LG Electronics: Repositioning a Successful Brand

LG Electronics is the largest player in the consumer electronics market in India,

which is worth Rs 35,000 crore per annum. And now it feels the need to take the
brand to the next level. From an aggressive price warrior and technology
provider, the brand will henceforth be communicated as a youthful enabler of life
enrichment, and of value-added products.

For almost 10 years after it came to the country in 1997, LG had focused on the
mass market. Initially LG’s objective was to create a footprint among the sizeable
middle class, and other than its aggressive pricing, there was little to distinguish it
from other consumer durable companies operating in India. Its product range
choices also reflected the portfolio of its then rivals such as Whirlpool, Videocon,
and Onida.

Changing profile of Indian consumer durables market

The Indian consumer durables market of today is very different, redefined
primarily by the nimble Korean duo of LG and Samsung. Prior to their entry the
consumer durables market in India was largely characterized by restricted
product choice, very poor after-sales service, and distribution through limited
multi-brand outlets. By the time the new millennium came around, LG and
Samsung had started making their presence felt. Their priority was to establish
an exclusive chain of company-owned and franchised outlets where consumer
connect could be much more meaningful than in many of the poorly staffed multi-
brand outlets that existed then. The other area which they felt required urgent
attention was a service network which would not only ensure customer
satisfaction, convenience, good word-of-mouth, and a favourable disposition
towards repeat purchase, but could also become an additional source of revenue
for the company. Finally, unlike Onida, Whirlpool, and Videocon which then had
presence in limited product lines, the Korean companies expanded their product
range to cover both home appliances such as washing machines, refrigerators,
and microwave ovens as well as entertainment electronics such as music
systems, VCD/DVD players and television sets. They wanted to dominate the
entire chain of consumer durables for a household.

Though LG and Samsung were initially perceived as similar in their strategic

approach, the latter was much more interested in developing a higher-end
product range targeted at the more affluent consumer. Samsung’s vision in this
respect reflected a shrewd understanding of the changing profile of the growing
prosperity in the Indian consumer market. In fact, LG realized that a sizeable
chunk of consumers over the years had moved up the value chain — a space
well captured by rival brands like Samsung and Sony, which are also
aggressively competing for market share. This shows up in the fact that LG is
trailing Samsung in the LCD television market.
Mind over matter
Research carried out by AC Nielsen has shown, according to LG Electronics
Chief Marketing Officer LK Gupta, that people associate LG with quality and
reliability. “This is because of our wide presence in the country and our service
network. Most households have an LG product now,” adds he. However the
brand is not perceived as youthful and trendy.

Despite being the largest player in the consumer electronics market in India, LG
now feels the need to take the brand to the next level. So LG is making a
concerted effort to redefine itself as a youthful and up-market brand. Rivals like
Samsung, Sony and Videocon too have turned aggressive. And India is a key
element of LG’s global game plan. At the moment, India accounts for about 6 per
cent of LG’s worldwide turnover. LG Electronics India Managing Director M B
Shin wants to raise this to at least 10 per cent by 2012. By 2015, India will
become the second largest contributor to LG’s revenue after the US and ahead
of South Korea. It’s a tough challenge and the brand needs to keep the buzz
alive to meet it.

So far LG has been known in India for its home appliances and entertainment
electronics products, such as audio and video-based products. The product lines
where LG intends to make a big splash in India in 2010 are LCD televisions, and
in a departure from its past focus, for mobile phones. For the latter, being able to
appeal to youth will be a key determinant of success. LG’s advertising campaigns
and its recent products like the Jazz LCD TV sets and Chocolate mobile phones
reflect this thinking.

The right match

Shin admits that the average age of the LG consumer is above 30.The brand has
low appeal among youth. As far as mobile phones are concerned, youth are
attracted by music, gaming and file sharing options. LG’s lack of youth appeal is
reflected in its performance in the mobile handsets market. In 2009, LG was able
to increase its share from 4 per cent to 6 per cent in the GSM mobile phone
market. While Nokia’s share went up from 70 per cent to 71 per cent during the
period, Samsung doubled its share from 8 per cent to 16 per cent. All three were
helped by the fall in the share of Sony Ericsson and Motorola. But Shin thinks
that LG’s lack of contemporariness and up-market image is an issue that can be
addressed – the question is whether the market is willing to see it that way.
QUESTIONS

Q1. Based on the track record of LG Electronics to date, would you classify their
competitive strategy as that of a challenger or follower?

Q2. For consumer durable products do you feel customer retention strategies
have any value? In your assessment, has LG undertaking any such initiative,
based on information presented in the case?

Q3. Based on an assessment of its product portfolio so far, identify the factors
that could be responsible for LG not being perceived as a youth brand. LG
wishes to associate brand ambassadors with their communications campaigns
for their mobile phones. Suggest a suitable profile for youth-oriented brand
ambassadors in terms of occupation, age group and gender.

Q4. LG’s success in India so far has been based on its mass-market positioning,
in terms of pricing, and product range geared towards household products. How
successful do you feel it would be in attracting higher-end consumers for LCD TV
sets, and what are the marketing initiatives it needs to undertake in order to
make this happen?

Acknowledgement:

• The Strategist, Business Standard