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Adverting Plan for LG Mobiles Pakistan

Submitted by: Mohiuddin Baig

Muhammad

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 products and services. LG Electronics set its mid- and long-term vision anew to rank
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http://www.lgmobile.com.pk/experiencelg.php

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 Pakistans 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 Pakistans handset

market which isnt 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 Pakistans 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 Pakistans 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). Pakistans 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 users 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-thebattle-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-thebattle-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 End Low-Mid High-Mid High-

LG G 1600 GSM KU Price: Rs.2,200.

LG KG 195 Price: 6,000

LG KE 970 Price: 14,000

LG 990

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 Strong name Technological Innovation Weaknesses brand Ineffective Opportunities Growth in Threats the Counterfeiting phones Strong

promotions Telecom Industry No defined Using position against promotions establish competitive competition a

to Competition

Increasing Market share Diversified product line

position Negative word of Targeting mouth Relatively new in the market end market

low Market second phones

for hand

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 dont 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 Pakistans 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

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LG 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:
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Abrar Ul Haq Ali Zafar

research carried out by media track

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 LGs 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 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 to as express with music Sony they are introduced compete Ericssons

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 doesnt 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 Rs. 800,000 Jang Urdu) on weekends. Half page ads Television Geo TV and Hum TV. One Rs. 100,000,00 approx minute alternate commercial days on 4 times on each channel

during prime time and regular as well Outdoor advertisements Misc. Rs. 50,000,00 approx 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-ofpakistan%E2%80%99s-handset-market-%E2%80%93-an-analysis/ http://www.pro-pakistan.com/2008/09/08/an-insight-into-the-mind-ofmobile-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