IIPM Ranked No. 1 B-School In Global Exposre - Zee...LG is going for rebranding, but faces the daunting challenge of perceptionssounds hard to believe, but the company, which made life good for millions of consumer durable buyers worldwide began its journey with a cosmetic known as ‘Lucky Cream’. Consumer durables, was, of course a remarkable transformation.
Now LG is on the threshold of another vital transformation to alter its roadmap for the future. Buoyed by their remarkable success in the Middle East and Africa in 2005, where LG is positioned as a premium brand with high-end stylish products, the company is all set to adopt this corporate philosophy by re-branding their products on a global front.
After making their presence felt in four verticals – home appliances, consumer electronics, GSM handsets and IT products, the Korean giant is making a shift from a mass to a premium segment, even as they are now gearing up their sleeves for target sales of $3 billion in 2008, with an eye to double their revenues and profits by 2010.
“The kind of growth in the high end segment is phenomenal and we have had a change of approach after we did a global survey,” explains Amitabh Tiwari, Business Head, Consumers Electronics & Appliances, LGEIL. Another reason is the annual erosion of prices of around 2-3%, which makes it hard for manufacturers to meet turnover of the previous year with their average selling price intact. The recent hike in prices of steel in second quarter of the current fiscal by 10% has further pushed the consumer durable firms to raise their prices and thus move on to the premium segment. “LG is putting up a large upfront investment of around Rs.400 crores as in premium range, profits will be higher,” avers RC Chopra, consumer electronics expert, CII. Moreover, its a fact that in India, the premium durables segment is growing much faster than the mass segment.
The company plans to spend $1.4 billion globally and around Rs.3.5 billion in India,” avers L. K. Gupta, CMO, LGEIL. Surely, if they don’t play the game well they may lose out as repositioning will take them more than a year in India. Anyways, the company will not risk giving up on the mass market. “We can’t do away with janta products but with aspirational tag attached, even the mass product consumer will change their perspective,” projects Tiwari.
How will LG tackle other fishes in the pond (read niche segment)? As per Tiwari, LG is “keeping a price at premium and 3-5% above competitors.” They would also differentiate their product on conduct, after sales service and approach. LG aims to grow at over 20% in India and claims to have cornered all touch points including advertisements, in shop experience and consumer knowledge. “Our brand can stand premium image with or without a brand ambassador and we plan to spend three-fourth of our total investment on advertisement,” claims Gupta.
However, the stumbling block is only one, premium products are a different ball game and they will have to battle consumer perceptions. “LG will continue to be a mass product in white goods as it has the largest market share...,” comments a consumer durables analyst. Of course, to their credit, LG is not new to facing challenges in India.
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