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 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 consumers 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 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, 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 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?