LG scouts for an AOR

Korean electronics goods company, LG Electronics India Ltd (LGEIL), has called for a pitch for its Rs 80-crore media business. For the record, while LG's total media spend earmarked for the calendar year 2004 stands at Rs 125 crore, about Rs 45 crore would be spent through its various branches. Three agencies have made their presentations before the company brass already, and two have made it to the final shortlist. These two are Universal McCann and MindShare. A decision on this is likely towards the end of the month.

Some recent reports in the media had suggested that Initiative has retained the LGEIL AOR. However, when company officials were contacted, agencyfaqs! was told that no decision has been taken on the issue yet. Which means the field is still wide open.

The news of LGEIL's potential partnership with a new media agency comes close on the heels of the company's decision to realign its creative duties with O&M and McCann-Erickson. To recapitulate, about two months ago, LGEIL awarded McCann-Erickson the creative duties of products broadly clubbed under Digital Display Media (comprising colour televisions, audio and plasma display products), and O&M the duties for the Digital Appliances Company (in other words, home appliances) comprising washing machines, microwave ovens, air-conditioners and refrigerators.

The decision to redistribute its creative and media portfolio is a result of an ambitious growth plan the company has laid out for itself. Talking about the business targets for the calendar year 2004, Anil Arora, marketing head, LGEIL, says, "Our turnover target of Rs 7,000 crore for the year 2004 is important and this is where marketing will play a pivotal role. We are confident we will achieve this target. We will be focusing a lot on innovative below-the-line activities and promotions round the year."

As the company scales up its target, the expectations from the marketing and advertising efforts are bound to go up. The need of the hour is "fresh perspective", say company executives. Explains a senior marketing official at LGEIL, "When LG entered India, the odds were against the Korean goliath. Especially so on account of its late entry. The task of advertising then was to consolidate the entire creative and media duties under one banner." That is why the creative and the media businesses were entrusted with Lowe (then Lintas) and its media arm Initiative (then Initiative Media) in the early years of LGEIL in India.

Subsequently, when the company got into an expansion mode, the logical thing was to distribute the creative business category wise. Thus Capital and Rediffusion came into the picture. Rediffusion DY&R bagged washing machines, while Capital Advertising got refrigerators (frost-free and direct-cool) and DVD video players. Lowe handled CTVs, mircowave ovens, air-conditioners, IT and DVD audio systems. Excluding the promotional budget, the size of the business with Lowe was to the tune of Rs 40-45 crore, Rediffusion's billings amounted to Rs 7-8 crore and the business with Capital Advertising was around Rs 10 crore.

The company embarked on phase two of its growth strategy by reorganising its marketing structure and then getting down to changing its agency partnerships. "The company cannot create newer categories for expansion; so the manner in which the brand is promoted becomes critical to company operations," explains the LGEIL marketing executive. In other words, in keeping with the aggressive role envisioned for advertising, the entire brand alignment architecture had to change. "The categories that had synergies were clubbed and accordingly distributed. Display products were bundled under Digital Display Media and appliances under Digital Appliances Company," explains the LGEIL executive. For the record, the GSM mobile phone business of LG was recently assigned to rmg david.

A decision on the AOR will bring LGEIL's phase two plans to their logical conclusion. What will tilt the balance in favour of the eventual winner is its ability to "deliver". The LGEIL official adds, "We have 40 branch offices and 75 remote area offices. The media agency would have to integrate media operations with these sales offices of LG. In that context, the infrastructure of the agency needs to be very strong."

© 2004 agencyfaqs!