Interview with LG Electronics India marketing head Sandeep Tiwari

'We expect our involvement with cricket to improve our market impact by 25-30 per cent'
Posted on 2 May 2006

aving been in the country for nine years now LG Electornics is for the first time using

a Bollywood star as its brand ambassador. It has signed on bollywood actor Abhishek Bachchan to endorse its line of consumer durables like refrigerators, air conditioners. The aim is to connect better with women. This year the company is targeting a turnover of Rs 90 billion. Indiantelevision.com's Ashwin Pinto caught up with LG Electronics India marketing head Sandeep Tiwari on the sidelines of a media briefing. Excerpts: With the signing of Abhishek, LG is changing its strategy by moving away from relying only on cricket. What prompted this? I wont say that our strategy has changed. It has been enhanced. Quite a few people expect us to exit cricket. That is not the case. We realise though that two growth engines as far as the advertising fraternity is concerned will work. One is all around cricket and the stars. The other will revolve around entertainment. We are going with a double engine effect. Cricket delivers numbers and reaches masses. It however alienates women. It does not address that gender with the same amount of passion. Cricket is better for a consumer electronics television oriented effort for the male audience. It also partially delivers in the air conditioner category as men to some extent make decisions for this product. But when it comes to pushing mobile phones, washing machines, microwave ovens, refrigerators it does not deliver the full impact. We will be launching a mobile phone campaign later on. That TG is very young from the late teens. Our brand has to become younger, their generation brand. We do not want to

become a brand that is for an older generation just because we have been around for several years. We have learnt from what Coke, Pepsi have done over the years to remain young. This will helps us address all sections of consumers. We want to become a consolidated consumer driven brand that also encompasses mobile and IT. Could you talk about LG's brand positioning in the market and how it allows for differentiation? We are differentiated from the Indian and foreign brands. LG does not get classified as either. It is easy for Indians to relate to it. The brand has a multinational lineage while delivering what Indians require. We dont show any foreign ads. Our communication language is not that of a foreigner. Emotions work a lot in India. The warmth and affection that a brand showers upon its target audience will be reciprocated. A brand may be ranked higher but if it is not relatable then it will not do well. Has this positioning been tweaked in any way recently? I would not say so. In 1997 we were represented in high end markets. We were niche. Today we sell different TV sets, refrigerators. We dont just have SEC A+ 35+. Our target is total. So our communication must address everybody. You cannot have one for the higher end and another for the lower end. That is what we are looking to achieve with a celebrity. The sheer rub off of that celebrity will draw in masses for a high end product. It connects mind to mind. This is where a Saurav Ganguly works. This is also what Abhishek Bachchan will do for us. Even in Allahabad, Benares it will work. At the same time we do not use a celebrity for everything. For television sets our positioning has been around the eyes. We used an average child. Conventional wisdom says that television watching is bad as it causes strain. Our communication showed that with LGs eye technology it is not harmful. The position was very different in that we showed that it will give the child a world of knowledge. The child plays a crucial role in terms of buying a TV set. We looked at the TV as being an infotainment medium and not entertainment. Speaking of television what are the plans in the television manufacturing area and how challenging are price points as in consumers waiting for prices to fall and then buying TV sets? In this area we are targeting a 100 per cent growth for flat panel displays year on year in terms of the number of units sold. It is going to be interesting to see how we fare with little penetration of plasma sets and high acceptability of that category. People want a TV that can be hung from the ceiling or mounted on a wall. The big size experience at home is an aspirational product. As far as pricing points are concerned I will give the example of mobile phones. Though prices will fall nobody waits. People cannot wait to upgrade and change. People accept that gadgets will not last a lifetime. They want what is the best option as long as the brand is

delivering what it promises. The consumer has become more experimental in nature. 35-37 per cent of revenue comes from television. Electronics along with IT contribute around 48 per cent of our revenues. Appliances contribute around 36 per cent. In 1997 when we started our group turnover was Rs 125 crores (Rs 1.25 billion). In 1999 we crossed Rs 1000 crores. Last year it was Rs 7500 crores. We are looking to touch Rs 9000 crores this year. What is a more powerful platform - Bollywood or cricket? They complement each other. No brand in our position can afford to ignore one or the other. The cricketing calendar is limited. We take the time for which they are played. For a lot of the months we cannot device our season vis-a-vis the cricket calendar. But with a film star we can plan better. A cricketer is only relevant when a game is being played. His performance affects how a brand that uses him is perceived to an extent. Brands go through highs and lows. When a cricketer fails the public reacts badly to the ad featuring the cricketer. A Bollywood campaign though cannot only be attributed to the star involved. Actors do not always play themselves. They show more versatility in negative, positive roles. It offers a wider spectrum.

awareness programme right from our carton boxes to communication. It became known to everyone'

'The 1999 World Cup in England was our first mass

In what way has the brand communication for home appliances evolved and why choose Abhishek? Till now the home appliances communication platform had the health message. Today that platform is being adopted by a lot of me too brands. We felt that we therefore needed to break way from that by graduating to a Health Plus objective. From here came the idea of Intello. This means that the products are technologically intelligent and futuristic. We want to position the brand as being young, vibrant and premium. So we picked Abhishek as he portrays Indian values. He also exudes an aura of aristocracy. The signing of Abhishek marks the start of the second phase of our marketing strategy in India. It is the marketing of a leader phase.

Which are your key products that will be given a marketing thrust this year? Mobile phones are key for us this year. Flat panel displays are also important. Laptops will be third in importance but from the long term point of view as in 2010 laptops will be second. ACs have experienced good growth and the market shares are high. The aim is to sustain AC growth. To what extent is the marketing budget going to rise this year? How much of this will go towards television? The marketing budget will increase marginally compared to last year apart from cricket due to the Champions Trophy. We expect our involvement with cricket to improve our market impact by 25-30 per cent. Media advertising constitutes 40 per cent of the marketing spend. Out of that 40 per cent is spent on television and print. Does LG feel that there is scope for using television in a more interactive manner to reach consumers? By interactive I mean engaging the audiences in a more active manner. This is going to be very important. Using a celebrity is a classical way to approach that. If you could increase market share by simply putting ads then there would be no need for marketing professionals. Wittiness and innovation play a crucial role in breaking the clutter. It is not money versus money. It is not a question of Rs 250 crores versus Rs 280 crores. The content of communication and synergies created are what the focus should be on. LG is one of the ICC's official partners. How has this benefited the brand over the years? When we associated with them in 1999 it was a big transitional phase. This was because it was our first attempt at national penetration and visibility. From 1997 till 1999 we did not have any television commercials. We were not represented among the masses in a true sense. We were just represented in towns through hoardings, newspapers. The 1999 World Cup in England was our first mass awareness programme right from our carton boxes to communication. It became known to everyone. Subsequently the two Champions Trophies and the 2003 World Cup became a mainstay in our efforts to build the brand. The ICC association has given us the stature of a mammoth brand. This would not have been possible through regular communication. The ICC association is more to do with the LG logo as a whole rather than with simply different parts of the company like a fridge or an AC. No other medium would have given us that.

important towards enhancing brand value. In the long term word of mouth publicity is key'

'The pre purchase and post purchase experience are

How is LG looking to leverage the Champions Trophy which will be held in India? What is interesting is that it is coinciding with Diwali. It will be from the second week of October to the second week of November. Diwali falls somewhere in between. We have to figure out how the two communications of Diwali and cricket can work together. There will be two objectives to be achieved simultaneously. Can they be jelled to leverage the best out of the two? This is one of our biggest marketing challenges of the year. LG and the other ICC partners met recently. What transpired? There are two huge events coming up. It certainly required some getting together to figure how to leverage that. LG, Hutch, Hero Honda and Pepsi met with the ICC to discuss how we can work together to maximise opportunities. These are four large brands that do not compete or fight with each other. We discussed avenues that can be worked on together. How successful this is time will tell. Are below the line activities and promotions growing in importance for the brand? Significantly. 60 per cent of our budget is spent on these kinds of activities. It is crucial because no technology will work well until it is explained to the customer. At the ground level the product must be on display. The experience that a customer goes through on ground is equally important as using mass media. The pre purchase and post purchase experience are important towards enhancing brand value. In the long term word of mouth publicity is key. We have around 1,150 in shop demonstrators and 1,000 counters across the country. This is a force and manpower that no other competing brand has. Exhibitions play a significant role across the country. The portfolio that we have cannot be addressed with just one showroom. One showroom can only accommodate 30 per cent of our product line. Exhibitions give us the opportunity to display more products and do something meaningful. We concentrate on training our sales people and upgrading their sales skills. Mobile vans and road shows will play a crucial role going forward. We are also using malls as a place for display as a lot of people visit them. In-house demonstrations of products after purchase are another area of focus. Cookery classes for our microwave ovens tells the

customer that LG does not just sell microwaves. It is also teaching him how to cook. Ladies come to learn cooking and they also learn about the other products available from the range. This activity will be strengthened over the years as India cannot be addressed by only going to 10 or 20 towns. The major growth will have in those middle markets. As a marketing tool what potential do you feel the mobile has? All our portfolio except for laptops and mobiles are in house. You can only see someone elses Airconditioner by going to their living room. They remain inside. A mobile phone is flashed around as a personality trait. If you sell a LG phone to a school or college student you are preparing him/her to be a future LG television, washing machine, refrigerator customer. So we are catching them young. The mobile phone in the future will be the first entry product into the customers home. After that will come television sets and washing machines. It becomes a brand that a person is proud of. However we are staying away from SMS and MMS communication activities on ethical grounds. Are you happy with how global sports organisers have combated the threat of ambush marketing? I do not think that it is a very big issue. There are enough marketing opportunities for everyone. I do not think that media alienation for a certain period of time makes a big difference. There are lots of major sporting events this year. So how is LG splitting up its ad spend? We are staying away from cricket apart from the Champions Trophy. Every brand has limited resources and cricket is no longer an inexpensive proposition. Conserving of resources for better utilisation is what optimisation is all about. We will be doing activities around the Fifa World Cup though. We are yet to roll out ideas at the storyboard level. This activity will be in select markets like Goa, West Bengal. How do you work with your creative agencies? It is a partnership right from the concept generation level to how it shapes out to seeing it delivered to the marketplace. We even address the media together. The competitive business environment leaves little room for chance. It has to be a team effort.

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How LG became No 1

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LG Electronics India's marketshare dropped in January 2005

-- for the first time since the

company was set up in 1997. But managing director Kwang-Ro Kim isn't worried. "The dealers must have met their targets in December itself, so they took it easy in January," he explains. Were it any other company, the managing director's insouciance would appear to border on foolhardiness. But this is LG, a company that can afford to take it easy. Even after the blip in sales in January -- LG's marketshare in refrigerators fell fractionally from 28.6 per cent the previous month to 28.1 per cent -- the Korean consumer electronics brand is still the preferred white goods brand in India -- across categories and sub-categories. Whether it is refrigerators, air conditioners, washing machines or colour televisions -- LG's dominance over the white goods market is complete (see chart). That's pretty decent going for a company whose first experience in the Indian market was nothing short of disastrous. In its earlier avatar, the Korean company came to India as Lucky Goldstar. This was in the early 1990s, and the rules at the time didn't permit foreign companies to start independent ventures. So Lucky Goldstar took on not one, but two joint venture partners. The first partnership ended acrimoniously while the second never took off from the ground. In 1997, the Foreign Investment Promotion Board finally gave the Korean company permission to set up its own factory to make washing machines and refrigerators.

Rechristened LG Electronics, the new company -- a 100 per cent subsidiary of the Korean chaebol -- swung into action and set up a state-of-the-art manufacturing facility at Greater Noida, Uttar Pradesh [ Images ].
LG: Looking great
Category Marketshare in volume terms

There's been no looking back since then. In October 2004, LG set up a second manufacturing facility at Ranjangaon, near Pune, which makes
LG No 2 player

white goods as well as cellular phones -- the first GSM handset manufacturing Get Quote ]) facility in India. Another facility, exclusively for GSM handsets, is being set up and will start operations in August. Turnover is also on the upswing: starting from Rs 150 crore (Rs 1.5 billion) in 1997, LG registered a turnover of Rs 6,500 crore

Refrigerators

27.2 21.2 (Whirlpool [

Colour TVs [

Get Quote ]

25.5 15.1 (Samsung)

Microwave ovens

41.4 19.7 (Samsung)

Washing machines

34

13.8 (Whirlpool)

(Rs 65 billion) last year and is targeting Rs 9,000 crore (Rs 90 billion) in 2005. Off with the old Perhaps the most important step was to leave behind the baggage of the past. As Lucky Goldstar, the company's biggest fault was that it did precisely what other white goods brands of the 1990s were doing: some half-hearted advertising and pushing the products only when the consumer entered the store. Activities that "pulled" potential buyers into showrooms were conspicuous by their absence. Once it got the permission to operate as a wholly-owned subsidiary, though, all that changed. Within just five months, LG products were available across the country, compared to the average two years competitors took for a nationwide launch. An advertising blitzkreig followed. And the momentum hasn't let up since. LG is one of the most aggressive advertisers in the white goods industry, spending close to 5 per cent of its revenue on marketing activities -- that's Rs 130 crore (Rs 1.3 billion) last year. A close tie up with cricket ensured the brand building exercise would score well on consumer recall -- apart from signing on leading Indian cricketers, LG also launched a cricket game on one of its television models. Point of sales promotions were also extensively advertised to ensure customers were tempted to visit the stores.

Importantly, for LG, a nationwide launch meant just that. A penetrative distribution strategy ensured that products were available even in smaller towns and cities, breaking the chain of urban dependency that plagues most white goods manufacturers. More than 65 per cent of last year's Rs 6,500 crore (Rs 65 billion) revenue came from nonurban sources; up from under 60 per cent the previous year. The industry average? Twenty-five to 30 per cent. Add the fact that the rural markets accounted for a remarkable 30 per cent of total sales and it's clear that LG's strategy is working. "We push rural marketing," agrees Kim. How does it do that? 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. Each RAO has servicing, marketing and sales teams at its disposal and an individual budget for marketing activities in its territory. The executive in charge has independent decision-making powers -- he can decide the tenor and scale of brand promotions in his area, without having to cross check every little detail from the head office. Technology, too, is being used to the hilt to ease their jobs. The RAOs and CAOs are all electronically connected through a V-SAT and Intranet network. And where earlier decisions about putting up large hoardings could be approved only after a visit from the head office, LG has provided all its branch managers digital cameras -- now they just click images of suitable locations and get them approved electronically. Bells and whistles 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 15day 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. Of course, it's not just the finance schemes that are tailormade. LG has been careful right from the start to offer customers a "value-plus" proposition. Explains KSA Technopak principal Harminder Sahni, "LG has always taken the stand that 'We're selling the AC, not the remote. The remote comes as part of the package.'" Which is why,

he adds, the company does not qualify as a "budget" models company. "LG does not sell nofrills product; it gives you all the bells and whistles," Sahni says. LG recognised the need to do that early on. Kim -- who's been with LG India since 1997 -points to a basic characteristic of Indian consumers: "They are very price sensitive. They want the best quality at reasonable prices." Accordingly, LG introduced its economy range in the country, which Kim predicted would be "easily accepted". 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 has been a price warrior while retaining its brand equity," points out Ajay Kapila, vice president, sales and marketing, Electrolux India. "Our success is the result of hard work and commitment. There's no miracle involved," says Kim. The hard work was on the features, which were carefully chosen -- and adapted -- to appeal to Indian audiences. For instance, Kim points out that consumers in southwest India prefer big sounds and big bass outputs. Accordingly, 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. Colours, too, are chosen keeping market preferences in mind. White refrigerators, for instance, don't sell well in Kolkata [ Images ] and Punjab [ Images ] -- while the sea air in Bengal corrodes the paint, the masalas used in Punjabi cooking discolour the fridge. So LG offers a range of bright colours 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. The research for these adaptations and innovations is done in-house. LG invests significantly in local R&D -- last year the company spent over Rs 100 crore (Rs 1 billion) on research. "We want to be independent of Korea," states Kim. It's working towards that: already 70 per cent of its product line is produced locally, with the rest imported from China, Korea and Taiwan. In refrigerators, 95 per cent of the components are localised. All of which also help keep prices down. On with the new But that was in the past. "Economy" and "value-for-money" are no longer going to be the

cornerstones of LG's India strategy. In the next five years, says Kim, the company will concentrate on building itself as a premium brand, targeting 10 per cent of its earnings from super-premium products. That includes products like the Whisen range of wall-mounted air-conditioners (Rs 50,000 and above), Dios refrigerators (Rs 65,000 and above) and X-canvas plasma TVs (Rs 100,000 and above). LG has already set up 75 exclusive showrooms for these products, which were launched earlier this year, with more in the pipeline. This year it will spend upward of Rs 20 crore (Rs 200 million) promoting the super-premium sub-brands. "High-end products need high-end outlays," smiles Kim. Perhaps, but industry analysts have their doubts whether exclusive showrooms for such bigticket items will bring in the bucks. "When it comes to consumer durables, people prefer comparison shopping. I will be surprised if the stores make money," comments KSA's Sahni. Meanwhile, there's the imminent departure of the man who built up LG India to its present height. Kim, who was last year promoted as head of LG South West Asia, is likely to move up within the parent organisation some time soon. "I am preparing to leave," he admits. Will that make a difference to LG's growth curve? Kim doesn't think so. "The system is working, so things will continue as they are," he says. That thought finds an echo in Sahni, who points out "Kim may be leading from the front, but LG couldn't have achieved what it has without a strong team." The challenge now will be to integrate the new incumbent's working style with the existing culture of the organization -- and work on the new marketing strategy. If LG meets that head on, then, like its tagline says, Life's Good. Bending over backwards Flexibility and adaptability have proved indispensable for LG Electronics India, whether in the showrooms or on the shopfloor. At the Greater Noida unit, multi-product lines ensure that in-demand products can be given priority -- in summers and during the Diwali [ Images ] season, for instance, the line makes more TV sets; during the winter, it switches to washing machines. Of course, multi-product lines come with their set of problems, but LG encourages the shopfloor workers to seek solutions at their level. Consider, 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. Other solutions are less elegant, but their relevance is undoubted. At LG, each TV set on the line needs to be checked by switching on remote control. Earlier, workers on the line would have to pick up the remote each time a set came down the conveyor line. Now, they've created a small slot at the edge of the line for the remote, which has been jigged so that the "on" button is always pressed. Suggestions from workers on the shopfloor have not just helped improve productivity -- the line target is to increase TV production from 2,600 sets to 4,000 a day, within the next couple of months -- they've also helped in keeping costs down, says Vipin Gupta, head of research. Earlier, for instance, there were different packagings for 20" and 21" TV sets. Since they're both nearly the same size, now the same size carton is used to pack both types of TVs -- a sticker outside indicates the size and model. Factory and customer service head Sanjay Arora points out that workers at LG are better placed to offer suggestions on product improvements because they're encouraged to experience life outside the factory gates as well. Workers are routinely sent to do sales stints at company showrooms and even to customers' homes to service the products. "This way workers on the line know what problems the customers face and they also become more involved with innovations on the line," Arora points out.