In 2008, rising input costs and lack of incentives had compelled durables manufacturers to take two rounds of price hikes on an average. These firms rued that the depreciating rupee and global financial crisis were adding to their woes. The Rs 32,000-crore consumer durables industry imports inputs such as pre-coated sheets, plastics, chemicals used for foaming and custom-built units such as LCD and plasma televisions which now cost more. Other factors such as delayed summer and early rains, especially in North India, affected air-conditioners sales. Also, several consumer finance companies have stopped lending for purchase of consumer durables.
Incidentally, manufacturers had expected the Sixth Pay Commission recommendations to increase the purchasing power and fuel demand further but the upswing was restricted to the festive season.
In spite of a slow year for consumer electronics industry in 2008, LG Electronics India managed to clock revenues of Rs 10,730 crore, a 15 per cent growth over 2007, in line with its 2006 growth rate. The net profit margin was at 4 per cent of sales despite severe pressure on raw material costs. LG will increase ad and marketing budget by 10 per cent to Rs 400 crore in 2009. In line with its strategy, LG grew by 20 per cent in January and February. The company hopes to save $384 million through cost cutting and efficiency-improvement measures in 2009. It will also continue to hire people in order to grow its GSM phones business this year.
The strategy
“An apposite strategy followed by precise execution ensures the accomplishment of goals and vision of an organisation. LG India’s vision is to reach every consumer in the country via a route which is most befitting when it comes to practicality. Therefore, we developed a strategy which not only taps every region, state, or area but every individual,” says Moon B Shin, Managing Director, LG India. This is the kind of reach and presence LG India has been striving for and has maintained, since its inception in the country in 1997. “Be it the premium segment or the entry level products, there is always space for all categories of consumers,” Shin says.
“Following our core strategy we would maintain our product leadership position and be competitive in the Indian market even during the economic crunch,” Shin explains. Acknowledging the fact that the customer in today’s time is powerful owing to the availability of multiple choices, LG aims at offering the best to the consumer in terms of technology, pricing, looks, features and performance of the product. Using the best technology and manufacturing systems LG has its focus on products. It hopes to deliver products which are based on consumer insight, catering to the needs of Indian consumer. “In lieu of this, we are planning to invest Rs 200 crore in our Test Labs. Also, with a marketing and promotional budget of Rs 400 crore, LG intends to reach every corner of the country,” says Shin.
LG believes that the Indian consumer is evolving slowly in terms of lifestyle, preferences and choices and is always on the look out for something new to experiment with. “Based on the changing trend our future strategy is to develop technologies and products which would suit the needs of the Indian consumer,” he says. To quote an example, LG’s new frost-free range of refrigerators has been specially designed to woo the Indian consumer.
In the past couple of months, the products launched in home entertainment, home appliances and GSM segment have been customised based on the research conducted on the Indian consumer.
The trend in the white goods industry at present is to introduce feature-rich products which are not only stylish but technologically advanced. “Therefore, we are looking to launch a mix of energy efficient and innovative products to lure our consumers. Bringing further innovation to the global products we intend to give a global exposure to our consumers via the Indian way,” he adds.
LG will be introducing new products in the air conditioning, frost-free refrigeration and flat-panel display segments in the near future, following the mantra of launching products based on Indian insights. LG continues to invest behind conducting thorough lifestyle research based on which it will introduce a slew of lifestyle products for the urban consumer who looks out for style and functionality.
“As a marketer, you need to be innovative in your communication strategy and you have to offer spectrum of products to attract the customer. The idea is to communicate the developments to its consumer so that they benefit from the same,” explains Shin. In order to increase its reach, LG has set an ambitious retail vision of being present in every state, city and town in the country over the coming years, thus, boosting both product reach and sales growth.
Amidst the global meltdown, says Shin, it’s imperative to target the right populace at the right time as this is a tactic which never fails. According to the company, in the current scenario the future of consumer durable industry predominantly lies within the semi-developed rural India. Being least affected by the global meltdown, the Indian rural sector is still on a buying spree. With a splendid growth rate, the consumer of this sector not only has a considerable disposable income but is also yearning for an enhanced lifestyle. Supporting this regime is the introduction of loan waiver and subsidy to the Indian farmers by the central government. “In the current state of affairs, companies which are able to harness on this sector with their apt marketing strategies stand a better chance to combat recession,” Shin opines.
This proclamation is well supported by the 35 per cent contribution of rural sales to LG’s turnover in 2008 and this year it is expected to grow significantly to around 45 per cent. LG Electronics India seems to have has discovered and acknowledged the untapped potential in the sector and plans to encash on the opportunity further it has come out with a well thought out rural marketing strategy.
To bridge the gap between the company's promise of quality after sales service and actual delivery, LG India has also in place its unique customer service initiative '211' emphasising on 'Service When You Want'. The campaign includes LG response to customers' complaints within two hours. The fixing of time for complaints varies from one hour to a maximum of 24 hours. The IT infrastructure for the 211 campaign currently exists in 100 cities and would be extended to top 200 cities by year end.
With this initiative, the customer service field witnessed sweeping changes and has significantly improved customer satisfaction and service reliability in those cities. “LG Electronics realises the importance of after-sales service and understands that this as an opportunity of gaining a competitive advantage in consumer electronics market where prices go into a 'free fall', and thus has been focusing on after sales service with customer insight,” Shin says.
“Understanding and acknowledging the importance of information technology we are in the process of implementing it not only in our products but also in our human resources department during these times of economic crunch to increase productivity,” says Shin. The human resource division at LG is leveraging technology and developing a talent pool to beat the economic crunch. With this technology-driven initiative, the company's focus areas include operational excellence and talent retention. Performance management is one of the most vital systems of any organisation as it enables employees to be self-managed and understand their key roles. At LG, performance evaluation is done through an online system, which gives transparency and awareness to the employees. “At LG we emphasise on 360 degree evaluation for team heads, which will become online soon,” Shin adds.
