LG ELECTRONICS: REPOSITIONING A SUCCESSFUL BRAND

LG ELECTRONICS: REPOSITIONING A SUCCESSFUL BRAND

LG Electronics is the largest player in the consumer electronics market in Nepal and in India, which is worth Rs 35,000 crore plus 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 Nepal and India. Its product range choices also reflected the portfolio of its then rivals such as Whirlpool, Videocon, and Onida.

Changing Profile of Nepalese and Indian Consumer Durables Market

Nowadays, the consumer durables market is very different, redefined primarily by the nimble Korean duo of LG and Samsung. Prior to their entry the consumer durables market in Nepal and 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 connects 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 favorable 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, 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 Nepalese and 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 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 Nepal and 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. Asian countries like Nepal 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 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 Nepal and India for its home appliances and entertainment electronics products, such as audio and video-based products. The product lines where LG made a big splash in Nepal and 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

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.

LG ELECTRONICS: REPOSITIONING A SUCCESSFUL BRAND

DISCUSSION QUESTIONS

1. Discuss and describe the segmentation, targeting, positioning and differentiation strategy of LG wishes to pursue and recommend the most appropriate marketing mix for the brand based on its strategy.

2. LG’s success in Nepal and in India so far has been based on its mass-market positioning, in terms of pricing, and product range geared towards household products. In compare to Sony and Samsung, 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?