MAM

'Our marketing spends will stay flat at Rs 6 bn' : LG India VP marketing LK Gupta

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A sluggish market and depressed consumer demand is not deterring consumer electronic major LG India to reduce its marketing spend this year. The drive will be to reallocate spends with print seeing a marginal dip. Television will stay flat while digital ad spends will jump 50%.

The South Korean conglomerate will cut back its marketing spend on cricket, from Rs 1 billion in 2011. But it is still bullish on the game and believes addresses a wider consumer base compared to music or Bollywood.





In an interview with Indiantelevision.com‘s Ashwin Pinto, LG India VP marketing LK Gupta talks about the company‘s thrust in pushing new technology products like 3D and the marketing strategy it is following to drive growth in sales.

Excerpts:

So far year 2012 has been difficult for LG and the consumer electronics sector. What are the reasons behind this slow growth?

The market is looking sluggish because consumers are feeling less than confident about the situation - the economy, food and fuel inflation, interest rates and rising prices across categories. So, some consumers are postponing purchases of discretionary high-ticket items. We‘ve still had growth in AC and Appliances this summer while the rest of the industry has struggled.

However, even though it has been a year of challenges so far due to difficult macroeconomic environment like inflation, dollar appreciation and constant hike in input prices, the good news for us is that LG has grown by 15 per cent in its core business of Home Entertainment and Home Appliances. There has been a growth of 30 per cent in Home Appliances business and 25 per cent growth in Flat panel business.

By when do you see the situation turning around and what corrective measures are being taken by LG?

This is an industry wide situation and a lot of things at a macro level have to improve. So it’s tough to say by when the situation will turn around. We do expect the festival season in the second half to improve the growth somewhat.





At this point LG is launching flagship products across categories which will help in strengthening our product leadership via strong marketing campaigns. This includes LED, LCD TV, refrigerators, washing machines, Split ACs and microwave ovens.

We are looking at a 25 per cent growth in sales overall this year.

Could you talk about the impact of rising input costs due to the declining rupee value and how is it affecting the business?

Input cost is certainly a concern and rupee depreciation is also alarming due to which prices were hiked across all product categories by 15 per cent in the past year and a half. This was not only in television segment but all categories.

On a more positive note, there is increasing adoption and acceptance of new technologies like HD and 3D by consumers. How is LG tapping into this with new products?

LG is expanding the 3D market in a big way with Cinema 3D Smart TV range and is now poised to offer the widest range of 3D entertainment products - 3D LED, 3D Ultra Slim LED, 3D Home theater systems and 3D Blu-ray players.

Technology and design are key factors behind LG Home entertainment products. With our 2012 3D Smart TV line-up, we have been able to take a significant step forward, thanks to a series of new and upgraded 3D features led by the Cinema Screen Design.

With the 2012 Olympic Games to be broadcast in 3D and more than 30 English and Hindi 3D movies to hit the Indian Cinema theatres, 3D entertainment is set to explode in India at a steady growth of 500 per cent. We are targeting business worth Rs 10 billion from 3D TVs and aim to consolidate our position in the Flat Panel TV segment with 30 per cent market share.

To ensure the numbers we have an aggressive marketing strategy with a target investment of Rs 1 billion in Flagship product communication. This will be accompanied by experiential marketing campaigns.

‘This year we will spend slightly less on print and focus more on digital. Our spend on television will be similar to last year. We always look at efficiency for our marketing spends and digital platform is one where we can see good response. We have increased our digital spends by 50 per cent‘

LED TVs are growing fast in sales. Is this technology superior to LCD TVs?

The LED segment is growing at a faster pace with 500 per cent year on year growth (2011 versus 2010). The consumer preference is shifting to LED’s as CCFL and LED price gap is reducing. LED is perceived to be the latest, modern and eco-friendly technology. The LED segment contribution in sales was 35 per cent (in value) in 2011 and is targeting around 60 per cent in 2012.

Will the slowdown affect your marketing spends?

Our marketing spends will be Rs 6 billion, the same as last year. We are not reducing spends. We are only re-allocating spends to an extent.

A slowdown scenario indicates that fewer consumers are willing to buy in the current time and many consumers, due to the prevailing market mood, start postponing their discretionary purchases.

In such a situation marketing has to be focussed on converting the customers who are willing to buy. Accordingly, marketing spending will focus in the short term on in-store excellence.

Investments will be geared to give consumers a better in-store experience via display, demonstration and branding visibility for flagship products. At the same time, advertising will be more streamlined to deliver higher efficiency within the same budget. This will impact the media choices in print and TV media. Digital media, which plays a very important role in the consumer decision journey of searching and evaluating products, will be given a bigger share to have an early influence on potential customers.

In terms of LG’s marketing spend how does it split between TV, print, and radio? Will the slowdown force a change in the platforms that you use?

This year we will spend slightly less on print and focus more on digital. Our spend on television will be similar to last year. We always look at efficiency for our marketing spends and digital platform is one where we can see good response. We have increased our digital spends by 50 per cent.

Which medium is more impactful in terms of reach and brand recall?

All mediums have their own role to play. Some work better to create awareness, while others are important to drive consideration and even comparison with other brands.

But isn‘t it true that when consumers are hesitant companies need to be more aggressive in marketing? Does LG agree with this?

Yes! We have an aggressive marketing strategy in our flagship product communication so that we achieve our goals within the set budget.

A couple of years ago LG aimed to change its brand perception from a mass to an aspirational brand. Did this work?

We have managed to grab a bigger share in categories across the product portfolio. We are leading the market in side by side refrigerator, Front load washing machines, convection microwaves. Our image is much better compared to five years back. This effort to change and improve brand perception, though, is an on-going process. Our products are more modern and more high-tech, which has helped improve brand perception. We have single-handedly carved out a premium LED 3D segment where we sell the most TVs.

Have any new campaigns been lined up and could you talk about the thrust?

We have rolled out two campaigns. The first one is for our flagship product LG Cinema 3D smart TV and second is Eco health campaign for Home Appliances. We have started out Home Appliances Above The Line campaign Eco friendly which showcases eco friendly technology in LG HA products.

Simultaneously we announced a digital interactive campaign on Facebook called My Eco Home which will allow Facebook fans around the world to create and share their own personalised, virtual dream homes. An industry first, LG’s My Eco Home Facebook app reflects the company’s effort to interact with today’s customers in new, innovative ways. We also rolled our new TVC for the latest range of Cinema 3D Smart TV. LG Electronics India is betting big on Flat panel category and you will see a 360 degree campaign across to strengthen this portfolio.

When LG partnered the ICC and then renewed the deal what were the objectives? To what extent have these objectives been met?

We have a long association being the Global Partners of ICC, promoting cricket among its billions of passionate followers. We are proud to be associated with this great sport and with ICC. Through the global platform provided by ICC events, we will enhance the joys of cricket with our own innovative programmes and campaigns. Lead 11 is one such initiative to celebrate the national spirit by giving platform to our young future generation to lead the Cricket Stars in ICC World Cup.

What role has the ICC relationship played in giving you leg up on competition?

The association has helped us in establishing a strong relationship with the consumers. With our unique consumer engagement programmes, we have actively established the brand as a young, sporty today‘s brand.

How much of your marketing spend goes towards cricket and has this been rising year on year?

Last year almost Rs 1 billion of our marketing budget was spent on cricket. This number is lower this year since there is a smaller ICC tournament and also we didn’t participate in IPL broadcast advertising this year.

Why did you stay away from the IPL? 

This was a wise decision, given the decline in viewership. We felt that under the circumstances this year, the IPL would not have been cost effective given that rates have increased every year. So, our decision was the right one.

As a platform how does cricket compare to other avenues like music and Bollywood?

Certainly cricket is a far bigger platform and it addresses a far bigger consumer base as compared to music or Bollywood.
Will the monies that cricket gets this year from advertising be affected as it requires high expenditure by companies who are fighting a slowdown?

Not really! In India cricket fortunes swing with Indian team’s fortune. If the team does well, advertisers will continue to invest behind cricket.
Apart from cricket, which other sports is LG involved with?

At present LG is associated with cricket and at the global level with Formula 1. In cricket, we like to develop innovative consumer engagement programmes.

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