Page 47 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes 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 blitzkrieg 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 ` 130 crore 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. Points 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 ` 6,500 crore revenue came from non-urban sources; up
from under 60 per cent the previous year. And what was the industry average? It was
between 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 (CAOs) in smaller towns; these in
turn reach out to even smaller towns and villages through remote area offices (RAOs)—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.
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 ` 1 lakh, 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 tailor-made. 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
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