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LG Electronics India has not increased its marketing spends this year. The South Korean company, which follows a January-December accounting calendar, has only assigned Rs 600 crore towards marketing and advertising in 2012, the same amount it spent in 2011.
This is significant since marketing spends typically see a 10-12 per cent increase year on year. It raises questions on growth of the Rs 16,200 crore company. Early last year, LG had, with great fanfare, announced a sales turnover target of Rs 20,000 crore, but had been unable to meet it.
The typical spend allocation strategy followed by durables companies is to reserve 5-10 per cent of their turnover on marketing/ advertising.
Peer and competitor Samsung for instance, which too follows a Jan-Dec accounting calendar, says it is looking at a 20 per cent growth this year and has correspondingly increased its marketing/advertising spend.
Mr Lakshmikant Gupta, Vice President — Marketing, LG India, however, says the company grew 15 per cent last year, but that marketing spends have consciously not being hiked this year as the company is pursuing media efficiencies.
“Today, we are questioning every bit of money spent on media and have realised that the same money can be used for having direct connect with consumers through in store activations and promotion,'' says Mr. Gupta. “This is being done by entering housing societies and holding weekend carnivals to sell our products.”
“The company is trying to build efficiencies and has become ROI conscious,” he adds.
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Today, he says, LG would rather spend on in-store promotions and direct sales than trying to spend heavily on big-ticket media events on television.
Even at the store level, LG is holding activation programmes and improving the ambience of its stores to lure consumers.
The past year has been difficult for LG's core categories like air conditioners, refrigerators and washing machines. “Today, our biggest challenge is to win back the consumer. Last year was not a great year with consumers postponing their purchase decisions of big ticket items. The consumer durables category grew at 9 per cent while we managed to grow at 15 per cent although growth has been slow in most of our categories,” added Mr Gupta.
This year, LG's focus will be on upgrading its product portfolio with new innovations and technologies in order to compete with brands like Sony and Panasonic. However, unlike these brands, it has decided to stay away from brand ambassadors.
It has also decided to go premium in in the mobile phone category where it has a meagre share of 4 per cent. “We have decided to operate only in the premium smart phone category as the mass brands are dominated by Chinese players,” added Mr. Gupta.
LG has also recently entered new categories like air and water purifiers.
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