Samsung Offering Financial Incentives to Galaxy Note 7 Customers

The tech company attempts to maintain its reputation in the wake of a damaging product safety crisis

Samsung Offering Financial Incentives to Galaxy Note 7 Customers
Image: Samsung
October 13, 2016

Samsung is offering financial incentives for customers in the U.S. and South Korea who want to refund their Galaxy Note 7 smartphones or exchange them for other products.

It is also expanding a recall of the phone in the U.S. to a total of 1.9 million Note 7 phones. This number includes the one million Galaxy Note 7 models that it recalled on September 15.

Samsung was forced to abandon the Note 7 after it was unable to fix overheating problems that caused several of the phones to ignite and explode, posing a safety risk. The company is now working on damage control as tech rivals like Apple and LG attempt to take market share.

In an effort to minimize the damage done by the demise of its device, the South Korea-based company is increasing its marketing and promotion of the other smartphones in the Galaxy series.

The company said that it is offering up to $100 in bill credit to Note 7 owners who exchange those phones for any other Samsung smartphone in the U.S. Customers who decide to exchange their phones for a refund or a smartphone from a different brand will get $25 in bill credit.

"We appreciate the patience of our consumers, carriers and retail partners for carrying the burden during these challenging times," said Tim Baxter, president and chief operating officer of the American branch of Samsung. "We are committed to doing everything we can to make this right."

The Consumer Product Safety Commission said that the device's "battery can overheat and catch fire, posing serious fire and burn hazard to consumers," adding that the company has gotten 96 reports of Note 7 phone batteries overheating in the U.S. These reports include 23 new ones received since the recall announcement in September.

Samsung started sending fireproof boxes and protective gloves to customers in the U.S. who were returning potentially-explosive Note 7s, leading to humorous jabs from social media commentators.

The company has also begun to offer similar financial incentives in its home market in South Korea. This action, it says, will compensate its customers for their "big inconvenience."

Samsung customers will soon have plenty of competing devices to choose from if they do not want to stick with the embattled tech company. Carriers in South Korea, such as SK Telecom, intend to take pre-orders for Apple's iPhone 7 beginning on Friday, and LG recently launch the V20 smartphone.

Many analysts believe that the real risk run by Samsung lies not in the financial costs of the Note 7 crisis, but rather in the damage to the company's reputation in a ruthless industry.

"Industry experience, such as the decline of Nokia and BlackBerry, shows how successful manufacturers can lose market share particularly quickly in the handset business," the Fitch ratings agency said.

Moody's agreed, stating that the Note 7 problems "threaten to have a more lasting negative effect on the Samsung brand and would require significant marketing expense to regain consumer confidence."

And it is not only Samsung that may suffer from the crisis. The central bank in South Korea stated that it is possible that economic growth could be damaged by the failure of the Note 7, but that more time was needed to accurately assess the consequences.