Samsung Smart MKT Plan(401)

2. 2 Table of Contents Introduction 3 Product Class Diagram 4 Reasoning 5 Predicted Trends 6 Implications 9 Conclusion 18 References 19 Appendix A 23

3. 3 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.

4. 4 Product Class Diagram Entertainm ent (USA) Indoor Electronic Connected to Internet TVs RegularSmart Requires Controller LG Smart TV Panasonic Smart Viera Apple TV Does Not Require Controller Samsung Smart TV Sony Smart TV Toshiba Smart TV PCsTablets Not Connected to Internet TVsRadios Non- Electronic Board/Car d Games BowlingShoppingParties Outdoor SportsConcertsCarnivalsBeachesParks

5. 5 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.

6. 6 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

7. 7 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,

8. 8 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).

9. 9 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

10. 10 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

11. 11 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.

12. 12 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

13. 13 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

14. 14 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

15. 15 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.

16. 16 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)

17. 17 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.

18. 18 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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21. 21 http://adage.com/article/special-report-audience-buying-guide/demographic- die/240870/ Nielsen (2013). Local television market universe estimates. Retrieved from http://www.nielsen.com/content/dam/corporate/us/en/docs/solutions/measurement/tel evision/2012-2013-DMA-Ranks.pdf Occupational wages. (2013). Department of Labor. Retrieved from http://labor.ny.gov/stats/lswage2.asp#13-0000 Plummer, L. (2013, April). Affordable oled tvs to launch by 2015, says lg. Retrieved from http://www.t3.com/news/affordable-oled-tvs-to-launch-by-2015-says-lg Samsung (2013). On TV. Retrieved from http://www.samsung.com/us/2013-smart-tv/#smarttv-1 Samsung Television. (n.d.). Samsung. Retrieved from http://m.samsung.com/ae/consumer/tv-audio-video/television/? Samsung to sell 25 mn ‘smart tvs’ this year. (2012). Retrieved from http://www.dailytelegraph.com.au/samsung-to-sell-25-mn-smart-tvs-this-year/story- fn6b3v4f-1226266003628 Satel, G. (2013). 5 trends that will drive the future of technology. Forbes. Retrieved from http://www.forbes.com/sites/gregsatell/2013/03/12/5-trends-that-will-drive-the- future-of-technology/ Sharp lc-60le650 60-inch aquos 1080p 120hz smart led hdtv. (2013). Retrieved from http://www.amazon.com/Sharp-LC-60LE650-60-inch-Aquos- 1080p/dp/B00BG5M93Y Skipworth, H. (2013). 2013 smart TV shootout: Samsung vs Sony vs LG. Digital Spy. Retrieved from http://www.digitalspy.co.uk/tech/news/a502201/2013-smart-tv- shootout-samsung-vs-sony-vs-lg.html Smith, E. (2013). Samsung leads with 26 percent of global smart TV market share in Q1 2013. Strategy Analytics. Retrieved from

22. 22 http://www.strategyanalytics.com/default.aspx?mod=pressreleaseviewer&a0=5400 Steele, C. (2013). Smart tv apps everyone should use. Retrieved from http://www.pcmag.com/slideshow/story/312027/smart-tv-apps-everyone-should-use Sutton , J. (2011, June 18). Samsung sold 2 million internet-connected smart tv sets in 3 months. Retrieved from http://www.hdtvtest.co.uk/news/samsung-2-million-smart-tv- 201106181222.htm U.S. and world population clock. (2013). United States Census Bureau. Retrieved from http://www.census.gov/popclock/ Wallenstein, A. (2013). The stupidity of smart TV. Variety. Retreived from http://variety.com/2013/tv/news/the-stupidity-of-smart-tv-1200480143/ World usage patterns & demographics. (2013). Retrieved from http://www.newmediatrendwatch.com/world-overview/34-world-usage-patterns-and- demographics?start=6 Wright, M. (1996). The dubious assumptions of segmentation and targeting. Management Decision, 34(1), 18-24. Retrieved from http://ezproxy.aus.edu/login?url=http://search.proquest.com/docview/212052487?acc ountid=16946

23. 23 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

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