lg mobiles pakistan

27
Adverting Plan for LG Mobiles Pakistan Submitted by: Muhammad Mohiuddin Baig 2009

Upload: noorirocks

Post on 10-Apr-2015

1.744 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: LG mobiles Pakistan

Adverting Plan for LG Mobiles Pakistan

Submitted by: Muhammad Mohiuddin Baig

2009

Page 2: LG mobiles Pakistan

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.

Page 3: LG mobiles Pakistan

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

Page 4: LG mobiles Pakistan

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.

Page 5: LG mobiles Pakistan

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

Page 6: LG mobiles 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

Page 7: LG mobiles Pakistan

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

Page 8: LG mobiles Pakistan

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

Page 9: LG mobiles Pakistan

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:

Page 10: LG mobiles Pakistan

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

Page 11: LG mobiles Pakistan

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

Page 12: LG mobiles Pakistan

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.

Page 13: LG mobiles Pakistan

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

Page 14: LG mobiles Pakistan

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.

Page 15: LG mobiles Pakistan

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

Page 16: LG mobiles Pakistan

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:

Page 17: LG mobiles Pakistan

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

Page 18: LG mobiles Pakistan

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

Page 19: LG mobiles Pakistan

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

Page 20: LG mobiles Pakistan

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.

Page 21: LG mobiles Pakistan

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.

Page 22: LG mobiles Pakistan

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

Page 23: LG mobiles Pakistan

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.