Amid the rough-and-tumble of the maturing mobile handset business, the mantra du jour appears to be “understanding the consumer.”
That simply means mass-market techniques long in vogue to sell other consumer goods are being employed in wireless.
Instead of delivering handsets with various feature sets to the market, searching for traction, the large vendors have spent time and money on customer segmentation studies to more closely match their offerings to end-users’ expectations.
The version of this mantra at LG Electronics MobileComm U.S.A., Inc. is “respecting the consumer.”
“Two years ago, if you had asked me whether segmentation matters, I would have hesitated,” said Juno Cho, president of LG’s U.S. operations, last week at CTIA Wireless 2007. “Now consumers want ‘their’ phones and the U.S. market is upgrading.”
To catch that wave, LG has done consumer segmentations studies but, unlike others who trumpet their findings, the South Korea-based vendor holds its conclusions close to its chest.
Strong in U.S., slipping overseas
Why not? The company is well-positioned here. It claims to be the top CDMA-based handset supplier in the U.S. and ranks second in overall sales here, according to new data from NPD Group. Motorola Inc. has 33 percent of the overall market, with LG at 16 percent. (Samsung Electronics Co. Ltd. and Nokia Corp. each claim about 15 percent market share, but Nokia is losing share, according to NPD.)
Globally, however, LG slipped in global rankings from No. 4 to No. 5 in the past year-allowing Sony Ericsson Mobile Communications to claim the No. 4 spot. Thus the well-watched U.S. market represents an opportunity to bolster LG’s existing strengths.
LG began in the U.S. with mass market handsets in 2002-2003, Cho said. Then it pursued an “elevation of value” by selling music phones, QWERTY devices and HSDPA-enabled phones.
“Being No. 1 in a particular market is attractive,” said Cho. “But you must create value for the end-user to sustain your business.”
With its CDMA market position here solid, the company wants to leverage that installed base to capture the healthy average selling prices promised by the upgrade cycle, expand its GSM presence with its Shine handset and seize the day on HSDPA, Cho said. Globally, the vendor is pursuing more business in Europe and China.
New blood
The implication is that, having fought its way to an enviable position with U.S. carriers in a showcase market, LG needs to solidify its gains and focus on profitable market segments. Following a major shake-up in its executive suites in its global telecom and handset units in South Korea late last year-more than 30 executives were replaced-Cho has hired Ehtisham Rabbani as LG’s new vice president of product strategy and marketing for the U.S.
Rabbani had previously been involved in marketing and brand development efforts at major, consumer-facing companies such as Mars Inc., Activision and Procter & Gamble.
The new V.P.’s charge is to “make us a marketing powerhouse,” Rabbani said.
That means moving beyond “spiffy” advertising campaigns, Rabbani said, to apply the lessons of Marketing 101. One begins strategic marketing by defining one’s consumers, he said.
“We’re taking a knowledge inventory,” Rabbani said. “What do we know and not know?” Then, one designs products to meet those consumers’ needs and ensure that marketing and messages align with that match-up, he said.
“This is the way to win long-term,” he said. “Say, 10 years from now. There’s been a crisis in marketing in the U.S. because it has been seen as a quick fix. We want to build a market that will pay for premium products.”
LG will pursue this goal by designing products that address each market segment and avoid an excessive number of stock keeping units by consolidating its handset platforms at the low-end of its portfolio, while increasing the number of high-end models.
Cho said it would take some time for this approach to be reflected in product offerings.
“This will go to the core of our product design efforts,” Cho said. “We would like to be No. 1, but as an end result of delivering value to the consumer.”
