Head (Marketing) | 27 Dec 2003
The rural market is going to be the main focus of LG for 2004. Since we intend to be very active in the rural market, we have set a target of 70% value growth. So the target is Rs. 7,000 crores. We think the rural market contribution will be around 65% and the growth over this year on the rural market will be something around 40%.
After working in Eureka Forbes for three years, Anil Arora joined BPL Sanyo as Asst. Sales Manager, looking after direct marketing for vacuum cleaners. After the company merged with BPL in ‘93, he took charge of microwave ovens and gas tables in Delhi; the next stop was Head of Sales, Punjab, HP, Chandigarh and J&K, before he left BPL to join the 5,000-cr Korean consumer durable major – LG.
A strong believer in ‘feet marketing,’ within two years Anil moved on to Asst. GM and later shifted to the corporate headquarters at Noida where he took over as Product Group Head-refrigerators, finally moving on to Head (Marketing), LGEIL. In a chat with Jasmeen Dugal at LG’s Greater Noida plant, Anil Arora shares some details on the new brand positioning, the company’s aggressive strategy to strengthen reach in rural India and more.
Q. How do you view the consumer durables market today?
The consumer durables market is not that good as of now. The growth has not been good at all, although LG has grown by 35-36%. We thought that the market would grow by 10-15% but that has not happened. The washing machine segment has been totally dead; direct cool and frost-free has not been good. CTV, on the other hand, has been good.
Q. To what would you attribute this stagnancy?
Well, last year witnessed heavy purchase because of two-three events. Early this year, the World Cup took place, so the money might have been drained out there. That is why even in peak season, the compressor products too did not sell in a very big way.
Coming to Diwali, the trends have changed – over the last two-three years, Diwali has shifted from a month-long shopping event to a weeks’ event; people have been indulging in shopping only in the last week of the festive season. Additionally, Diwali was a festival where even high-end products used to sell in a big way; today, it has degenerated to a very middle or low-end trend where only products for gifting purposes or on exchange schemes are being purchased.
Stagnancy could also be because there are so many players in this segment, it even has the consumer confused about the best buy for him – and in this confusion, he postpones the purchase.
Q. How does LG intend to strengthen its reach in rural India?
The rural market is going to be the main focus of LG for 2004, which includes marketing activities and other initiatives in the form of surveys and the like. So for that, we are opening many more branches across the country. In September ’02 we had only eighteen branches; now we have forty branches.
Additionally, we have 112 area offices, which were not there at all last year; these area offices have been opened in the district-level areas. Below these area offices, we have remote area offices, which we call ‘RAOs.’ Currently we have eighty RAOs, which we are planning to expand to two hundred RAOs by next year so that we can reach out to the rural market in a better way and feel the pulse of all the consumers and the dealers there.
Q. What are your expectations from the rural market?
We thing there is a lot of potential in the rural market. Till now we have seen a 35% growth. But now, since we intend to be very active in the rural market, we have set a target of 70% value growth. So the target is touching around 7,000 on DP value i.e. Rs. 7,000 crores. We think the rural market contribution will be around 65% and the growth over this year on the rural market will be something around 40%.
Q. Please share some details on your new communication plank: ‘Goodness Inside.’ Does it completely rebuff the health positioning?
Over the last four-five years, LG was positioned on technology and health grounds, and we sold many units on health and technology. But after extensive research, we noticed that even though LG was number one, the connect between the consumer and LG Electronics as a family brand was missing.
To bring that connect, we have taken the family route on all the aspects i.e. outdoor hoardings, glow signs, press ads, television commercials etc. We want to draw emphasis on family grounds. LG should be perceived by the customer as an in-house brand. This does not imply that we will abandon our technology ground; basically, it is just one step ahead, put together with a lot of family interfaces into it. For instance, in the case of LG Golden Eye TV’s promise of ‘Ankho ko kuch nahi ho sakta’ has been broadened to mean more to the overall life of the consumer, and not just his eyes.
‘Goodness Inside’ is a part of that. If you own LG products, you will feel ‘good’ inside. That is the punch line we would like to adopt. We will be implementing it from 1 January 2004 in a big way. And we are ready with all the ads; in fact, there will be nine-ten new ads, which we will air shortly.
Q. What was your ad spend this year?
The total spend including the outdoors, indoors, hoardings, shop translites, small-scale activities, exhibitions and the like, put together comes up to Rs. 180 crores. But clear-cut spend on television commercials and print ads are in the vicinity of Rs. 74 crores.
Q. Does this include the new ad campaign?
Yes, this budget is more than enough and we will manage with it. Apart from the two agencies coming in, at the regional level we have started a new concept – we are not going to control everything from the corporate; we have allocated all things to four different regional vendors. And we have also set ourselves a cost-cutting target of 22-30%. If we do this, we will be saving Rs. 20 crores. So we’ll be able to manage within this budget.
Q. In such a vast market, what is LG’s key differentiator?
Our key differentiator is our product and our technology. If you pick up any of our products, starting with color televisions, we have the ‘Golden Eye,’ which nobody has. In refrigerators, nobody has the ‘ice-beam door cooling’, which we have. In the case of air-conditioners, we have the ‘Plasma;’ in washing machines, we have ‘punch wash.’ Technology remains the biggest differentiator in LG.
The second differentiator will be reach. We are going to have a number of new offices in the near future, so our infrastructure and ground-level activities will increase. Besides these key differentiators, we are going to stress on the placement of our ads in vernaculars at the regional as well as district levels. And with our Pune plant coming up, we will be able to address the needs of the western and southern markets immediately.
In line with our regional concept, i.e. the feedback from our area and district managers in the northeast and southwest zones, we are making ‘regional required products.’ This means products, which are required more in, say, the southern zone, is sent there in bulk. Basically, the product team and the R&D team are working on this together. I personally feel that these ‘regional required products,’ that is ‘different products for different markets,’ is soon going to be our biggest differentiator.
Q. Does LG rely heavily on ground-level activities?
Brand building activities through advertising is one thing, but below the line and ground-level activities are important for any organization. To achieve a growth of 68-70% against an economy growing at 6-7%, these secondary activities are very, very important. We’ll be focusing on road shows and sponsorship of district-level activities in a very big way.
Q. How does LG deal with the competition?
Every now and then different competitors are coming in and everyone has different technologies. To fight competition, a very strong base is essential. If the roots are strong, automatically, other things will fall in line.
Having spent so much in our Pune and Noida factories, LG can adapt to changes; we can adapt to competition reaction in case of pricing, technology, model or anything immediately, and give back the product to the trade at least within a span of ten days. So competition is not a threat to us – only, our infrastructure should be in place and our employees should be highly motivated to work.
Q. What are the new launches on the cards?
There are no new product categories, but within the existing product categories, there will be many new products launches. GSM is the focus area for us – that is a new line we are entering and we need to have a sale of at least 5-6 million handsets next year. Keeping that in mind, there will be many major launches in GSM. And we will also be looking into new product launches in air-conditioners, refrigerators, washing machines – everywhere.
Q. How are the GSM handsets faring?
Our handsets – G5300 and G7030 – are both targeting the upper middle class. If you look at the market size, next year as announced, is estimated at Rs. 30 million. This year it is around Rs. 19 million. We are addressing 15% of the total market share, which is above 14-15,000 handsets. We have not been aggressive as far as the sales have been concerned but we have been very aggressive where marketing is concerned. This is because we want to first establish our presence with outdoors, glow signs, dealer meets etc.
Where our marketing strategy is concerned, LG always comes in with the high-end brands and then comes into the middle or low-end markets. We hope that by 2005, we will be number one in the field of GSM handsets also.
Q. What kind of a growth do you expect to achieve in 2004?
We are targeting Rs. 7,000 crores next year as opposed to Rs. 4,400 crores this year. That’s approximately a growth of 68%.