LG India Brand Report

LG India’s brand repositioning - from “Mass to Class”
Prepared by:

Sunil Gautam

Corporate Overview

LG Electronics India Pvt. Ltd. a wholly owned subsidiary of LG Electronics, South
Korea was established in January, 1997. In India for more than a decade now, it is the market
leader in consumer durables, and a leading technology innovator in the information technology
and mobile communications business. Acknowledged as one of the most formidable brands, it is
the recognized trendsetter for the consumer durable industry in India with the fastest ever
nationwide reach, latest global technology and product innovation. LGEIL has an impressive
portfolio of Home Appliances, Consumer Durables, Digital Display products, GSM mobile
phones 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 Handset

Evolution of LG India

The trend of beating industry norms started with the fastest ever-nationwide launch by
LG in a period of 4 and 1/2 months with the commencement of operations in May 1997. LG set
up a state-of-the art manufacturing facility at Greater Noida, near Delhi, in 1998, with an
investment of $108.5 million. In 2004, LGEIL also up its second Greenfield manufacturing unit
in 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

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Televisions, Air Conditioners, Refrigerators, and Microwave Ovens Color Monitors. Both the
Indian manufacturing units has been designed with the latest technologies at par with
international standards at South Korea and are one of the most Eco-friendly units amongst all LG
manufacturing plants in the world.

Starting 1998, LG has targeted broad, price conscious consumers who wanted the white
goods but were turned off by the relatively high price of products offered by competition. LG
started off by offering them the value proposition in terms of quality yet affordability. It also
rolled out one of the biggest distribution network in consumer goods industry in India which
helped it to reach to the deeper market and ability to understand the nuances of broader consumer
market. Backed with this market information, it designed and sold products with localized
features and heavily advertised in its marketing campaign. With its focus on wide distribution
and marketing support, it has been able to craft out in ten years, a premium brand positioning in
the Indian market and is today the most preferred brand in the segment.

Source: ORG-GFK (Value market share: Jan - Aug. 2008)

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Industry analysis

The Indian market has finally reached a critical mass -- after the U.S. and China, this is
the largest consumer market in the world. This attractiveness has made the marketplace very
competitive with the presence of many national and multinational players. Margins in the
consumer electronics business are not very high. Technologies change rapidly and there is price
erosion in the market. There is pressure to generate more profits. Therefore, every company

strives to innovate and bring new product to the market. They also develop marketing programs
to build brand loyalty and boost profits by offering various schemes like replacement of old
equipments, festival discounts, extended warranties. This is backed by heavy marketing
campaign in media through advertisements. This is proving more crucial in this recessionary
time when consumers are cutting back on spending and marketing campaign can make a
difference by influencing their choices.

LG‘s biggest rival is Samsung Electronics, another South Korean giant. It has formidable
product lineup almost all categories offered by LG and is a continuous innovator of new
products. While LG was busy seeking a wide reach and extensive distribution network that
would help build volumes, Samsung built its premium brand image and customer base. Now that
LG too has seen a shift in business strategy, it is investing in its marketing program to build the
brand equity.

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Brand Identity

The brand‘s phenomenal success story is a result of various factors. The key among them
are: focus on technology, aggressive sales and marketing, providing value for money to the
consumers 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 in
other markets. From start, it focused to reach every consumer in the country via a route that not
only tapped every region, state, or area but every individual. Relationship is a critical
combination 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 tying
with local dealers, with the aim of developing local market and gain relationship advantage by
brining the brand to their hometown. Being on its own, LG was also able to move at a fast pace.

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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 you
can buy only LG items — and independent, multibrand stores for consumer electronics and
consumer durables, where LG products compete with products from other companies. LG
successfully used multibrand structure to track competition and introduce products to succeed
them.

Sales people gathered market intelligence and communicated them to LGEIL
headquarters in Delhi. This information was used by the R&D team to develop products that
would appeal to rural consumers. For instance, intensive customer research and feedback was
done to determine the kind of adaptations to be made to color of refrigerators, for instance. The
generous use of oil and strong spices such as turmeric in Punjabi (a Northern State0 cooking can
stain pastel-colored appliances, understanding that more intense shades would do particularly
well in that market. Then heavy advertising was used to convey the functional and emotional
benefits arising out of the deep market research and localization of products to Indian
requirements.

To increase brand awareness among consumers, LG sent vans across India covering a
distance of 5000 km every month. As the volumes grew faster, LG pushed its dealers towards
selling products at lower margins and focusing on quick rotation of stocks. It also generated pull
by launching various attractive schemes and promotional activities. LG also developed Brand
Shoppe concept, to create a platform to communicate the LG brand identity. The objective was
not just to attract the impulse buyer, but to also introduce an element of interactivity in the outlet
while projecting the identities of LG products. The showrooms were designed to allow customers
to shop in comfort even during peak seasons such as festivals. There are several value-added
services 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 on
promotion and advertising. LG gave immense importance to its promotion and advertising

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activities. Its advertising message was built round its differentiated products due to their Indian
localization, ease of use and durability- attributes all of which were found appealing to Indian
consumers in various marketing researches. It used similar other product offerings to
communicate its differentiation by introducing a line of health-oriented products. In all the
communications of LG during the early years, the USP remained the same for individual
products. For refrigerators, it was "preserve nutrition;" for CTVs, it was "less strain on eyes;" for
air conditioners, it was "healthy ambience and air quality;" for washing machines it was "fabric
care;" and for microwave ovens it was "healthy cooking." This prolonged communication creates
a mindspace among the consumers and LG has occupied that fairly well." Unlike many Indian
brands 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 in
high brand recall and successful positioning.

LG also introduced a replacement scheme where customers could bring in any durable or
electronic product from any brand and get them evaluated. Once the evaluation is done, the
customer will get a cash voucher which can be redeemed on the purchase of any LG product
within a time period of three months. LG First initiative was aimed at making upgradation for its
customers easier, which is a very significant phenomenon in mature markets. This scheme
proved very popular in the market where people wanted to upgrade but considered price as a
significant factor. This would also help build brand loyalty within its customer base.

LG used varied marketing arsenals and unleashed different campaigns for different
consumers in varied media almost simultaneously. For Indian consumers, it's a matter of product
quality, and brand recall owing to high decibel communication which makes them repose faith in
the 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 brand
messages 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 2007
LG has associated with in India. Cricket is most viewed sport event in India and religiously
tracked by a larger population in TV or print media. According to its top management, this
association has provided wide brand exposure to LG in this ambush marketing campaign.

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Replacing the traditional four P's of marketing -- product, price, place and promotion, LG
India has designed its marketing mix to improve the four A's -- affordability, awareness,
availability and acceptability. Its state of the art and massive production facilities allowed
innovation on manufacturing to introduce products at low price points. It has customized
promotional strategies for rural markets meeting local requirements. For example, to improve
product acceptance, LG Electronics developed a customized TV (cheap and capable of picking
up low-intensity signals) for the rural markets and christened it ‗Sampoorna‘. It sold 100,000 sets
in the first year.

Blue ocean strategy

―Blue Ocean‖ is a business strategy that promotes creating new market space or "Blue
Ocean" rather than competing in an existing industry to enjoy continued growth. Blue Ocean
strategy was introduced at LGEIL in 2006 and its focus is on creating high growth & profit by
focusing on five key areas at LG: Products, Business Model, Work, and Systems & People. The
outcome is to help LG create differentiated value for the customer and build a strong and
winning brand for LGEIL.

Under the Blue Ocean Strategy, company has already rolled out products like Time
Machine TV and Chocolate phone and will continue launching many more unique technologies
and 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 paid
well. LG claims to have achieved a growth rate of 25 per cent during the first three months of
2008, compared to a reported negative growth of 3 per cent in the industry during the same
period. This new strategy would be instrumental in driving company towards its shift in market
positioning.

Shift in Positioning- The birth of the 'aspirers'

With double income families becoming the norm in India and disposable incomes going
up, the high-end market is the next potential segment, which is expected to boom in India, and
therefore, is the focus of LGEIL. It is realizing the growing—and untapped—potential of

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‗aspirers‘. These customers frequently travel abroad, they see high-end products there, and they
seek the same standard of technology, design and quality. First time purchase of high end
products has increased as technology has become the mainstay. They are ready to pay more if
they feel they are getting better value in return. A longish spell of economic prosperity has
increased their tribe compared to 1997. Consumers‘ preferences now are shifting towards
exercising 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 of
being a less premium brand to a tech-based premium brand with India-insight products. It has
recently done away with its affordability strategy and implemented a premium strategy in the
durables market following a global directive to chase value growth and improve profitability. To
supply to high end market of ‗VIP buyers‘ and ‗aspirers‘, LG India plans to develop a host of
high-end products that would be developed by the R&D team based on market research and will
be 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 increase
visibility. Instead of pushing sales as it had been doing in the last decade, it now focus on
creating a pull or demand. Their marketing program will be designed to convey the higher brand
value - 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) with
intelligent features, intuitive functionality, and exceptional performance. Choosing LG is a form
of self-expression and self-satisfaction. Our customer will take pride in owning the amazing and
take 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 it
aspirational brand. A lot of investment is being pumped into consumer understanding and
lifestyle behavior. It is repositioning itself by adding sheen to its designs, aesthetics and the
product line to suit the new age consumers. These high-end products not only provide the right
technology but also suit the new age lifestyles of Indian consumer. Under this new strategy, as an
example, it introduced its premium range plasma television ‗Scarlet‘ and high-end washing

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machines Steam Tromm and Top Loader to woo new age consumers. To communicate the
premium brand and make a differentiation, company has come out with a brand new
communication 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 appliances
range will focus on intelligent and futuristic technology under the "Intello'' umbrella. The
company also plans to enter newer categories such as air purifiers, wine cellars and built-in
kitchens 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 customer's perceived value of the product. LG already
being one of the leading brands in India and established quality in terms of products and services
has an advantage in setting up premium price. It would also gain from the high end consumers
who are willing to spend more for a differentiated and ―intelligent‖ product as LG plans to roll
out 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.

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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 brand's 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.

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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

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