Samsung Galaxy Note 7 starts smoking on board, prompting evacuation of US plane
Picture for representation Reuters

In a bid to retain its reputation in the smartphone market after several incidents of battery explosion in the new premium model Note 7, Samsung electronics on Thursday announced financial incentives for customers in South Korea who exchange their device for other Samsung models.

The South Korean giant had stopped the sales of its flagship model twice in the recent months after numerous reports of the phone catching fire across the globe surfaced. The phone manufacturer had also asked carriers to stop selling and exchanging the device while some reports suggest it would stop the production of Note 7 and move on to successor models.

Samsung is likely to incur a loss of around $17bn after the Note 7 debacle, according to reports. However, it is trying to control damage by coming up with marketing strategies focussed on promoting its other models.

Meanwhile, the Smartphone leaders' rivals Apple and LG have already come up with plans to capture the market share in the wake of the crisis Samsung has been facing.

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

Samsung, in its home market, has been offering refunds and exchanges for other products. According to the news agency, it is offering a coupon worth 30,000 won ($26.91) to customers who returned their Note 7s, priced at about $880. For the customers who chose to exchange for another high-end Samsung phone for the faulty device were promised an additional 70,000 won mobile credit.

The company also started sending fireproof boxes and protective gloves to customers returning potentially explosive Note 7s in the United States, an act that received flak on social media.

Samsung promised to compensate customers for their "big inconvenience" through these initiatives, reported Reuters.

According to the analysts, the real threat lies in the reputation damage for Samsung following this debacle. "Samsung reflected most of the costs from the Note 7 in the Q3 earnings, reducing uncertainty about Q4 profit," said analyst Jay Yoo at Korea Investment & Securities, as reported by the news agency.

"Potential long-term brand damage ... is a greater threat to its credit profile than the direct financial impact, which will be buffered by ample liquidity and a strong balance sheet," Fitch added, according to Reuters.