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A study on the evolving marketing focus and strategy to re-position the LG India brand

A study on the evolving marketing focus and strategy to re-position the LG India brand

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LG India Brand Report LG India Brand Report Document Transcript

  • LG India’s brand repositioning - from “Mass to Class”Prepared by:Sunil GautamCorporate Overview LG Electronics India Pvt. Ltd. a wholly owned subsidiary of LG Electronics, SouthKorea was established in January, 1997. In India for more than a decade now, it is the marketleader in consumer durables, and a leading technology innovator in the information technologyand mobile communications business. Acknowledged as one of the most formidable brands, it isthe recognized trendsetter for the consumer durable industry in India with the fastest evernationwide reach, latest global technology and product innovation. LGEIL has an impressiveportfolio of Home Appliances, Consumer Durables, Digital Display products, GSM mobilephones and IT products. Business Areas & Main Products Category Main Products Consumer LCD TV , Plasma Display , Display Panel, Color Electronics Television, Home Theatre System, Music system, DVD Recorder/Player, MP3 & MP4 Player Home Appliances Room Air Conditioner, Commercial Air Conditioner , Refrigerator, Washing Machine, Dishwasher, Microwave, Vacuum Cleaner Computer Laptop, Personal Computer, LCD monitor, CRT Products monitor, Optical Storage Devices Mobile Phone Premium trend setter phone , Camera Phone , Music Phone , Color Screen GSM HandsetEvolution of LG India The trend of beating industry norms started with the fastest ever-nationwide launch byLG in a period of 4 and 1/2 months with the commencement of operations in May 1997. LG setup a state-of-the art manufacturing facility at Greater Noida, near Delhi, in 1998, with aninvestment of $108.5 million. In 2004, LGEIL also up its second Greenfield manufacturing unitin Pune, Maharashtra that commences operations in October 2004 with an investment of $195m.Covering over 2, 02,340 square meters, the facility manufactures LCD TV, GSM Phones, Color Page 1 of 11
  • LG India’s brand repositioning - from “Mass to Class”Televisions, Air Conditioners, Refrigerators, and Microwave Ovens Color Monitors. Both theIndian manufacturing units has been designed with the latest technologies at par withinternational standards at South Korea and are one of the most Eco-friendly units amongst all LGmanufacturing plants in the world. Starting 1998, LG has targeted broad, price conscious consumers who wanted the whitegoods but were turned off by the relatively high price of products offered by competition. LGstarted off by offering them the value proposition in terms of quality yet affordability. It alsorolled out one of the biggest distribution network in consumer goods industry in India whichhelped it to reach to the deeper market and ability to understand the nuances of broader consumermarket. Backed with this market information, it designed and sold products with localizedfeatures and heavily advertised in its marketing campaign. With its focus on wide distributionand marketing support, it has been able to craft out in ten years, a premium brand positioning inthe Indian market and is today the most preferred brand in the segment.Source: ORG-GFK (Value market share: Jan - Aug. 2008) Page 2 of 11
  • LG India’s brand repositioning - from “Mass to Class”Industry analysis The Indian market has finally reached a critical mass -- after the U.S. and China, this isthe largest consumer market in the world. This attractiveness has made the marketplace verycompetitive with the presence of many national and multinational players. Margins in theconsumer electronics business are not very high. Technologies change rapidly and there is priceerosion in the market. There is pressure to generate more profits. Therefore, every companystrives to innovate and bring new product to the market. They also develop marketing programsto build brand loyalty and boost profits by offering various schemes like replacement of oldequipments, festival discounts, extended warranties. This is backed by heavy marketingcampaign in media through advertisements. This is proving more crucial in this recessionarytime when consumers are cutting back on spending and marketing campaign can make adifference by influencing their choices. LG‘s biggest rival is Samsung Electronics, another South Korean giant. It has formidableproduct lineup almost all categories offered by LG and is a continuous innovator of newproducts. While LG was busy seeking a wide reach and extensive distribution network thatwould help build volumes, Samsung built its premium brand image and customer base. Now thatLG too has seen a shift in business strategy, it is investing in its marketing program to build thebrand equity. Page 3 of 11
  • LG India’s brand repositioning - from “Mass to Class”Brand Identity The brand‘s phenomenal success story is a result of various factors. The key among themare: focus on technology, aggressive sales and marketing, providing value for money to theconsumers and a slew of product launches from time to time.Marketing Focus and execution- Marketing communication then LG India right from the beginning avoided replicating marketing strategies adopted inother markets. From start, it focused to reach every consumer in the country via a route that notonly tapped every region, state, or area but every individual. Relationship is a criticalcombination of factors that builds trust and faith among Indian consumers for a particular brand.To take local preferences and requirements on board, LG set up its distribution channel by tyingwith local dealers, with the aim of developing local market and gain relationship advantage bybrining the brand to their hometown. Being on its own, LG was also able to move at a fast pace. Page 4 of 11
  • LG India’s brand repositioning - from “Mass to Class”When it started off, within a space of five months it was able to complete its nationwide launch.Distribution consisted of a mix of its own branded shops in some large towns-shops where youcan buy only LG items — and independent, multibrand stores for consumer electronics andconsumer durables, where LG products compete with products from other companies. LGsuccessfully used multibrand structure to track competition and introduce products to succeedthem. Sales people gathered market intelligence and communicated them to LGEILheadquarters in Delhi. This information was used by the R&D team to develop products thatwould appeal to rural consumers. For instance, intensive customer research and feedback wasdone to determine the kind of adaptations to be made to color of refrigerators, for instance. Thegenerous use of oil and strong spices such as turmeric in Punjabi (a Northern State0 cooking canstain pastel-colored appliances, understanding that more intense shades would do particularlywell in that market. Then heavy advertising was used to convey the functional and emotionalbenefits arising out of the deep market research and localization of products to Indianrequirements. To increase brand awareness among consumers, LG sent vans across India covering adistance of 5000 km every month. As the volumes grew faster, LG pushed its dealers towardsselling products at lower margins and focusing on quick rotation of stocks. It also generated pullby launching various attractive schemes and promotional activities. LG also developed BrandShoppe concept, to create a platform to communicate the LG brand identity. The objective wasnot just to attract the impulse buyer, but to also introduce an element of interactivity in the outletwhile projecting the identities of LG products. The showrooms were designed to allow customersto shop in comfort even during peak seasons such as festivals. There are several value-addedservices like dedicated service help desks, which will enhance the overall shopping experience.This concept was new to the Indian consumers and accepted highly valuable in the market,leading to similar steps by the competitors. Of all the elements of marketing mix, LG seemed to have put more emphasis onpromotion and advertising. LG gave immense importance to its promotion and advertising Page 5 of 11
  • LG India’s brand repositioning - from “Mass to Class”activities. Its advertising message was built round its differentiated products due to their Indianlocalization, ease of use and durability- attributes all of which were found appealing to Indianconsumers in various marketing researches. It used similar other product offerings tocommunicate its differentiation by introducing a line of health-oriented products. In all thecommunications of LG during the early years, the USP remained the same for individualproducts. For refrigerators, it was "preserve nutrition;" for CTVs, it was "less strain on eyes;" forair conditioners, it was "healthy ambience and air quality;" for washing machines it was "fabriccare;" and for microwave ovens it was "healthy cooking." This prolonged communication createsa mindspace among the consumers and LG has occupied that fairly well." Unlike many Indianbrands which advertised seasonally i.e., (two-three months of the festival season-September,October and November), LG advertised all round the year. According to analysts, this resulted inhigh brand recall and successful positioning. LG also introduced a replacement scheme where customers could bring in any durable orelectronic product from any brand and get them evaluated. Once the evaluation is done, thecustomer will get a cash voucher which can be redeemed on the purchase of any LG productwithin a time period of three months. LG First initiative was aimed at making upgradation for itscustomers easier, which is a very significant phenomenon in mature markets. This schemeproved very popular in the market where people wanted to upgrade but considered price as asignificant factor. This would also help build brand loyalty within its customer base. LG used varied marketing arsenals and unleashed different campaigns for differentconsumers in varied media almost simultaneously. For Indian consumers, its a matter of productquality, and brand recall owing to high decibel communication which makes them repose faith inthe top brands. LG has followed that message and wove messages over multiple media channels,blurring the lines between ads and entertainment. They have worked to make their brandmessages so enjoyable that consumers have seen them as entertainment instead of an intrusion.One good example is the nature of ICC Cricket sports sponsorship and Cricket world cup 2007LG has associated with in India. Cricket is most viewed sport event in India and religiouslytracked by a larger population in TV or print media. According to its top management, thisassociation has provided wide brand exposure to LG in this ambush marketing campaign. Page 6 of 11
  • LG India’s brand repositioning - from “Mass to Class” Replacing the traditional four Ps of marketing -- product, price, place and promotion, LGIndia has designed its marketing mix to improve the four As -- affordability, awareness,availability and acceptability. Its state of the art and massive production facilities allowedinnovation on manufacturing to introduce products at low price points. It has customizedpromotional strategies for rural markets meeting local requirements. For example, to improveproduct acceptance, LG Electronics developed a customized TV (cheap and capable of pickingup low-intensity signals) for the rural markets and christened it ‗Sampoorna‘. It sold 100,000 setsin the first year.Blue ocean strategy ―Blue Ocean‖ is a business strategy that promotes creating new market space or "BlueOcean" rather than competing in an existing industry to enjoy continued growth. Blue Oceanstrategy was introduced at LGEIL in 2006 and its focus is on creating high growth & profit byfocusing on five key areas at LG: Products, Business Model, Work, and Systems & People. Theoutcome is to help LG create differentiated value for the customer and build a strong andwinning brand for LGEIL. Under the Blue Ocean Strategy, company has already rolled out products like TimeMachine TV and Chocolate phone and will continue launching many more unique technologiesand products. These Products are the simultaneous pursuit of differentiation and low cost.The Blue Ocean Strategy adopted by the company in the form of product innovations has paidwell. LG claims to have achieved a growth rate of 25 per cent during the first three months of2008, compared to a reported negative growth of 3 per cent in the industry during the sameperiod. This new strategy would be instrumental in driving company towards its shift in marketpositioning.Shift in Positioning- The birth of the aspirers With double income families becoming the norm in India and disposable incomes goingup, the high-end market is the next potential segment, which is expected to boom in India, andtherefore, is the focus of LGEIL. It is realizing the growing—and untapped—potential of Page 7 of 11
  • LG India’s brand repositioning - from “Mass to Class”‗aspirers‘. These customers frequently travel abroad, they see high-end products there, and theyseek the same standard of technology, design and quality. First time purchase of high endproducts has increased as technology has become the mainstay. They are ready to pay more ifthey feel they are getting better value in return. A longish spell of economic prosperity hasincreased their tribe compared to 1997. Consumers‘ preferences now are shifting towardsexercising affirmative choice to buy high quality reliable products rather than bargain hunting. To woo these new age consumers, LG is now trying to change the customer perception ofbeing a less premium brand to a tech-based premium brand with India-insight products. It hasrecently done away with its affordability strategy and implemented a premium strategy in thedurables market following a global directive to chase value growth and improve profitability. Tosupply to high end market of ‗VIP buyers‘ and ‗aspirers‘, LG India plans to develop a host ofhigh-end products that would be developed by the R&D team based on market research and willbe launched in the Indian market on a regular basis. Apart from just launching these products,LGEIL also plans to open exclusive showrooms to display these products and increasevisibility. Instead of pushing sales as it had been doing in the last decade, it now focus oncreating a pull or demand. Their marketing program will be designed to convey the higher brandvalue - aspirational and premium. The focus will be on consumer benefit and not price discounts. New positioning Statement-LG strives to enhance the customer‘s life (and lifestyle) withintelligent features, intuitive functionality, and exceptional performance. Choosing LG is a formof self-expression and self-satisfaction. Our customer will take pride in owning the amazing andtake comfort in knowing he/she made a smart, informed decision.Marketing mix- Same Game, New Rules Product –LG is aggressively working towards lifestyle research and to make itaspirational brand. A lot of investment is being pumped into consumer understanding andlifestyle behavior. It is repositioning itself by adding sheen to its designs, aesthetics and theproduct line to suit the new age consumers. These high-end products not only provide the righttechnology but also suit the new age lifestyles of Indian consumer. Under this new strategy, as anexample, it introduced its premium range plasma television ‗Scarlet‘ and high-end washing Page 8 of 11
  • LG India’s brand repositioning - from “Mass to Class”machines Steam Tromm and Top Loader to woo new age consumers. To communicate thepremium brand and make a differentiation, company has come out with a brand newcommunication for its entire home appliance range, breaking away from its health platform,which was conceptualized in 1997. The campaign for new `Health Plus for the home appliancesrange will focus on intelligent and futuristic technology under the "Intello umbrella. Thecompany also plans to enter newer categories such as air purifiers, wine cellars and built-inkitchens as a part of its expansion in India. Price – Price is determined by a number of factors including market share, competition,material costs, product identity and the customers perceived value of the product. LG alreadybeing one of the leading brands in India and established quality in terms of products and serviceshas an advantage in setting up premium price. It would also gain from the high end consumerswho are willing to spend more for a differentiated and ―intelligent‖ product as LG plans to rollout in its digital innovations. Place – In addition to the existing dealers selling the new ‗premium‘ products, LGEIL also plans to open exclusive showrooms for these products and increase visibility. That would be a good strategy in the long run as this niche market develops and the cost of exclusive distribution network is justifiable. Promotion- Instead of pushing sales as it had been doing in the last decade, LG now focus on creating a pull or demand. It has moved away from discounts and moving towards high-tech innovation and good customer services as the focus. More trade promotions like exhibitions, trade magazines would be used. The idea is not to dilute the brand equity by offering discount but creating a buzz in the mind of customers about the new product and invite them to be a part of ‗the new technology‘. The same marketing communication of high end user experience and functional benefits (i.e. digital, easy to use, intra-connectivity) can be conveyed in the advertising message on television as well as print media. Use of billboards and event sponsorship is also an effective way to introduce the awareness of new products. Page 9 of 11
  • LG India’s brand repositioning - from “Mass to Class”The Branding Challenge and recommendations The shift is not easy to happen. Already companies like Samsung, Sony, Hitachi etc has taken a long lead in developing their position as premium brands in certain product categories. Also, consumers have for long seeing LG as a mass brand, available at every nook and corner and hence its premium image may be hard to establish. Branding will be a challenge, as LG is a strong mother brand. The new ‗premium‘ products can‘t share shelf space in multi-brand showrooms, as it will dilute the equity of those premium products. LG can go for repositioning in two ways- It can either reposition itself completely towards premium or image products, or it can offer a balanced basket of mass and premium. In our view, LG, which currently has a leading market share of 38% in consumer durables and in some product categories, nearly twice ahead of its nearest competitor, should take the second approach. In this case, it won‘t vacate, or even hold back on, its mass-market positioning. But, it can increase its premium offerings. Our recommendation is to come out with a sub-brand for new products and start selling them in the selected metropolitan exclusive shoppes. This would insulate the new product line from the backlash it could have from the ‗mass‘ image of mother brand and also, avoid a chance of cannibalizing its own regular product line-up. An advertising blitzkrieg would be required to improve customer awareness of the range of products available and enable comparison of products. It can combine state-of-the-art design, research, and innovative feature to develop products that are simple and easy to use. Also, it should stress the ―intelligence‖ bestowed in products to make consumers‘ life easy. They have to clearly communicate brands values, promises, benefits and personality. It is an ultimate expression for what the brand stands for and how different consumers lives will be with the enhanced user experience. LG India can also use the premium products for exports to other nations. This way it can achieve the scale of operations needed to maintain the new products and eventually build a brand image of ‗mass‘ as well as ‘class‘ products. Page 10 of 11
  • LG India’s brand repositioning - from “Mass to Class”Bibliography  http://www.in.lge.com  PASSION: THE UNTOLD STORY OF LG ELECTRONICS INDIA by Yasho V. Verma  www.wikipedia.com  http://www.thehindubusinessline.com  http://knowledge.wharton.upenn.edu/india  http://business.outlookindia.com/article.aspx?261651  http://www.financialexpress.com/news  http://www.ndtv.com/news/videos  http://economictimes.indiatimes.com/news Page 11 of 11