LG Corporation is a South Korean multinational conglomerate corporation. It is the second-largest company of its kind in South Korea, following Samsung, and its headquarters are situated in the LG Twin Towers building in Yeouido-dong, Yeongdeungpo-gu, Seoul. LG makes electronics, chemicals, and telecom products and operates subsidiaries such as LG Electronics, Zenith, LG Display, LG Telecom and LG Chem in over 80 countries.
Created in 1947 as “Lucky-Goldstar”, it assumed the abbreviated name of “LG” in 1995. LG is also an abbreviation of “Lucky Geumseong” in South Korea, which is translated into English as Lucky Goldstar. Before then, many electronic products were sold under the brand name Goldstar, while some other household products (not available outside South Korea) were sold under the brand name of “Lucky.” The Lucky brand was famous for producing household cleaning products and laundry detergents in South Korea.
The history of LG Electronics has always been surrounded by the company’s desire to create a happier, better life. LG Electronics was established in 1958 and has since led the way into the advanced digital era thanks to the technological expertise acquired by manufacturing many home appliances such as radios and TVs. LG Electronics has unveiled many new products, applied new technologies in the form of mobile devices and digital TVs in the 21st century and continues to reinforce its status as a global company.
Marketing strategy is a process that can allow an organization to concentrate its resources on the optimal opportunities with the goals of increasing sales and achieving a sustainable competitive advantage. Marketing strategy includes all basic and long-term activities in the field of marketing that deal with the analysis of the strategic initial situation of a company and the formulation, evaluation and selection of market-oriented strategies and therefore contributes to the goals of the company and its marketing objectives.
LG in their initial years 4
Marketing strategies 6
LG’s green marketing strategy 9
Rural marketing 10
The 4 A’s of rural marketing 11
LG India today 12
Viper report 15
Fast growth is the result of strategies designed to expand the market size and earnings quickly, in the process improving the growth rate in terms of monetary value rather than quantity.
LG in their initial years
The transformation from ultra-cheap Lucky Goldstar to upscale LG Electronics has been nothing short of remarkable. Credit goes to Michael Ahn, who guided the branding effort for LG Electronics North America before stepping down as the Group’s president and CEO in 2010. The Goldstar brand dates back to 1958 and the LG initial stems from a merger of two long-time Korean brands, Lucky and Goldstar in 1990. In 1995, Lucky Goldstar purchased the last remaining American-based TV manufacturer, Zenith Electronics. That acquisition provided the impetus for the plan to upgrade the brand, but it would take a number of years to accomplish this.
LG’s initial step was to try to get distribution in higher-end retailers but this effort was stymied by the low-quality “couldn’t be trusted” perception of the product line. A critical decision in the early 2000s was to avoid the path of least resistance and seek distribution in stores like K-Mart, Wal-Mart and Sam’s Club. While such distribution would have made the Korean factories hum with activity it was off strategy for Ahn who sought to make LG an upscale brand.
The company also started paying 30 percent of its sales to distributors instead of the more typical 25 percent. Another smart move was providing sales staffers at retailers with expanded training and other incentives so that these sales people would be more likely to recommend LG to buyers and thus overcoming the previous low-image perception.
The next building block was consumer advertising and Ahn took a page from Panasonic’s “Ideas for Life” and Sony’s “Like No Other” themes and created the “Life’s Good” motto with obvious connection to LG. To personalize the brand, LG created a “Cheery Face” transformation of its LG logo.
Ahn’s team enhanced the advertising effort with sponsorships such as the highly rated NCAA college basketball tournament. They also teamed with Oprah Winfrey to give away 350 “refrigerator of the future,” and high definition TVs. In addition, LGs has aggressively placed its TVs in hotels and motels and teamed with CNN to provide TVs at a number of major airports.
When Ahn stepped down after 35 years with the company, LG had become No. 2 worldwide in television sales and has also become a major player in cell phones. During the six years Ahn was in charge of North Americas operations, sales increased 20 percent a year from $5.6 billion to $13 billion. In addition to electronics, LG’s appliance business, which featured front-loading washers and dryers, also increased dramatically thanks to the addition of bright color schemes, which contrasted with the competition’s drab white.
While distributing through Wal-Mart and Sam’s Club was off-strategy in the early 2000s, the company’s transformation put this channel on-strategy in 2010 when LG flat screen TVs began appearing on the shelves at Wal-Mart and Sam’s Club. This was an acknowledgement of consumers recognizing that LGs image as a high-end product has followed the product life cycle dynamics as big screen TVs have become more of a commodity.
LG is the market leader in various segments like color TV’s with market share of 26.2%, microwave ovens with market share of 41.2%, frost free refrigerators with market share of 37.9%, washing machines with 34.1% market share and air conditioners with 34% market share.
Challenges faced by LG when it entered India
Low brand awareness about LG in India.
Competitions faced from Samsung, Sony and Panasonic as they entered India in 1995 whereas, LG entered in 1997.
LG has to pay high import duty
Price sensitiveness of the Indian consumer
Competition from local players and other multinational companies in the consumer electronics segment
To make itself a known brand LG took various innovative marketing and promotional strategies:
Launch of new technologies in consumer electronics and home appliances.
LG was the first brand to enter cricket in a big way, by sponsoring the 1999 World Cup, and followed it up in 2003 as well.
LG brought in four captains of the Indian cricket team to endorse its products. LG invested more than USS 8 million on advertising and marketing in this sport.
LG has differentiated its products using technology and health benefits. The CTV range has ‘Golden Eye’ technology, air-conditioners have the ‘Health Air System’ and microwave ovens have the ‘Health Wave System’.
To overcome high import duties, LG manufactures PC monitors and refrigerators in India at its manufacturing facility at Noida, Delhi.
LGEIL had already commissioned contract manufacturing at Mohali, Kolkata and Bhopal for CTVs. This has helped LGEI to reduce costs
LGEIL has implemented a digital manufacturing system (DMS) as a cost-cutting innovation. This system is a follow-up to the Six Sigma exercise LGEIL had initiated earlier.
LG came out with Hindi and regional language menus on its TV.
Introduced the low-priced Cineplus and Sampoorna range for the rural markets.
LG was the first brand to introduce gaming in CTVs. In continuation of its association with cricket, LG introduced the cricket game in CTVs.
LG has adopted the regional distribution model in India. All the distributors work directly with the company. This has resulted in quicker rotation of stocks, and better penetration into the B, C, and D class markets.
LG also follows the strategy of stock rotation, rather than dumping stocks on channel partners
LG Electronics has awarded a contract to develop IT solutions to LG Soft India (LGSI). The project involves development and support for ERP, SCM, CRM and IT-enabled services for LG Electronics’ 60 overseas subsidiaries and manufacturing facilities worldwide.
LGSI has offices in San Jose, London and Seoul with over 300 professionals in the development facility at Bangalore. All its offices are networked for swifter communication and decision making
LG has set up research and development facilities in India at Bangalore and is in the process of setting up another at Pune. Both the units carry out R&D work for the domestic market as well as for the parent company. It also does customized R&D for specific countries to which it exports products
LG reaches into the hinterland through a pyramidal sales structure. Branch offices in larger cities set up central area offices in smaller towns; these in turn reach out to even smaller towns and villages through remote area offices — at last count, the company had 51 branch offices, 87 CAOs and 78 RAOs
LG has made a foray into the e-commerce market in India and has partnered with various local websites like fabmall.com, rediff.com, indiatimes.com, and indiaplaza.com
LG India is leaving no stone unturned to market its products via social media. And presently, the core focus seems to be on its range of World Record (WR) products. With sizeable presence on Facebook, Twitter, YouTube and a Bulleting Board Forum (!!!), they are going all out with their social media activities.
Also the brand has moved away from TVCs to creating real value video content. Interesting program titled LG Mallika-E-Kitchen which is program geared towards their target segment. This video content works as an effective channel for the promotion of LG’s products.
For customers, though, the direct approach is preferred. The advantage of an extended distribution network is that marketing executives can keep a finger on the pulse of the market. Promotions and finance schemes are designed to suit the needs of local customers.
In a small town in Uttar Pradesh, for instance, last year LG offered select households a free 15-day trial of a 50-inch flat screen television during the cricket season. The TV set costs close to Rs 100,000, but several families took the bait and considered buying the TV — at which point the showroom staff offered them carefully planned finance schemes.
LG has been careful right from the start to offer customers a “value-plus” proposition.
The company was ready to do battle on two flanks: it offered modern, features-packed products, at the same time keeping its margins wafer-thin. Even competitors accept the merit of the tactic.
LG India created Ballad, a flat screen television model that sells only in the subcontinent and comes equipped with 2,000-watt speakers.
Similarly, refrigerators in India have smaller freezers and big vegetable compartments — Indians prefer fresh food and a significant proportion are vegetarian. Colors, too, are chosen keeping market preferences in mind. White refrigerators, for instance, don’t sell well in Kolkata and Punjab — while the sea air in Bengal corrodes the paint, the masalas used in Punjabi cooking discolor the fridge.
So LG offers a range of bright colors in these markets. The cricket game in TV sets wasn’t the only “go local” innovation: LG also offered on-screen displays in five languages and large capacity semi-automatic washing machines that would suit Indian families.
LG’s GREEN MARKETING STRATEGY
Green Marketing has become one of LG’s Corporate Social Responsibilities. As part of LG’s strategy to improve on the environment, Green Marketing has being employed by LG Electronics Company in the development and marketing of products like the LG-3D Plasma Cinema designed to minimize negative effects on the environment. The recent Green product is the LG plasma TV that has the energy star logo on it.
This energy star logo is an indication that LG Company is aware of the green house effect and therefore is participating in the reduction of greenhouse gasses by striving to produce energy saving products for its customers. Interestingly, environmentally aware consumers tend to earn more and are willing to pay more for green products, LG, Electronics has made it a prime concern to educate consumers on how to use the Green LG-Plasma TV.
Today’s consumers are becoming more and more conscious about the environment and are also becoming socially responsible. Therefore, more companies are responsible to consumers’ aspirations for environmentally less damaging or neutral products. Many companies want to have an early-mover advantage as they have to eventually move towards becoming green. Some of the advantages of green marketing are,
It ensures sustained long-term growth along with profitability.
It saves money in the long run, thought initially the cost is more.
It helps companies market their products and services keeping the environment aspects in mind. It helps in accessing the new markets and enjoying competitive advantage.
Most of the employees also feel proud and responsible to be working for an environmentally responsible company.
According to LG the rural population in India is 73% of the total population in the country. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural or remote area offices in India with 230 service centers. LG paid great importance to the affordability factor, as the rural population cannot afford expensive electronics. LG Electronics in 1998 developed a customized TV Sampoorna for the rural market. Therefore, it had launched Cineplus for Rs. 4900 and Sampoorna for Rs. 3000. It was a runway hit selling 100,000 sets in the first year.
The main reasons for the growth were:
Increase in income of the rural people
Growth in education among the rural population
Enlarged media reach
Growing interaction with urban area
Marketer’s efforts to reach the rural areas
Rural markets was considered as a growth opportunity
Increasing competitiveness in the urban markets
LG India tripled the number of its retail and distribution outlets in rural areas. The average price of its Sampoorna range of CTV’s came down to about the price so competitive that had resulted in bridging the gap between CTV’s and other local B/W TV’s. LG had also tapped local forms of entertainments like annual haats and fairs and made huge investments in infrastructure for distribution and marketing. LG had started mobile vans for its promotion in the rural areas. They had also started cookery classes at different locations for the rural housewives.
LG had tied up with BSNL and Reliance its mobile phone marketing penetration. Handsets were provided at a very low cost and with offers in order to promote their mobile phones in the rural areas and provided the people with good connectivity.
The 4 A’s of RURAL MARKETING
65 remote area offices under the branch offices that are empowered to directly link to the central billing system for orders.
230 service centers
2600 mobile authorized service personnel for villages having below 10,000 residents.
Reduce cost by replacing 4 speakers by 2
Sampoorna for Rs. 3000
Cineplus for Rs. 4900
Product localization is the key strategy used by LG
LG came out with Hindi and other regional languages menus on its TV’s
Introduced the low price Sampoorna and Cineplus
Mobile vans (garam garam khana)
LG INDIA TODAY
The company is concentrating to build itself as a premium brand targeting 10% of its earnings from its super-premium brand. It includes products like the Whisen range of wall-mounted air-conditioners which are of the price range of Rs. 50,000 and above, the Dios refrigerators which ranges above Rs. 65,000 and their X-canvas plasma TV’s ranging Rs. 100,000 above.
Flexibility and adaptability have proved indispensable for LG Electronics India, whether in the showrooms or on the shop floor.
At the Greater Noida unit, multi-product lines ensure that in-demand products can be given priority — in summers and during the Diwali season, for instance, the line makes more TV sets; during the winter, it switches to washing machines. Multi-product lines come with their set of problems, but LG encourages the shop floor workers to seek solutions at their level. For instance, when the line is switched from TV sets to microwave ovens. All fittings on the TV are done from the back, while a microwave requires work from the front.
When the lines are switched — the process takes less than 10 minutes — the workers don’t move to the other side. Instead, they’ve placed mirrors strategically so that they can continue working on the same side, looking at the reflection. At LG, each TV set on the line is checked by switching on remote control.
LG’s marketing is concentrating on bringing the cinema home to consumers living rooms by highlighting the screen design of its LM series, highlighted by its Minimized frame, maximized 3D specification
At LG, sourcing is done through an electronic bidding system. This allows us to get not only the best price, but also a wide choice of vendors. Once a vendor, is selected they are provided a unique user ID and password and they merge into LG’s system. The portal informs them of weekly, monthly and yearly production and when they can expect their next consignment
LGezbuy.com is a B2Cportal. The portal targets Non Resident Indians who want to purchase goods for their families in India. It helps us push slow moving items, which are not always in demand. The site allows someone living in the United States to buy a product at the best price and we promise to have it delivered. At the moment LG gets a business of about Rs 20 crores from LGezbuy.com.
The result of success in today’s highly charged competitive market depends not only in product innovation and level of productivity but also in hands of efficient service network with technological advancements and more adaptability towards information edge.
It has been seen that companies are trying to lower the cost of production and trying to give more emphasis in creating value added customer base and customer service. It has lead to extreme innovation and cost reduction to the marketer. It is also seen during last few years that the companies, which have more, efficient, and meaningful service network and also the companies who have controlled the cost of distribution have eventually controlled the market. Companies are finding that they can attract more customers by giving better service or lower prices through better physical distribution. On the other hand, companies may lose customers when they fail to provide service to its customers at the right time because a satisfied customer brings five new customers while a dissatisfied customer takes away fifty.
LG brand has ceased to be a major differentiator at least in metro, with almost all companies offering similar brand. As a result now marketers have to find out some innovative ways products of LG brand to differentiate from competitors. Currently, their buy one get one free offers a very attractive and effective demand.
Such promotional scheme tools are very useful in the short term as it increases sales and induces in first time trials. These types of products schemes should be consistent and changed from time to time depending upon season and competitor’s schemes.
With the increasing number of supermarkets and hypermarkets, the branded packaged goods work as silent sales persons. Therefore, in such stores, LG products play an effective role in stimulating consumer’s demands.
LG’s proper marketing skills and strategies have set an example for other multinationals who want to set their industry in India. LG has proved its mettle by providing its customers with vale for money along with customer satisfaction and also increasing its profit at times.