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Case Study of LG Electronics: Repositioning a Successful BrandPosted in Management Case Studies By admin No Comments Tagged Under : Marketing Strategies

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 LGs 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

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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. Samsungs 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 LGs global game plan. At the moment,

India accounts for about 6 per cent of LGs 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 LGs revenue after the US and ahead of

South Korea. Its 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

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focus, for mobile phones. For the latter, being able to appeal to youth will be a key

determinant of success. LGs 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. LGs 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 Nokias 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 LGs 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. LGs 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?