors such as Apple, LG and Sony. According to Breil (2011), Samsung has sold

730,000 units of their smart TVs in just 3 months after it was launched in North America in

2011. This shows a huge demand for Samsung SmartTV; overall in 2011, the company sold

1.15 million smart TVs in the United States. In 2012, Samsung global SmartTV sales reached

25 million out of 50 million; this shows how customers trust Samsung and are willing to buy

their SmartTVs (Daily Telegraph, 2012). In 2013 sales, Samsung acquired a market share of

34.5% in the US market in the first two months. Below is the complete breakdown of the US

market share in January & February 2013.

© Chousinblo (2013)

34.5

26.4

14.6

9.6

9.1

USA Smart TV Market Share (JAN & FEB 2013)

Samsung

Vizio

Sharp

Panasonic

LG

31

In 2014, the sales of Smart TVs in North America are expected to 30 million units

(Cericola, 2014). If we assume that Samsung market share will remain 34.5%, then they will

be able to sell 10.35 million Smart TVs. There are currently 114,173,690 TV owners in the

US with a potential of becoming 114,649,310. Samsung can sell to 34.5% of these owners,

which means their current sales are 39,389,923 Smart TVs.

Segmentation

Market segmentation will enable identification of new ways to improve the products,

services, profits, and customer traffic. The relevant market will be segmented using both

Demographic and Geographic Segmentations. This will enable the narrowing down of the

focus from the US in general to the top 10 most populated cites in the U.S. This indicates

segmentation based on the region and size of the population.

According to Nielsen measurements, the top ten cities in television consumption are

New York, LA, Chicago, Philadelphia, Dallas, San Francisco, Boston, Washington DC,

Atlanta and Houston. Furthermore, based on the United States Census Bureau, New York

City has a population of 8,336,367 million people, while Houston has 2,160,821 million

people (2012). Based on the demographics, the top 10 cities’ residents tend to consume and

purchase TVs based on their income, education, and lifestyle. For example, in New York the

consumer’s average income is estimated $62,330 according to the Department of Labor of

32

U.S, which indicates to be quite high, which is why people are able to afford to purchase

Smart TV or TV in general (2010). According to Nielsen, a total of 7,384,340 TVs are

consumed in New York City, which covers the largest percentage of consumption, whereas

LA has 5,613,460 TVs consumed by their residents (2013). This indicates that the largest

population, which is New York, purchases much more TVs than any other cities in US due to

their higher income. Furthermore, the United States Census Bureau stated that the number of

people are educated in the United States are 70,441 high school graduates and 43,277

bachelor degree (2012).

The relevant market is unique and different because it provides features that are not

provided in the regular TV such 3D option, no touch service, voice control, high definition,

wireless Internet service and many more. These are the some of the benefits that comes

along with the Smart TV that attracts the customers to purchase the product in comparison to

the regular TV.