Note 7 fire fallout: Can shoppers still trust Samsung?

Samsung’s Galaxy Note 7 was supposed to be the smartphone that could help the prominent electronics company compete with Apple’s iPhone 7 this holiday season. Instead, it’s turned into a nightmare that could ultimately send consumers into Apple’s waiting arms.

The trouble started last month after the Galaxy Note 7 launched worldwide. As consumers got their hands on Samsung’s smartphone, which comes with a 5.7-inch screen and support for the company’s S Pen stylus, an odd thing occurred: it started to get really, really hot. And in some cases due to its battery overheating, the Galaxy Note 7 even exploded, reportedly causing serious burns to owners from New York City to Korea.

Samsung responded quickly and issued a voluntary recall with different policies depending on the country. In the U.S., for instance, Galaxy Note 7 owners can turn in their devices for a replacement device, like the Galaxy S7 or Galaxy S7 Edge, or get a full refund. They’re also eligible to receive a $25 gift card or credit on their carrier bill.

But that was just the beginning. Airlines and the U.S. Federal Aviation Administration soon deemed the Galaxy Note 7 unfit for travel and required all owners to turn off the devices while traveling in the air. The U.S. is also currently working on a mandatory recall in the name of public safety.

Although Samsung hasn’t pegged an exact figure for the losses it could incur related to the recall, the company has said that it would be a “heartbreaking” sum.

But the cost of a recall is just one of many Samsung concerns. Now, it needs to regain consumer trust and make its customers believe it really does care about them, even if it launched a faulty device that could do them harm.

“The last thing that any consumer wants or expects is their device that they paid a significant amount of money for to pose a danger to them,” said IDC research manager Ramon Llamas in an interview.

Bryan Ma, IDC’s vice president of devices research, added that Samsung’s “battery issue isn’t getting any better” and it’s starting to cause collateral damage.

“The impact to its brand is spreading where other Samsung phones - regardless if they are Note 7's or not - are now becoming guilty by association,” he says. “I won't be surprised if more consumers are questioning whether their Samsung phones are safe.”

Avi Greengart, an analyst at Current Analysis, was succinct in his evaluation of the situation: “[Samsung] sold products that explode. That’s never good.”

Still, the fight must go on and Samsung, against long odds, needs to find a way to prove to consumers it can regain their trust.

Regaining consumer trust is about “acknowledging” there’s an issue and then finding ways to improve relations with customers, Llamas argues. He says that Samsung must share as much information as possible about the flaw and then make a “guarantee” that those who buy its devices won’t face the problem again.

Greengart, who believes Samsung has made “more wrong than right” decisions so far in its handling of the situation, must go to “extraordinary lengths” to regain consumer trust.

“Make it up to customers with generous incentives to stick with the Note 7 instead of moving to a competitor,” Greengart recommends. “These are Samsung's best customers, and offering $25 through the carrier is not nearly good enough.”

Ma similarly believes that Samsung must go farther than it has to regain consumer trust, and should even consider “some form of compensation” so it might be “viewed as a company that really went out of its way to care for its customers rather than just being obligated to do so.”

Managing consumer understanding might also prove critical, the analysts say. While the problem has so far only affected its Galaxy Note 7, there might be some who worry that Samsung devices in general are troubled. Samsung needs to find a way to explain that the battery problems have been contained and they can safely buy its other products without fear.

“Samsung somehow has to quickly convince the world that all of its phones are safe, which might be easier said than done,” Ma says. “And this has to happen within days; it can't afford to wait a few weeks for the new batch of phones are ready, lest more unfortunate incidents occur.”

Ultimately, Samsung’s success in winning back consumer trust comes down to its ability to acknowledge internally that the Galaxy Note 7 explosions are a real threat to its brand and do everything it can to restart a dialogue with consumers, all while proving it really cares about them and the concerns they might have.

“The big question is what can you do beyond the smartphone?” Llamas asked of Samsung. “That’s where Samsung needs to step up. If you’re directly responsible, you have to step up to the responsibility.”