Our vast portfolio is one of our biggest strengths.

When Anil Arora became head of marketing at LG Electronics India Ltd (LGEIL), he must have been aware of the expectations that were being placed on him, both from within the company and by industry watchers. After all, he had assumed charge at a time when LG's growth curve was scaling dizzying heights, and his job was to push the graph up even further. Arora has yet to complete his first year as marketing head, and LG is already aiming for a turnover of Rs 7,000 crore in 2004 - a substantial 55 per cent jump over 2003. Arora - who started his sales career at Eureka Forbes, after which he moved to BPL Sanyo (later BPL), then LG - is, of course, confident of meeting LG's targets. In this interview with Sumita Vaid Dixit of agencyfaqs!, Arora speaks about LG's strengths, and shares details on the durables company's ambitious growth plans which include pushing into untapped semi-urban markets.

Edited Excerpts

LGEIL’s success has been a result of its investment in cutting-edge technology and its relentless efforts to provide the customers value for money. The company operated strategically and aggressively in the marketplace, supported with a prior understanding of the Indian consumers. Today, the company has the widest range of product portfolio in the marketplace, thus catering to each and every income group, requirement et cetera.

Another factor that has contributed to the phenomenal success of LG is the establishment of a wide and extensive trade network that aims to cater to both the urban as well as the rural population. Focus on rural markets too contributed to the company’s bottomline. Currently, we have 72 regional area offices, 61 Central Area Offices with 43 branches in the rural markets.

The establishment of a second manufacturing unit in India – in Maharashtra – further reiterates LG Electronics’ commitment to the country. With the opening of this new plant, the company foresees the increase in the contribution of the Indian subsidiary from 5 per cent to 10 per cent by year 2010.

And, of course, communication has played a significant role in building the LG brand. Its association with the ‘health platform’ and ‘cricket’, backed with strategic communication, has helped LGEIL garner a strong position in consumer mindspace.

In today’s globally competitive environment, companies are under relentless pressure to provide innovative products in shorter time cycles with reduced costs and improved quality. Therefore, we obviously can’t survive without tracking consumer behavior and preferences. This information is used to formulate our products, pricing and promotion strategy to remain ahead of competition.

Now this is possible because of our presence in about 180 cities across the country, and the internal focus given on Research and Product Planning activities. Extensive studies are carried out for the remotest parts of the country to understand the feasibility of the markets, products, and communication. Accordingly, products are developed keeping in mind the different requirements for the customers in each market. For example, different colours of refrigerators are made for different markets as consumer preferences differ from market to market. In the case of televisions, we have four different languages for the on screen displays.

LG believes in partnership with its retailer and consumer fraternity, and without understanding the dynamics that affect our and their business, a symbiotic relationship is not possible. Our communication strategy was changed to follow the route of being more emotionally connected with the Indian consumer, based on our understanding of the consumer.

The semi-urban markets are showing much faster growth compared to the urban markets, and promise a lot of hidden potential. These markets have been showing a positive trend in terms of increased purchasing power, increased awareness level of products and the desire to improve living standards. All this has made it imperative for companies to offer the right product, with the required features and at competitive prices to these markets. Of course, most importantly, all this has to be backed with efficient after-sales services.

The rural areas have shown a remarkable growth over the last one-year. While the urban markets are growing at a rate of approximately 35 per cent, semi-urban areas have shown growth of almost 100 per cent. This year also, these markets will show a good growth rate keeping in mind the various initiatives and policies that the government has taken to upgrade the lifestyle of the people, and to help various companies to reach even the remotest areas. The other factor that will drive growth of these markets is increase in the education level in these areas. The markets in the semi-urban areas promise a lot of untapped potential.

LGEIL has always been very aggressive in its communication and promotional strategy. Our objective has been to always create reasons for celebration, while the competition waits for the regular stream of festivals before doing something. LGEIL has always taken steps to create excitement in the marketplace throughout the year. The latest was its mega consumer offer ‘LG Cup Uthao, Shandaar Inaam Pao’. Armed with the clear-cut objective of leveraging the cricket fever, this promotion took the market by storm.

But it’s not promotions, per se, that has brought about a change but the designing of effective promos. The products groups first understand what is it that puts a gleam in the consumer’s eye without distorting the image of the brand – that is, without eroding brand equity. Our promotions are synergistically linked to the brand attitude. This has helped us enhance our brand equity. The normal practice is to assume that promotions have their own agenda – to stimulate sales – and thus one needs to select and evaluate them accordingly. This view is myopic and counterproductive. The correct method is to devise promotions that strengthen at least one component of brand equity. Which is exactly what LG has achieved.

LG was one of the few companies that recognized the emerging trend in consumer needs towards health consciousness. Our advertising strategy has been to communicate what our products actually deliver – health, convenience, advanced features, and technological superiority. LG communication, till date, was centered at the theme of ‘protective health’. It was driven by LG’s concern for the consumers’ health, and having technology that work towards protecting them. This platform gave LG the ability to cater to the benefits that consumers were looking for and was focused on ‘product and technology’.

The year 2004 began with the new face of LG’s communication. It moved the LG brand into being part and parcel of the consumer’s life, the cultural ethos, and the warmth of Indian family interactions. It positioned products that allowed the consumer to celebrate their lives and to be in harmony with the world they thrive in. LG brand communication speaks the language of ‘active health’, which is all about a ‘vibrant and colourful life’. The active technology allows consumers to go ahead and explore the myriad vignettes of their lives and frees them from all worries and cares. It allows them to live their dreams in full colour and enjoy life to the fullest.

This is a positive step for the brand in connecting with consumers at a personal level, thereby building bonds that further cement the LG brand in the consumer’s life. During the seven years of existence in the country, LG has managed to capture a premium brand positioning in the market through its integrity, dynamism and innovation making it a symbol of trust and quality.

LG was one of the first companies in the industry to realize this need of the consumers and leverage it. The brand has been successful in creating a connect with the consumers for being the pioneer in this communication. Examples are many: ‘Golden Eye’ for its televisions, ‘Preserve Nutrition’ for refrigerators, ‘Fabricare’ for washing machines et cetera. While other consumer durables brands have also begun using the health platform, we have the benefit of the first mover advantage.

However, now there has been a strategic shift in the brand communication and marketing strategy. As I said, we have gone a step ahead and pitched our products on ‘happy living’. This platform extends beyond health and across all product categories to reflect the overall well being of consumers.

LG has positioned itself with ‘health and fitness’, and sports is integral to this. We hope to increase customer affinity towards the brand with this association. LG started its positioning with cricket in 1997 – with the World Cup – and today has the global sponsorship rights for the World Cup till the year 2007. Cricket, in India, is a religion that cuts across boundaries. LG has aligned itself with the aspirations of the country, which has increased our brand recall manifold. Cricket has helped us in bringing the population of this country on one platform, and for LG, which pioneered the cause of healthy living, this association is a natural corollary.

LG Captains of India is based on the fact that LG is the captain of the industry and has the desire to own the game of cricket. Incidentally, all cricket fans also know that the captain leads while the team follows. It is a clever positioning move, which suddenly makes competitive advertising a follower. LG is not trying to create an image – we are just communicating the already existing image of the leader, as personified by the greatest Indian captains.

A market like ours comprises both mass and premium-end segments. Neither can be ignored. While we are going after the consumer who is market conscious, we do not ignore those who want high-end products. For the mass market, I would not like to use the term ‘value-for-money’ as at every price point there is a value for money. But this consumer also desires products that are aesthetically appealing, desirable and technologically superior. Our strategy is to promote LG as a product that satisfies all these needs.

The rural market is going to be the main focus at LG for 2004. So, for that, we are opening many more branches across the country. In September 2002, we had only 18 branches; now we have 40. Additionally, we have 112 area offices, none of which were there last year. These area offices have been opened in district-level areas. Below these area offices, we have remote area offices, which we call RAOs. Currently, we have 80 RAOs, and are planning to expand that to 200 by next year, so that we can reach out to the rural market in a better way and feel the pulse of consumers and dealers there.

Now addressing the premium-end market… the consumer really is not price-sensitive today. That is, if you are giving quality products and the latest technology, they want it. As for our products in the premium-end segment, in every product category we have feature-packed products at every price point. I think a customer today is ready to pay a slight premium for a value she believes she will get. So they are marginally flexible on their budget. LG demands a premium and the customer is ready to pay since he is assured of greater value. Here again we have managed the psyche of both these segments significantly well to be able to achieve numero uno status in all product categories and segments.

LG India has a multi-tier structure for its distribution model. We have LG Shoppes (exclusive dealers for LG for all products), cyber shoppes (for IT products), SSDs (for air-conditioners), X Canvas Studios (for PDPs and the premium range of NDPs) and direct dealers. On the other hand, we also have a network of distributors and sub dealers. In total, LG has about 10,000 stock and selling points spread across the country.

This is undisputedly a network spread that is unmatched by any other player in this industry. This vast network has not only helped us in increasing our reach, but our strong relations with the trade and the focus on these markets have also helped us in getting a better understanding of the consumers in these markets, which has been a very interesting learning.

Regarding your question on LG’s presence in multiple categories, I would like to say that our vast portfolio is one of our biggest strengths. Today, LG is a one-stop-shop for durables as we have a basket of almost all products starting from CTVs, air-conditioners and refrigerators to optical storage devices, personal computers and now GSM mobiles too. This is indeed an advantage as we have something to offer the trade partners round the year, and further keep adding the latest technology products.

Our aim has always been to bring in the latest technology to the Indian consumer, at competitive prices. This has been our strategy since we entered the Indian market. Specifically, LG Electronics will be using the direct dealer channel, cutting across the different layers like national and regional distributors. Initially, there will be about 500 dealers, and the strength will be gradually expanded to 2,000 dealers by the first quarter of 2005. In order to ensure an overall satisfied experience for the consumer, we will be setting up over 250 service centers across India to be present in the interiors of the country.

Cashing in on our experience in this segment internationally – and our brand strength in the domestic market – we plan to bring a range of mobile gizmos to the Indian consumer, and hope to capture a substantial market share in this segment. LG aims at selling 4 lakh handsets during this calendar year. LG will be present at every price point in this market as we will be introducing new models, which, in addition to offering unique technology, will also have superior designs. In fact, in a short span of six months, we have already become leaders in the colour phone segment, which is raved by the youth. On the occasion of our seventh anniversary celebrations, LG Electronics India announced Yuvraj Singh as the brand ambassador for its premium range of products. The first product to be endorsed by him would be our GSM range of mobile handsets.

The main focus at LG for 2004 will be striking a balance between the push into semi-urban markets while building on our premium image.

There is a lot of potential in the rural market. Till now we have seen a 35 per cent growth. But now, since we intend to be very active in the rural market, we have set a target of 70 per cent value growth. So the target is to achieve a turnover of Rs 7,000 crore. We think the rural market’s contribution will be around 65 per cent, and the growth over this year on the rural market will be something around 40 per cent.

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 have forayed into and we aim at attaining the leadership position in GSM in the next two years. We will also be looking into new product launches in other product categories also.

As far as investments go, it is going to be huge.