Post on 10-Apr-2015
Adverting Plan for LG Mobiles Pakistan
Submitted by: Muhammad Mohiuddin Baig
2009
EXECUTIVE SUMMARY
The scope of the project is to analyze the current advertising strategy of LG
mobiles Pakistan and recommend changes in it.
First the Industry analysis is discussed in which market share and the market
segmentation is included, followed by consumer behavior and consumer buying
patterns. Then the focus is shifted on the client. After discussing the target market
and Marketing mix (Product, Price, Distribution and Promotion) their current
strategy and ads are discussed.
It has been observed that LG mobile is perceived to be a low quality brand
primarily due to ineffective promotions. Now LG has an opportunity to change this
perception considering two major players are leaving the market. The new plan
suggested incorporates as to how LG mobiles can seize on this opportunity.
The strategies adopted by the competitors and the competitive posture of LG
mobiles against it are discussed.
New strategy is proposed along with its benefits are discussed. The media
selection for the new strategy along with the implementation of the strategy is also
discussed.
In the end the challenges in the proposed strategy is discussed followed by
conclusion.
COMPANY PROFILE1
LG Electronics Mobile Communication Company (LG) is a global leader and
innovator in the worldwide mobile market, providing consumers with better mobile
experiences through its advanced mobile technology and premium handset design
capabilities. LG is the largest handset provider in the global CDMA market, and is
rapidly expanding its presence in the GSM market.
In Pakistan LG mobiles was launched when LG electronics ventured with New
Allied Electronics few years back.
LG aims to provide the best quality products and technologies for consumers and
to become the undisputed leader in the mobile industry. The company is
strengthening its presence in the global market and earning favorable reputation
as a top-quality brand.
LG has combined its cutting edge design and technological capabilities to create a
more emotional experience for customers with the launch of its Black Label
product under the edge of LG's Black Label series, showed the company's
commitment to high-end premium design products. it was also a commercial and
industry success, selling more than 7.5 million units last year and winning
numerous design award. This year, LG will keep the momentum going by
continuing to focus on handset style and usability.
LG Electronics pursues its 21st century vision of becoming a true global digital
leader who can make its customers worldwide happy through its innovative digital
1
http://www.lgmobile.com.pk/experiencelg.php
products and services. LG Electronics set its mid- and long-term vision anew to
rank among the top 3 electronics, information, and telecommunication firms in the
world by 2010. As such, we embrace the philosophy of “Great Company, Great
People,” whereby only great people can create a great company, and pursue two
growth strategies involving “fast innovation” and “fast growth.” Likewise, we seek
to secure three core capabilities: product leadership, market leadership, and
people-centered leadership.
INDUSTRY ANALYSIS
Pakistan’s handset market is primarily a low-end market with majority of volume
comes from low-end mobile phones. Another important aspect is that our handset
market is extremely price sensitive just like any other handset market of a
developing country.
To comprehend the local market dynamics, below is the price segmentation
analysis along with the market share each price segment comprised upon.
Source: http://www.pro-pakistan.com/2008/08/30/the-state-of-pakistan%E2%80%99s-handset-market-%E2%80%93-an-analysis/
Now let us take a look at the market share of handset manufacturers in Pakistan
Source: http://www.pro-pakistan.com/2008/08/30/the-state-of-pakistan%E2%80%99s-handset-market-%E2%80%93-an-analysis/
These figures might be shocking for some people, since in Pakistan most of the
people still think Sony Ericsson is the second major player in the Pakistan’s
handset market which isn’t correct any more, As mentioned earlier Pakistan is
primarily a low end market with approx 63%-65% volume generates from phones
worth less than 3000 and if we look into Sony Ericsson local product portfolio you
will not find a single Sony Ericsson model in this price range, strangely enough
their majority of portfolio compete in a price segment (High-end) which is just a
mere 5% of the total handset market.
Motorola is just vanishing in Pakistan, the disaster of their F-3 model started a
vicious slide from which they never recovered with the future seems more bleak.
The Koreans are playing their cards really well with the success of both Samsung
& LG they are really flying high. Especially the success of Samsung is very
impressive with a very strong portfolio (the most balance portfolio in the industry
covering all price segments with good products). This success in Pakistan has
come down from the global success Samsung Mobile has been enjoying from the
start of 2007. Their flagship model SGH C-160 targeting the low-end category is
making waves in the most lucrative (volume vise) price segment in Pakistan’s
handset market. With more emphasis on R&D & product development the future
looks bright for this giant conglomerate.
LG has also succeeded really well through getting direct benefit from the absence
of any substantial products by Sony Ericsson. But the question mark on the
product quality is hurting the brand to grow exponentially; I believe that they need
to work very hard in building their brand image (development of high perceived
value through High-end Flagship model) as LG still have very low brand image in
comparison with the competition.
Nokia, the global leader in the world is still the player to beat in Pakistan’s handset
market with the resounding success of Nokia 1200 and Nokia 1208, this global
giant has so much to offer in-terms of quality products. In Pakistan, Nokia plays a
major role in 3 main price categories (Low-end, Low Mid & High) which comprised
upon 82% of the total market.
If we look at how the current market stands with respect to market share of each
handset manufacturer, Nokia still has a sizeable lead though their market share
has been deteriorating steadily (from 65% in 2006 to 48% at the end of July, 08).
The progress of Samsung has been phenomenal from 8% market share in 2006 to
the current 30% with indication of further progression in 2009. LG is the second
biggest gainer (approx 17% share for a player who has just been active since 2
years) with most of the success came from its 2 successful models LG KG195 &
KG270. Sony Ericsson & Motorola represent 2 of the biggest losers in the handset
market with only 5% & 1% share in the market.
PRODUCT LIFE CYCLE
In the product life cycle LG mobiles is currently in the growth stage and this can
be substantiated from the data above which says that it has increased its market
share to 17% in just two years.
CONSUMER BEHAVIOR
The mindset of our local mobile phone user is very unique & complex. Influences of
socio-economic & demographic factors, peer pressures & life style etc are the main
driving force through which the consumer ends up owning a particular model for
his/her communication needs.
A rough estimate suggests that in Pakistan the usage span of a new cell phone is
mere 3 months (means majority of local users upgrade their cell phone within 3
months time).
Pakistan’s mobile user can be divided into two main categories (2 basic types of
users).
1. Those who are driven by their needs
2. Those who are driven by their aspirations (Users who can easily suffice their
communication requirement through a say Rs. 10k mobile phone but instead they
choose to carry a cell phones worth Rs. 40K or more)
In every mobile phone user’s mind there is a battle going around, a battle between
their needs & aspirations. Some own phones to suffice their communication needs
while some own phones to meet their aspiration urges.
Now look at the mobile phone user preference chart while making actual decision,
the data is a study & extrapolation is used for analysis purposes as it enable us to
understand the psyche of local consumer. Also take a look at the chart depicting
local consumer purchasing pattern.
Source: http://www.pro-pakistan.com/2008/09/08/an-insight-into-the-mind-of-mobile-phone-users-the-
battle-of-needs-aspirations/
The above chart suggests that the consumer is sensitive to a number of factors and
it is difficult to point out just one or two.
PURCHASE PATTERNS
Following table shows the prominent factors that influence the customers in
buying a phone:
Source: http://www.pro-pakistan.com/2008/09/08/an-insight-into-the-mind-of-mobile-phone-users-the-
battle-of-needs-aspirations/
It is a high involvement product. We can see that referral and advertisement both
play a vital role when a phone is being bought. Building a strong brand image and
ensuring a positive word of mouth are the two key success factors for any player in
the industry.
TARGET MARKET
LG mobile caters to both high and low end market by providing a diversified
product line. This has already been discussed earlier that the market is segmented
essentially in four broad categories
Low-End
Low-Mid
High-Mid
High-End
Now let us take a look what products of LG caters to which segment
Low-End Low-Mid High-Mid High-
End
LG G 1600 GSM LG KG 195 LG KE 970 LG
KU 990
Price: Rs.2,200. Price: 6,000 Price: 14,000
Price: 30,000
Also LG has launched an exclusive phone for females this is in response to
Motorola pink phones:
LG KG 270
So it is difficult to say that LG targets a specific segment the range of products is
as such that it caters to all broad categories that are there in the market. From
advertising perspective the ads shown do not target any segment specifically
rather they are generic ads which is a major drawback because you first need to
identify the target market according to the product and then make ads
accordingly.
SWOT ANALYSIS
Strengths Weaknesses Opportunities Threats
Strong brand
name
Ineffective
promotions
Growth in the
Telecom Industry
Counterfeiting
phones
Technological
Innovation
No defined
position against
Using
promotions to
Strong
Competition
competition establish a
competitive
position
Increasing
Market share
Negative word of
mouth
Targeting low
end market
Market for
second hand
phones
Diversified
product line
Relatively new in
the market
Strengths:
LG has a strong brand name which is mainly due to the other electronic items that
are there in the market. When we talk of LG mobiles we see that LG is constantly
innovating, it is bringing in new features in its phones. This is primarily due to the
competition that is there for example if Nokia or any other competitor would
launch a new phone, LG would be quick to launch a similar phone with same or
even more features. Another key attribute that LG has is its strong financial
backing. LG provides a diversified product line targeting both high and low end
customers. These phones vary in design, features and prices in order to cater to
each segment. LG has been one of the prominent brands in the cellular industry
which increased its market share considerably.
Weaknesses
If we look at the promotions of LG mobiles we can identify a number of flaws. They
play heavily on the celebrity endorsement and in the end the celebrity turns out
bigger than the brand. Also we would not find and cohesion between the
promotional strategies. Another key issue is that even if they produce a quality
product the customers would perceive it to be sub standard because of the
negative word of mouth. LG provides all features at a relatively cheaper price but
somehow customers don’t associate quality with it. LG mobile is a relatively new
player in the market. It has only been there for two years, considering Nokia have
been in the market for a long time.
Opportunities
Pakistan has seen immense growth in the telecom industry over the last few years.
According to PTA (Pakistan Telecommunication Authority) 91% of
Pakistan’s population is covered with mobile. LG mobile has a huge market that it
can cater to thereby it can increase its market share. If LG formulates a consistent
promotional strategy and define its position it would be able to compete with
giants like Nokia. This is crucial because even if it continues to produce quality
products, incorporating new features it would continue to suffer because of the
ineffective promotional strategy. As discussed earlier chunk of the revenue in the
industry comes from the low end market so LG should strongly focus on that to
increase its market share.
Threats
The major threat for all mobile producers including LG is the presence of
counterfeiting phones which are the replica of the original phones. They provide
the same features and sold at half price or even lesser than that in the market.
Considering the decreasing disposable income due to inflation customers are
switching to these phones. With reference to LG mobiles it is facing stiff
competition from big players like Nokia the reason is that the loyal customers of
other brands refuse to switch to any LG. Pakistan is a host to one of the biggest
mobile for used phones and customers prefer to buy a second hand Nokia phone
instead of getting a new LG phone because they relate reliability with Nokia not
LG mobiles
MARKETING MIX
Product
LG mobiles provide a diversified line of products of handsets in order to cater to
different segments. Currently it is providing a variety of more than twenty phones
in the market. They include the phones that were launch with the intention that
they would compete with Nokia and other brands and then there are some which
are completely different.
Some categories of phones that are as follows
LG KG series
LG KU series
LG KF series
LG KM series
LG KP series
Within these series variety of sets are offered keeping in mind the pricing and the
features that have to be offered with it.
Price
The price range varies from Rs. 2,000-30,000 depending on the features and
design of the phones. The nature of the product is as such that it has to cater to
various segments and obviously you cannot charge a similar price to all the
segments so this variability in price provides flexibility.
Distribution
LG has its own showrooms where their products are displayed and sold but
primarily it is sold through distributors namely Advance Telecom and United
Mobile. These distributors have contracts with LG mobiles and they also claim the
warranty in case of any damage or malfunctioning of the product.
Communication/ Current Promotions
2LG has remained one of the top advertisers for the year 2008 yet it has not been
able to define its clear position in the market although the market share of LG is
increasing but that is due to the fact that one of
the major player i.e. Sony Ericsson is leaving
the market.
If we look at the promotional campaign of LG
mobiles we see heavy use of celebrity
endorsement in all their advertisements
whether print or media. They have used
celebrities like:
Abrar Ul Haq
Ali Zafar
Atif Aslam
There is nothing wrong with using celebrity
endorsement but if you rely heavily on it and do
not highlight the brand, the celebrity becomes
bigger than the brand and that is exactly what is happening with LG’s campaign.
This is one of the reason why LG phones are perceived to be sub standard. The
impact on the high end products is greater than
the low end products because consumers are
not willing to spend a lot of money buying a LG
phone.
In their ads they do focus on the features of the
product but in the end it gives an image of a
2 research carried out by media track
sales pitch. It does not talk about building brand or building relationship with the
customers. According to my analysis the issue is not of the product or the quality
the issue is of the perception. So far none of their campaigns tries to resolve that
issue. Earlier when consumer buying behavior was discussed we observed that the
brand name plays a vital role but unfortunately LG has not been able to establish
that. Due to ineffective promotions LG has also been a victim of negative word of
mouth, people who have not used the phone still have to say something bad about
it because they do not like the ads that they have seen on TV or print media. They
started of their campaign with Abrar ul Haq and the TV commercial gave an image
of a low quality and low price brand although it had all the features to compete
with Nokia and Samsung. Then they bought in Atif Aslam in LG KG ads which was I
believe much better than the previous one and now they are using Ali Zafar. The
point that I am trying to make here is that there have been no cohesion between
these campaigns and the message was confusing. It is giving an image that LG is
relying on celebrities to compensate for lack of quality in the products.
Media Selection
As discussed earlier LG mobile has been one of the top three advertisers on TV
having said that they do advertise on print media as well but primarily they focus
on the TV. Print media includes advertisement in news papers and billboards as
well. LG mobile hardly uses radio for advertising.
To sum up the analysis of the current campaign of LG mobiles, here are the salient
features of it:
COMPETITOR ANALYSIS
Let us now take a look at what companies like Nokia, Samsung and Sony Ericsson
is doing in terms of their ad campaigns.
The ads of these companies are not locally made so they have adopted a regional if
not a global strategy.
Sony Ericsson
If we take the example of Sony Ericsson the
ads shown in India are the same that run
here. Sony Ericsson has a well defined
product line meaning everyone knows that
Walkman phones of Sony Ericsson are the W
series and they Cyber shot phones are the K series so the customers can relate to
it. The ads that run of each line are different and tailor made for each segment.
Also the tagline of I (logo of Sony Ericsson) has proved to be very effective. It
sends a consistent message.
Nokia
Recently Nokia has introduced a line of music
phones known as express music they are
introduced to compete with Sony Ericsson’s
Walkman phones. The ads truly depict the core
benefits of the products. Like Sony Ericsson,
Nokia has a well defined product line. The
customers know what to expect from N-series
and E-series. The latter is a sophisticated product line designed for the corporate
and N-series for gaming.
Samsung
Samsung has recently launched Omnia to compete against Apple I phone but
surprisingly Samsung hardly advertises its products. The ads we see on television
are not on our local channels. One thing that they do is that they bundle their
phones with their other products such as LCDs and home theatre system. So
essentially they are cashing in on their strong brand name. When it comes to
advertising their phones separately they have no defined plan as such with
reference to our market.
COMPETITIVE POSTURE
LG mobiles has an advantage over its competitors that it makes local ads in which
usually the medium of communication is Urdu, the reason why it is crucial because
it is the most understood language among the masses. Same is not true for its
competitors in which the medium of language is English. Ads by LG usually have a
local touch which is a double edged weapon because on one hand masses do
understand the product and on the other perceive it to be sub standard since it
gives a local touch.
PLAN SUGGESTED
The plan suggested would focus on building a stronger brand image for LG
mobiles. The plan would require a more sophisticated and customized approach
while designing the campaign.
OBJECTIVES
The objective of the plan proposed is to build a strong brand image of LG mobiles
so it can penetrate into high end market. This is important because the penetration
of LG mobiles in high end market is very less. The ads designed should reach out
to the High end market. Currently none of their ads appeal to this class this
includes all their celebrity endorsed. Their ads should be focusing on the brand
rather than the strategy. One thing that they are doing well is explaining the
product features well so I would not recommend changing that considering the
nature of the product however the brand LG mobiles should be focused as well.
The plan would also include defining each product line again taking example from
its competitors Nokia has a well defined product line( N-series, E-series) but LG
doesn’t have that all they have is their LG KG series but no one know how it is
different from its other products.
STRATEGY & IMPLEMENTATION
Market positioning
The plan suggested would project LG mobiles as a high quality brand. Considering
Sony Ericsson and Motorola are leaving the market and the consumers are running
out of alternatives, now would be the best time for LG mobiles to take advantage of
the phone. Consumer Behavior analysis and purchase patterns suggest that the
perception of the brand is important. The plan would try to improve that.
Advertising Message
The advertising message should show
sophistication and they can use punch lines such as
“Sophistication with Style”
The appeal of these advertisements should
primarily be slice of life. The music especially in
the TV ads should be sober yet classy. They focus
on the product features which is essential but they
also need to focus on the brand as well. This
advertisement is from their current campaign and I
believe it is a pretty decent ad but somehow these kind of ads are over shadowed
by celebrity endorsed ads.
They have to do away with too many celebrities that are currently endorsed and
move their focus to the brand. Making sophisticated ads like Nokia does is
important for a better brand image. They should not mention the price with their
every ad because in the end the product is perceived to be sub standard. If we look
at the competitors no one shows the price of the product in the ads.
In the ads they have to use more sophisticated colors such as black also they need
to come up with a jingle like Nokia and Sony Ericsson has. Jingle leads to an
immediate brand recall. LG mobile needs to have one as well which is
sophisticated.
BUDGET
Considering LG mobiles is among the top advertisers for the last year so one can
safely assume that the company has no major financial constraint. The costs of
showing new ads which have a more sophisticated look and message which lead to
brand building are as follows:
The cost would be assumed for a campaign of one month:
Newspaper ads (The News and The
Jang Urdu) on weekends. Half page
ads
Rs. 800,000
Television Geo TV and Hum TV. One
minute commercial 4 times on
alternate days on each channel
during prime time and regular as
well
Rs. 100,000,00 approx
Outdoor advertisements Rs. 50,000,00 approx
Misc. Rs. 50,000
The costs are high because it would be a month campaign focusing on brand
building.
MEDIA
I believe the media vehicles used by LG mobiles now are fine but I would like to
propose advertising more on print media and radio.
The sole focus of LG mobiles current advertisement is TV. The new strategy would
require LG to shift its focus slightly from that to other media as well. LG should
advertise more in Newspapers and radio following the footsteps of Nokia because
they are the market leaders right now. Outdoor advertising would include
billboards and point of sales (Mobile Markets).
Considering it to be a high involvement product direct mail can be effective and
would give a more personal touch to the potential customers.
EVALUATION
The strategy proposed can be evaluated through the following
Increase in sales of high end products
Customer surveys as to how they perceive the brand after the campaign
Feedback from distributors
CHALLENGES
The challenges that can be faced while this strategy is adopted can be the strong
influence of the Parent company as it would be difficult to create a separate
positioning for this particular product line. Considering the recent financial crunch
allocating huge costs to advertisements can be a threat. Stepping into high end
market would mean additional competition from brands like Blackberry and I
phone so that is a major challenge.
CONCLUSION
LG mobiles is increasing its market share but that is only due to the sales of low
end products. At this point market is flooded with counterfeiting phones coming
from china. So they must explore new markets or re visit their strategy in their
existing markets. It is about time LG focuses on its advertising strategy for high
end products and have more sophisticated approach. This would improve the
brand image of LG mobiles in the market. If LG is able to change the perception of
the consumers about the brand it will for sure see a growth that is sustainable in
the long run as well.
References
http://www.pro-pakistan.com/2008/08/30/the-state-of-pakistan
%E2%80%99s-handset-market-%E2%80%93-an-analysis/
http://www.pro-pakistan.com/2008/09/08/an-insight-into-the-mind-of-
mobile-phone-users-the-battle-of-needs-aspirations/
http://pakgsm.com/lg_mobile_rates.html
http://www.lgmobile.com.pk/experiencelg.php
http://geo.tv/geopages/ratecardgeonews.htm