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."
In
yet another indication that Infosys is trying to put the focus back on
its traditional services, the company is cutting the strength of its
R&D arm, called Infosys Labs, and is moving these employees to
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