Page 48 - DMGT408DMGT203_Marketing Management

Unit 2: Understanding the Marketplace and Consumers

is why, he adds, the company does not qualify as a “budget “ models company.” “LG does Notes
not sell no-frills products; 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 sound 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 and Punjab—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 ` 100 crore 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.
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 (` 50,000
and above), Dios refrigerators (` 65,000 and above) and X-canvas plasma TVs (` 1 lakh 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 ` 20 crore
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
big-ticket items will bring in the bucks. “When it comes to consumer durables, people
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