LG's plan to shadow the consumer

'Consumer insight products will be our key performance index'.

“Indian consumer insight products” are what LG, the Korean conglomerate, says it is going to be known for — and to increasingly profit from.

The plan is based on consumer lifestyle research, on which LG India has launched a slew of customised products. In 2008, this category contributed around Rs 20 crore to revenue, with only two products launched. The company hopes to double the contribution of such products from 10 per cent this year to 20 per cent in 2010.

“To make sound profits, at least 30 per cent of our revenue should come from consumer insight-based products in the next three-four years,” Moon B Shin, managing director, LG Electronics India Pvt Ltd (LGEIL) told Business Standard, adding: “This will be our key performance index and indicate our growth story in India.”

Over the past six months, LG has introduced around six-seven of such products across categories — Jazz LCD, a talking washing machine, Nimbus refrigerators, pre-fed recipe microwave ovens, Dolby sound cell phones and air-conditioners. “The response has been phenomenal, especially from Tier-II & III cities, and the plan is to keep adding a similar number of products every six months,” Shin said.

Going ahead, the company plans to aggressively invest in lifestyle research and development, to bring out products that suit the various needs of Indians. “On an average, we will spend around Rs 200 crore on R&D and testing labs for these products each year, and this number will grow as we attain volumes,” says Shin.

LG will spend around Rs 25 crore during the summer months of April to June only to advertise and market the new products. The company is targeting a 30 per cent market share for each of the category of products over the next two years.

Further, going by consumer demand, LG will re-visit its expansion plans from next month to accommodate the new line of products. “The process will take three months before we can define our expansion plans in terms of manufacturing and logistics,” said Shin.

While the products have been developed especially for the Indian market, Shin said some of these have been received well in other countries and will be exported out of India. “We will export Nimbusa Refrigerators to other South Asian markets by the second half of the year.”

In spite of a slow year for the consumer electronics industry in 2008, LG managed to clock revenues of Rs 10,730 crore, a 15 per cent growth over 2007, in line with its 2006 growth rate. It was able to maintain a net profit margin at 4 per cent of sales. Last year, the company spent around Rs 360 crore on advertising and marketing; this year, it will be around Rs 400 crore.