How Samsung plans to regain No.

1 spot in India
The Korean consumer electronics giant is now reaching deeper and wider into the Indian market, tempting consumers with technologically advanced products specially tailored to their needs.

Samsung India has been around for a while now, and its close association with Indian cricket - team and tournament sponsorships and so on - has meant brand recall rates are pretty high. The core of Samsung's new strategy, therefore, has been to reach out to a bigger base of consumers, both in the metros and non-metro markets through its products and marketing/communication strategies. To tap the non-metros and semi-urban markets, last year Samsung conducted over 100 road shows in class B and C towns. The Digital Home Road shows were meant to showcase our full range of products to customers in towns like Meerut, Saharanpur or, say, a small town in Tamil Nadu," says Zutshi. The success of the road shows was measured in terms of the number of people who visited these stalls and any bookings made with the local dealer. And the focus on small towns doesn't mean the metros can be overlooked. There's a growing market for replacements as well as an increasing number of homes wanting multiple television sets. The growth of modern retail and the expansion of large-format electronics stores like Croma, Jumbo and E-Zones add to the opportunity. Meanwhile, company-owned outlets remain a key strategic tool - Samsung will add another 30 showrooms to its existing 100-odd this year. But, with a difference. Over the next few months, the existing Samsung Digitall Homes will all be rebranded Samsung Plaza, in keeping with the global practice.

Same game, new rules Samsung's biggest rival, of course, remains LG Electronics. The other Korean giant has maintained its volume lead in colour TVs, washing machines, frost-free refrigerators and airconditioners. While Samsung built its premium brand image and customer base, LG was busy seeking a wide reach and extensive distribution network that would help build volumes. marketing experts believe the chaebols are mirroring each other's strategies.

Along with the launch of new products, Samsung also consolidated its distribution system. Samsung had 18 state-level distribution offices and a direct dealer interface. The direct dealer interface helped the company get quick feedback from dealers, and enabled it to launch products according to consumer needs

LG marketing Stratergy We do not wish to push sales but create a pull or demand. Our marketing will focus on higher brand value - aspirational and premium. The focus will be on consumer benefit and not price discounts, More than 65 per cent of last year's Rs 6,500 crore (Rs 65 billion) revenue came from non-urban sources; up from under 60 per cent the previous year. The industry average? Twenty-five to 30 per cent. Add the fact that the rural markets accounted for a remarkable 30 per cent of total sales and it's clear that LG's strategy is working. "We push rural marketing," agrees How does it do that? LG reaches into the hinterland through a pyramidal sales structure. Branch offices in larger cities set up central area offices in smaller towns; these in turn reach out to even smaller towns and villages through remote area offices -- at last count, the company had 51 branch offices, 87 CAOs and 78 RAOs. Each RAO has servicing, marketing and sales teams at its disposal and an individual budget for marketing activities in its territory. The executive in charge has independent decision-making powers -- he can decide the tenor and scale of brand promotions in his area, without having to cross check every little detail from the head office. Technology, too, is being used to the hilt to ease their jobs. The RAOs and CAOs are all electronically connected through a V-SAT and Intranet network. And where earlier decisions about putting up large hoardings could be approved only after a visit from the head office, LG has provided all its branch managers digital cameras -- now they just click images of suitable locations and get them approved electronically. The company was ready to do battle on two flanks: it offered modern, features-packed products, at the same time keeping its margins wafer-thin. Even competitors accept the merit of the tactic. Similarly, refrigerators in India have smaller freezers and big vegetable compartments -- Indians prefer fresh food and a significant proportion are vegetarian. Colours, too, are chosen keeping market preferences in mind. White refrigerators, for instance, don't sell well in Kolkata [ Images ] and Punjab [ Images ] -- while the sea air in Bengal corrodes the paint, the masalas used in Punjabi cooking discolour the fridge.

So LG offers a range of bright colours in these markets. The cricket game in TV sets wasn't the only "go local" innovation: LG also offered on-screen displays in five languages and large capacity semi-automatic washing machines that would suit Indian families. The research for these adaptations and innovations is done in-house. LG invests significantly in local R&D -- last year the company spent over Rs 100 crore (Rs 1 billion) on research. "We want to be independent of Korea," states Kim. It's working towards that: already 70 per cent of its product line is produced locally, with the rest imported from China, Korea and Taiwan. In refrigerators, 95 per cent of the components are localised. All of which also help keep prices down.

Market Analysis The market for consumer durables has expanded over the years. The household income of Indian houses has experienced significant improvement in the past decades and as a result the demand for durables has also risen. The current projection shows that household income of the population in top 20 cities of India is expected to grow by 10 per cent in the coming years. This is likely to increase the demand for consumer products as well. The middle income group section (household with disposable income between 200, 000 to 1, 000,000) which currently constitutes 5 per cent of the population is expected to become 41 per cent by 2025. Rural poverty is expected to decline to 26 per cent by 2025. All these factors are expected to contribute towards improving the market scenario for consumer durables. The market has recently experienced around 30 per cent growth rate in demand for electronics and home appliances. Categories like Flat panel TVs, Microwave ovens, Air Conditioners and Refrigerators are likely to post strong growth. Urban growth is likely to be driven by new technology/innovative products, lifestyle products and replacement demand such as LED TVs, Laptops, Split ACs, etc. Rural markets are likely to outpace growth in the urban markets led by increasing penetration across categories such as Refrigerators and Washing machines. Some of the factors that are said to have promoted the growth of the industry are:

Changed lifestyle Higher disposable income Changed taste Affordable prices Boom in housing and real estate industry

Widened market- expansion of rural market Increased scope for advertising Easy financing- zero interest EMI Easy loans and credit card purchases Festival deals and discounts

Market Trends: New technology and lifestyle trends creating replacement demand Now Flat Panel (LCD, LED) TVs Frost Free Refrigerators Convection Microwave Blue Ray DVD Players, MP3s Then CRT TV Direct Cool Refrigerator Basic Microwave Cassette Players

4. Growth drivers Key growth drivers include:

Continued economic growth demonstrated through 8.4% CAGR growth in GDP over last 5 years Favourable demographics; 64% of the population in working age category Increasing Urbanization, nuclear families Increase in disposable incomes; which drives consumption Increasing affordability coupled with declining prices of products Lower consumer product penetration Availability of new products and technologies, Easy financing schemes and Increase in organized retail

Rural Markets offer a big opportunity

Rural Consumer durables markets is growing by 30 per cent currently, expected to grow by 45 per cent in FY12 Approximately 69 per cent population resides in rural India yet only 35 per cent sales is contributed by rural markets. However, this sales contribution is expected to increase to ~45 per cent in near future. Rural markets are expected to post much faster growth than urban markets in medium term led by o Increasing rural Income with higher contribution from non farm income. o Miniscule penetration (5-7 per cent) in many product categories generating demand from first time buyers o Increased distribution reach of consumer durable companies o Customized products for rural consumers o Product awareness through advertising

Growth is mainly contributed by first time buyers of products unlike replacement demand in urban markets Improved rural infrastructure, agricultural reforms, power availability will boost growth going forward.

Key Challenges

Intense competition among players - leading to higher ad spends and lesser pricing power, thereby lowering margins Increase in raw material prices major raw materials (metals) are exhibiting increasing trend posing margin pressures; however, shift in product mix to partially offset increase in input costs over the medium term Changes in technology - making product lifecycles short Rural distribution - availability of products to masses is difficult as 68 per cent of Indias population still lives in rural areas. Entry of cheap products - as private labels in organized retail