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Samsung's challenge: Rebuilding its brand in Apple's shadow

Rebuilding Samsung's brand

The very traits that helped define Samsung's brand — quality, performance leadership — are now in question, a strategy expert told CNBC's "Power Lunch" on Wednesday.

"I don't think a consumer really makes the [distinction] between one Samsung phone and another Samsung phone," said Erich Joachimsthaler, CEO and founder of growth strategy firm Vivaldi Group. "The consumer just says, 'Wait a moment, I have a problem.'"

Jaap Arriens | NurPhoto | Getty Images

Samsung's brand is on the line after the company announced this week it would end production, sales and exchanges of its flagship Note 7 device, as reports of overheating batteries continued to surface after a global recall. Major U.S. carriers yanked the devices from shelves, citing safety concerns, and mail carriers have limited shipments.

"What people buy is not just the product — they buy the brand," Joachimsthaler said. "When buy an electric car, you also buy Elon Musk and Tesla, the whole company ... you can't say anymore that it's just a product issue."

And Samsung is up against a rival renowned for its loyal customers.

Samsung's heir apparent

Apple is known specifically for engendering a "cult"-like loyalty among consumers, that helps it endure controversial decisions like eliminating the headphone jack, according to Barry Kirk, vice president of loyalty solutions at Maritz Motivation Solutions.

"If you really want to engender loyalty, you have to either stumble upon or build a tribe that follows that brand," Kirk said, pointing to gestures like the Apple stickers that come with its products. "When other users seem to have the same value systems as we do, it reinforces our decisions. You're an Apple person, you wouldn't think about swithing because you're part of that brand."

While the Apple iPhone is known both for quality and as a symbol of self-expression, performance is central to Samsung's brand equity, Joachimsthaler said.

"Years ago we could have relied on brand loyalty as a very important factor," Joachimsthaler said. "These days, consumers are very fickle ... they switch, zig-zag, one day to another. I think this is very serious, especially with something that daily life is centralized around."

Kulbinder Garcha, an analyst at Credit Suisse, estimates Apple could capture at least half of the volume of Note 7 phones that Samsung was poised to sell.

"There's a longer term issue here, which I think is currently more beneficial [to Apple]," Garcha told CNBC's "Squawk Alley" on Wednesday. "You think about the high end of the smartphone market ... it's a two player market. And what we've found in the past is that when market share shifts to Apple, it tends to be permanent, because their loyalty rates and their retention rates are very high."

Disclosure: Apple is an investment banking client of Credit Suisse.