Indian smartphone market: LG vs Samsung

Call it a tale of two strategies. Korean chaebols Samsung and LG waged furious battles against each other and the rest of the Indian consumer durables industry a decade ago. Today, LG claims leadership, but that's not enough. It wants a bigger slice of the premium market. 

Samsung shot up the sales and perceptual charts with a record run from its mobile division. It is now trying to transfer some of that equity to its durables business. 

As Nilesh Gupta, CEO, Vijay Sales puts it, "Most marketers are looking for profitability and not market share apart from the mobile category. They tell us if you cannot sell, don't buy. They used to go halfway down the crease to hit the ball, now they are on the backfoot. Four or five years ago, they considered India an emerging market and were investing. Now they are telling India we want profits." 

Both players however claim they are just as aggressive as always but are just showing it differently. We examine how Korea's finest are finding their way... 

The LG story With the launch of the G2, LG made its belated entry into the stratospheric premium range of mobile handsets. In a market where consumers are notoriously hard to impress, the phone has some unique bells and whistles to justify its Rs 40,000 plus price tag. 

LG India's managing director Soon Kwon hopes such products will be, if not the norm, at least less of an exception. And it better happen sooner than later given his ambition to make the Indian operations among LG's Top 3 businesses globally, by 2015. 

LG currently claims a 30% market share for itself in the consumer durables space. According to Gfk figures sourced from the industry for August 2013, its share for microwaves is 39%, washing machines is 38%, refrigerators is 37%, TVs are at 25% and air conditioners at 23%. And yet, the company is in the throes of a struggle. For too long, it has been perceived as a mid-priced middle class oriented brand and for the last few years has been trying to become a more significant force in the lucrative premium segment. 

It's the biggest challenge since its launch in 1997 and the years in which LG transformed from an unknown entity to a ubiquitous presence. 

Marketing consultant Nabankur Gupta observes, "It got into a volume game when multinationals were perceived to be playing on value. Apart from heavy advertising, certain products were subsidised." Consumers soon believed they were getting a good deal across the portfolio: a multinational brand at an Indian price tag. 

Rajeev Karwal, founder and CEO of Milagrow who headed sales and marketing for LG at the time, recalls the many coups the brand pulled off. In a market dominated by exchange offers, LG launched a TV for 7,500 claiming to stand for no scheming. One of its campaigns featured the grandiose claim of making other televisions history. 

It was all backed by a unified concept says Karwal: "We'd positioned the brand on the health platform which ran through all their communication whether it was 'Golden Eye' TVs for wrinkle free eyes or 'Health Wave' microwaves. By building innovative technologies and smart marketing, we came across as a lot bigger than we were." 

The health platform is gone, today. More significantly, so is the frenetic momentum. The reasons vary depending on who you ask. To LG's critics it is evidence of the brand becoming complacent and driven by diktats from the Korean headquarters. On the flipside, LG believes the strategies needed during a launch phase are quite different from those required to sustain and grow. 

Addressing LG's move away from emotional advertising Kwon says, "For the last 15 years, we may have been known as more of a family oriented brand. But, in fact, we are also strong in the very high end. We have decided to focus on a different element to the brand which is technology." 

A visible manifestation of LG's newfound, some would say belated aggression is its mobile handset strategy. Rival brands dove headfirst into smartphones and even dabbled with the nascent tab category because it positioned them on the cutting edge. 

LG, instead, was sluggish on smartphones and ignored tablets entirely. It now has to run a lot faster. It's doing so with a slew of models that offer more for slightly less and a strong dealer push. It's stated goal is cornering 10% of the smartphone market by 2014. Kwon expects Rs 150 crore turnover from the G2 alone. 

LG's priorities on the marketing mix have shifted too. Like many of its contemporaries, it's investing a lot more on the in store experience. It has around 2,000 exclusive stores, a necessity in a market where modern trade has performed below expectations, according to Kwon. 

Where LG claims its priorities have not shifted is coming up with India specific products. These are especially relevant to the rural sector where business growth is higher than in developed markets. LG's mix for these markets includes the ever cool refrigerator and tougher LCD TVs. 

To reach these price conscious customers who do not have access to easy finance, the units are priced lower and their features and benefits communicated in detail, according to Sanjay Chitkara, head - marketing, LG India. The urban segment on the other hand will be the focus of LG's Diwali campaign which according to Chitkara is built around launches of premium television sets. 

However, others see confusion in LG's attempt to straddle various segments. According to Karwal, "Samsung changed completely around the launch of its smartphones. It began to internationalise communication and moved out of low end TVs and washing machines. They got the platform LG used to be known for — the cutting edge of technology." 

As for LG, he believes, "The company is more focused on margins than marketing. A lot of their inefficiency and poor product planning gets covered up since they there is no alternative for the trade. If today there was a good marketing company that can synergise all its divisions they will have a run for their money." 

Given entry barriers have only gone up since LG rushing the market in the early 2000s this falls squarely into the easier said than done category. Karwal concedes, "It has one of the strongest nationwide distribution channels which itself is a competitive advantage." 

LG has a new sign off these days with It's All Possible. Instead of replacing the old Life's Good slogan, the new line sits alongside it as a supplementary message according to Kwon, drawing the consumer's attention to a vast assortment of products in different categories. It can also be seen as an internal affirmation: a brand reassuring itself that it can in fact try to be all things to all people. 

The Samsung story It's typically hard to define the point at which the fortunes of men and brands change. Not so with Samsung. 

It all changed in June 2010 with the launch of the Galaxy smartphone series. Suddenly from being one of the many consumer durable players dabbling across washing machines, air conditioners, TVs and yes mobile phones, it began to set the agenda for mobile telephony. It dethroned doughty stalwarts like Nokia and Blackberry and currently accounts for 31.5% of the Indian mobile handset market estimated to be worth Rs 35,946 crore according to a Voice & Data survey. 

Samsung executives still nevertheless have sleepless nights. There's the all too real fear of complacency setting in. 

Atul Jain, senior vice president - consumer electronics, Samsung who has spent two years in the mobile division admits, "We are completely on the edge as far as the next wave is concerned. I'm not satisfied with S III and the Note doing well or with being the first ones to have launched LED smart TVs, two years ago. That streak in our DNA of looking for the next stage is critical. The lack of it is why a lot of companies fall by the wayside." 

Samsung is trying to keep the momentum going. Vineet Taneja, country head - mobile business, Samsung India recalls telling the global chief about what he believed the country needed, only to have a product in hand four months later. "Any other company might have taken 12 or 18 months," he says, speaking of Samsung Grand a mid price smartphone which packed the gigantic screen size of the Note series into a more affordable model. 

For people who wanted the most high end devices and couldn't afford them, Samsung was the first to start EMI schemes. Taneja admits, "Affordability doesn't necessarily mean cheap. It means I will make great products accessible so consumers don't have to shell out so much." 

It has helped Samsung move to outlets that were hitherto beyond its reach. Taneja speaks excitedly of a small 2X2 store in Hyderabad with an EMI machine which guarantees a turnover. 

The demand is outpacing the financial system's ability to keep up. Taneja has met small shopkeepers in a tehsil at Hajipur, Bihar who wanted the EMI option in spite of there being no credit card holders. Asim Warsi, VP - sales, mobile business, Samsung says, "We would love to make, if we could, Samsung Mobile like an impulse brand — people come, decide, buy and walk out — like a packet of chips." 

Accessibility runs a lot deeper than affordability. One of the next big initiatives is getting local language interfaces in smartphones. Warsi observes, "People in interior Gujarat or Maharashtra are not poor for sure — they'll now have access to internet and mobile experience in a language that is their own." 

Samsung's task is to transfer the considerable equity gained via its mobile business to the other parts of the portfolio, inducing excitement even in age old categories like televisions and refrigerators. Given the speed of technological obsolescence in Smart TVs, it is trying to future proof its models. For instance, the evolutionary kit fitted into SmartTVs upgrades the set to the latest software and firmware a year down the line. 

Not all of its technology is that esoteric. Samsung's tweaking refrigerators to work out how often they are opened, for how long and to run accordingly. It could lead to 40% cut in electricity bills according to Jain who used this as a plank for a theme campaign this March called 'Samsung's on, Saving's on.' 

Chief marketing officer Rahul Saighal sees a healthy rub off taking place between Samsung's various divisions: "Smart televisions are contributing to Samsung's image as an innovation leader while our success with devices like Galaxy S4, Note 2 and now Note 3 are further reinforcing that perception." 

Even a notoriously hard to please marketing industry is currently a part of the Samsung fan club. Says Nabankur Gupta, "Every phone with a Samsung badge spells value even at the lower end. The consumer will be favourably predisposed even when there's a durable to be purchased. Both LG and Sony need to create that." 

Gautam Talwar, chief strategy officer, Rediffusion YR believes Samsung is no longer competing with LG or Sony or Canon at a mother brand level but with Apple. He says, "It stands for new age technology and hence can pass the software codes to all other categories rather than the hardware codes which brands like LG land up owning. It needs to move the consumers from the utility and feature enriching platform to the magical world of what technology is capable of doing." 

However, a former Samsung executive at a rival firm has a few words of caution, "Nokia got into the trap of believing that they know how to control technology, Samsung should be careful to avoid the arrogance that comes with the leadership position. Its approach has been primarily of a hardware manufacturer more focused on driving hardware specifications than (industry design) that would appeal. The seamless integration of software with hardware is something that is missing."