- Multi Split Air Conditioners.
1 Ton with remote Rs. 25500
1.5 Ton with remote Rs. 27500
1.5 Ton with remote (PLASMA) Rs. 29500
2 Ton with remote Rs. 32000
2 Ton with remote (PLASMA) Rs. 35000
- ArtCool Air Conditioners.
Metal Rs. 59900
Wood Rs. 59900
Blue Rs. 59900
On the pricing front the prices are a little higher as compared to the competitors but the better quality and higher technology offered we can say the prices are competitive. The prices are also higher because of the advance technology used and the additional features like PLASMA and Health care system being offered which are not offered by any other competitor.
Credit terms and Allowances
The company is selling through its various retailers across the city and it also has its exclusive LG galleries. The retailers are free to give discount from their margins to special customers and bulk orders as they are offered special incentives for meeting particular sales target.
The retailers do not give air conditioners on credit and hence there has to be cash payment before delivery. However some do offer facilities like cash on delivery.
The loans are available at 0% interest rate hence financing an air conditioner is very easy , but certain minimum criteria has to be met.
PRODUCT
LG Electronics is a company producing a wide array of electronic goods. Its product range includes Colour Televisions, Projection TVs, LCD projector, DVD Player, Digital Audio Systems, Air Conditioners, Refrigerators, Washing Machines, Vacuum Cleaners, Microwave Ovens, Home PC, Monitors and GSM Mobile Phones apart from customized electronic products for commercial use.
The Product which we have chosen from this huge LG stable, is its range of Air Conditioners (ACs). According to the Consumer Electronics and Television Manufacturers Association (CETMA), the air-conditioner segment is expected to grow at 20 per cent this year, which is much higher than the expected growth rates for other consumer durables such as washing machines (at 5 per cent) and refrigerators (at 10 per cent).
Moreover, AC market is one in India, which has traditionally been dominated by the grey market because of the huge price differential between branded and non-branded ACs. But over the last 2-3 years, according to CETMA estimates the share of this unorganized AC segment has been constantly dwindling. Moreover, in this booming economy and consumer driven market, ACs happen to be on the wish list of more and more consumers. Indeed the AC market is certainly hogging the limelight and is one which can’t be ignored.
LG offers Air Conditioners of two types:
- WINDOW AIR CONDITIONERS
- SPLIT AIR CONDITIONERS
Window Air Conditioners
Window Air Conditioners are those in which the entire AC unit is fitted in a room’s window. If space is a premium, then a window air conditioner is more suitable. For smaller rooms a window air conditioner would be just right. LG offers Window ACs in as many as 15 models and different ACs are available for different requirements. LG air conditioners come packed with a variety of features. Some of these have been discussed below.
Features
Price Range : Rs. 18,280.00 to Rs. 23,780.00
Cooling Capacity : 1 tonne, 1.5 tonne, 2 tonnes
(12000 BTU, 18000 BTU, 24000 BTU)
Heating Capacity : 17500 BTU (select model only.)
Moisture Removal : 1.5 lt/hr (1 tonne AC) to 2.4 lt./hr (2 tonne AC)
Noise Level : 48 decibels to 57 decibels.
Compressor : Rotary/Reciprocating
Temperature Control : 160 C to 240 C (cooling models) 160 C to 300 C (cooling/heating dual models)
Features available in select models
- Defrost Control
- Auto Restart
- Anti-Bacteria Filter
- Heat Pump
- Remote Control
- Sleep Mode/Timer
- Auto Air Swing
- Dehumidification
SPLIT AIR CONDITIONERS
The Split Air Conditioners are those in which the main air conditioning unit is installed away from the place where the air conditioning is actually required. The unit is installed at a convenient place and the cool and fresh air is delivered to the room with the help of pipes. Split air conditioners are suitable for larger enclosures. These air conditioners are low on energy consumption. They provide a better cooling effect. They are more expensive than Window ACs but are certainly more effective.
LG offers 6 models in its Split AC range.
Features
Price Range : Rs. 30,230.00 to Rs. 37,730.00
Cooling Capacity : 1.5 tonne, 2 tonnes
(18000 BTU, 24000 BTU)
Moisture Removal : 2.5 lt/hr (1.5 tonne AC) to 3.5 lt./hr (2 tonne AC)
Noise Level : 41 decibels to 59 decibels.
Compressor : Rotary/Reciprocating
Other Standard Features
- 2-way Auto air swing
- Soft dry operation
- Timer Setting
- Temperature Control
- 3/4 speed cooling (fan speed)
- Bottom Air Discharge
- Anti Bacteria Filter
- Forced Operation
- Chaos Logic
- Remote Control
Features Available in Select Models
- Electrostatic Filter
- Plasma Air Purifier
- Sleep Mode
- Time-delay Function
- Deodorizer Filter
PRODUCT DESIGN
At LG, product design is one of the foremost factors kept in mind. Not only the looks and aesthetics of the air conditioners are taken utmost care of but the technical details and design specifications are also diligently checked. Some of the technical details of Air Conditioners are mentioned here.
COMPRESSOR
The compressor is the air conditioner's most important component and helps in the cooling process. It compresses the gas causing it to become hot that is then condensed into a liquid through a set of coils. This cools the air around it. There are 2 types of compressors - Reciprocating and Rotary. A window air conditioner is fitted with one of the two types of compressors.
Reciprocating Compressor - It compresses the air by sliding the piston over the cylinder. Air conditioners fitted with a reciprocating compressor are generally less expensive and not as efficient and silent as the ones fitted with a rotary compressor.
Rotary Compressor - This is a superior type of a compressor over the conventional reciprocating type. It compresses air by centrifugal action of high-speed impeller in a confines space. This method reduces the loss in pressure of the refrigerator gas. Rotary compressors are more efficient and more silent.
ENERGY EFFICIENCY RATIO (EER)
Energy Efficiency Ratio measures the cooling efficiency of the air conditioner compared to the power it consumes. It is the ratio of the cooling capacity in BTU/hr to its electricity consumption in watts. Models with a higher EER would be energy efficient and save on the electric bills but may be more expensive to buy. A trade off is always there. It has been an endeavour at LG to match world-class standards and provide highest EER to the consumer at affordable prices.
FILTER
LG believes in providing total health solutions to its consumers. LG air conditioners include different kinds of filters to provide pure, fresh and healthy air to its customers. A filter purifies the air that goes through the air conditioner. There are different types of filters that remove dust, germs, bacteria, odour, etc. Deodorising filters remove dust particles, dirt, and anti-fungal filters clean the air and remove germs and bacteria thus reducing respiratory problems. The Electrostatic filter releases positive ions, which ionize the negative ions of dust and static electricity giving you a clean, dust free environment. Slide-in and Slide-out filters allow easy maintenance as they can be removed for cleaning without opening or dismantling the entire machine.
Figure – Functioning of deodorising and Electrostatic Filters
ANTI CORROSION BODY
The body and chassis of air conditioners is prone to corrosion particularly since it is exposed to rain and humidity from the outside. However, if the body is made of galvanised steel or is powder coated it helps in protecting the unit from corrosion and extends the life of the body. All LG air conditioners come powder-coated, fully corrosion-free and are aesthetically also very pleasing.
AUTO RESTART
Select models of LG Air Conditioners include this feature. In normal ACs, if there is a power failure or if the air conditioner has been disconnected, the user may have to reset and programme all the cooling functions and features that he had originally had. LG Air Conditioners with the Auto Restart facility start automatically and restore the original settings when the power is restored. This feature is especially beneficial in areas where power supply is irregular.
REMOTE CONTROL
Majority of LG Air Conditioner models come equipped with a remote control. It is a cordless device which can be used to operate the air-conditioning system without actually operating the controls manually on the machine. User can switch off the machine or alter the cooling speed or temperature of the air conditioner without moving from his current position. This is particularly useful when the user is in bed and need to alter the temperature of the room or when the AC has been placed at a height in the room.
TIMER
Select models of LG Air Conditioners provide this feature. The timer lets the user to set the air conditioner to begin cooling at any time, whether he is at home or not. It is also helpful to shut off during the middle of the night when it gets very cold.
NOISE
It has been LG’s continuous and sustained effort to reduce the noise levels in its ACs to the minimum possible level. For this in the past two years, the ACs have also undergone technical innovation and changes. Noise level is measured in decibels and is the level of sound generated by the appliance during operation. Air conditioners with rotary compressors generally make less noise than a reciprocating compressor.
QUALITY
LG has set up state-of-the-art production facilities at Greater Noida in Uttar Pradesh. Here, very stringent quality norms and regulations are followed very strictly. The company has obtained the required ISO 9001 standard for designing, installation and servicing and testing of new products. For its air-conditioning unit, each AC also undergoes extensive check to ensure that the heat liberated by the AC units is well within the specified norms. The pollution standards are not only met at the Indian level but at the European level. LG believes in total quality i.e. apart from production, the quality aspect has been executed throughout its Supply Chain Management (SCM). Right from the suppliers of various parts, to production, testing, packaging, transportation, delivery, distributors, retailers and after sales servicing, rigorous quality norms are followed throughout.
SERVICE
LG very well realises the importance of after sales service as a way to retain its customer base and further augment it. LG has established a very good network of service centres across the country. For the AC segment, LG realises that it is a product which requires periodic servicing unlike most of the other electronic products. Hence, LG knows that if it has to develop a long term relationship with its customers, it has to provide excellent services to its existing customers. LG has developed a network of AC service centres across various cities and the number of these service centres is in direct proportion with the AC sales in those cities. LG continuously strives to provide excellence in the services it provides and also tries to provide total solution and support to its customers.
LG always tries to attend to all complaints within 24 hours and acts very promptly. Since AC is a product which requires to be serviced on-site rather than at the service centre, it becomes very important for the personnel to be very focussed, friendly and highly skilled as it is a question of relationship with the customer. As far as warranty period complaints are concerned, LG promptly replaces all the defective parts and even the entire AC units as the case may be.
PROMOTION
In a highly competitive Indian market, LG made a sustained effort to expand the network and improve the level of penetration in a bid to generate higher revenues.It tried to penetrate the Indian market through network expansion and opening up a number of exclusive brand shops.
In 1997, when Kwang Ro Kim, the managing director of LG Electronics India said that his company would be India's largest consumer electronics company by 2005, nobody took him seriously. Today LG is one of the largest consumer electronics brand in India LG is also now the market leader in the Frost-free refrigerator, Fully Automatic Washing machines, Microwaves and the Room Air conditioner segment.
LG’s Product differentiation and marketing strategy :
LG studied the Indian Market and found out that the consumer is well informed on the health awareness front. LG was one of the first companies who recognized the emerging change in consumer needs and decided to differentiate their products on the basis of technology which appealed to the consumer on the basis of health benefits. Its vision was to become a 'Health Partner' for its consumers worldwide and therefore formulated its corporate philosophy to make peoples' lives better, convenient and healthier.
The CTV range offered by LG has 'Golden Eye' technology, which senses the light levels in the room and adjusts the picture to make it more comfortable for the eyes.
The entire range of LG air-conditioners have 'Health Air System', which not just cools, but keeps pollution out.
Similarly, microwave ovens have the 'Health Wave System', refrigerators have the 'PN System', which preserve the nutrition in food .
Washing machines have 'Fabricare System', which takes the health factor down to ones clothes.
All the products offered by the company have unique technologies, developed by its R&D departments that give customers a healthier environment to live-in.
LG does not come out with any particular promotions during festivals. It always focussess in terms of its consistent proposition to the consumer. So it does not suffer in the non-festive season and at the same time it gains during the festive period.
Regarding the threats from the Chinese products, LG feels that the Indian consumers basically go for highly value brands. The Chinese brands peg on the price and that LG will not be affected with their entry, as those low-priced brands do not contribute to more than 20 to 25% of the total durable market.
LGs’ market share in the microwave and the Air conditioner segment stands at 30 thus placing it into the number one position in both the segments.
The rural presence of LG :
LG has done very well in the rural markets from the very first day. It is the only one in the country to introduce local technologies for the rural. Sampoorna was specially designed for the rural consumers in the Devanagri script and it was the first company to do this. It made its TVs in the local languages so that people can read the menu in the local languages. It has been doing not just promotions networking and advertising but also developing products for the rural markets like memory back up washing machines etc. Today about 30% of its contribution comes from the rural segment. As a step towards special marketing efforts for the rural, LG is extremely focussed on exhibitions when launching new products.
LG also markets its products through mobile vans, which are not only used for exhibition but also as mobile retail outlet to the consumers. This distribution strategy has also been used to attract the rural market
The RAC Market Presence :
In the Room Air-conditioning segment, LG is the only brand, which in the very second year of its operations got the No 1 position in the market. Today it has more than 30% market share.
The strongest region for LG has been the North, which contributes to approximately 35% sales. It is also the largest growing region. The East and North have contributed to LG’s dominating market shares. However, South and West have also contributed quiet well.
The Internet Commerce :
is a pioneering effort by LG in e-commerce for the entire industry. Much of its initiative is about acquiring the future capabilities today and to have the first mover advantage in a spectrum like this. It is just unveiling the life styles of an upwardly mobile technology conscious consumer. In the worldwide-developed markets just 5% of retail sales are online. LG has moved very pragmatically towards a situation where if the consumers buying pattern does move online, it has a viable platform. A platform where the customer gets the product information, he is able to lodge complaint, he is able to see the demonstration and he is able to get online consumer financing options.
LG’s latest strategy :
The newly defined agenda for LG is cost-innovation -- from implementing higher technology efficiencies, to reducing design-related problems, to purchasing cheaper components, to more effective HR policies. Without denting profits significantly, LG has managed to cut consumer prices of air-conditioners by 20 per cent, and of colour televisions (CTVs) by 15 per cent.
LG has started with its digital management system (DMS), a cost-cutting technique that leads to shorter assembly lines, higher productivity, and reduced manufacturing costs by 30 per cent. The DMS exercise is a follow-up of the Six Sigma exercise LGEIL had initiated earlier with the objective of cutting costs across processes other than manufacturing.
LG has a long-term plan of turning India into an export hub for several South Asian countries. Apart from existing export markets in Sri Lanka, UAE, Bangladesh and Philippines, LG is hopeful of tapping the markets of Hong Kong, New Zealand and South Africa for exports.
EXAMPLES OF PROMOTIONS DONE BY LG :
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On September 26 2003, LG Electronics launched its mega consumer offer for Diwali, "Patakha Ghumao Inam Pao," starting from 25th September 2003 till 31st October 2003. This unique promotion entailed assured gifts on every purchase of an LG Colour Television, Direct Cool Refrigerator, Frost Free Refrigerator, Air Conditioner, Semi Automatic Washing Machine, Fully Automatic Washing Machine and MY PC. The consumers could win various attractive gifts ranging from a Flatron Television, Semi Automatic Washing Machine, Frost Free Refrigerator, Window AC with remote, Microwave Oven, Home Theatre Audio System, MY PC, Branded T Shirts, Bags and Emergency Lights. Over and above this, there were 80bumper prizes to be won worth Rs 1 lakh, each which included a basket of all LG products called "LG Healthy Home Jackpot". In total, LG is offered more than 7,50,000 gifts as part of the festive offer.The promotion involved a mega budget of over Rs 60 crore, which included spends on the print and electronic media, below the line activities and the gifts. Customers could avail the offer at all LG exclusive shopsand LG authorized counters.
- On the completion of five years of successful operations in India, LG Electronics announced and launched a nation wide birthday promotion called, "50 Lakh Smiles Celebration’. The campaign was a tribute to the 50 Lakh satisfied families that form the customer base of LG Electronics in India. The campaign aimed at the existing and prospective customers of LG Electronics, giving them a chance to be part of the month long celebration at LG Electronics and also presented endless opportunities to win grand prizes with every LG product purchase. The company had earmarked a budget of Rs150mn for the campaign During the month long Birthday Promotion, the company gave over 500 bumper prizes and 4 lakh gifts across the entire country. Every purchase of an LG Electronics product entitled the customer to a scratch card, which could win him a prize of a gold coin, a silver coin or the bumper prize of an LG product. The prizes comprised of premium LG products ranging from Projection TVs, Side by Side refrigerators, Washing Machines, ACs, Microwaves and Vacuum Cleaners. The contest scratch cards were readily available at all authorized dealer outlets across the country
.
LG Electronics India estimates that it can gain 1.5 to 2 percent margin impact through its Web-enabled supply chain initiatives. This is significant in an industry where margins run at an average of 10 percent. LG has about 25 percent of its dealer sales online, and purchase orders are fed into the ERP system for production planning. The dealers’ input has helped to reduce inventory from 11 to 3 days and this is further targeted to reduce to 1 day soon.
LG Electronics launched its B-to-B (business-to-business) portals-www. lgesource.com and www.lgedeal ernet.com. According to managing director, LG Electronics India, LG painted a vision of true B-to-B collaboration over the Internet with its Web sites. Developed by LG Software India, the sites have been designed to serve as information centres for dealers and vendors wherein the business partners, apart from having access facility, are able to place orders on the basis of stock positions. The development enables the company to deliver on mass customization, while reduces inventory and decreases fulfillment timeframes.
LG Electronics, plans to further enhance its position in India by making additional investments.
Investments would be made at
1) Expanding the capacity of its Noida unit, where the company is already manufacturing CTVs, refrigerators and air-conditioners. The unit will begin manufacturing washing machines next year and a compressor would be set up after that.
2) Set up an additional manufacturing unit, to be located in Gujarat or somewhere near Chennai.
LG lays special emphasis on productivity, reducing rejection levels and reducing costs. For this it has been training its employees so as to help achieve desired levels of productivity.
Summary of How LG succeeded in India?
R & D investments
LG did put up an application before the Foreign investment board to clear investments worth $100m over the earlier limit of $296m. This indicates the company’s commitment towards introducing product with latest of the technology.
Fast mover
Being a 100% subsidiary LG moved at a fast pace. Within a period of 5 months it was able to complete a nationwide launch. Most other companies took 2 years for the nationwide launch.
Geographic scope
Most other companies had ignored the eastern India however LG continued their distribution efforts in this region. Currently 20% of their turnover comes from the east
Differentiation
In an environment where their consumer was being given various exchange offers, LG differentiated their products on the basis of technology. They realized that the Indian customer was not price but value conscious. The televisions were launched with the Golden eye technology & the refrigerator with the preserve nutrition technology which has been patented by LG.
Innovation
Innovative features are constantly added to their models. The most imaginative of these was in field of television; multilingual screen display (the menu appears on the screen in five Indian languages)
Then just before the world cup LG loaded a cricket game in its television (it was developed by LG’s software arm in Bangalore. These two features caused a spurt in sales by 15%.
Advertising
LG used the world cup cricket as a means of advertising. It sponsored a substantial bill of the world cup. Indianizing its advertisements was one of the themes used by them.
Future Orientation
Now LG is comfortably in charge of over 23% market share. LG for the first time tapped the retail segment in air conditioners when the norm was to sell to the institutional buyers. Currently it is second to only Carrier.
Thus LG was successful in creating a corporate brand LG Electronics.
PLACEMENT AND POSITIONING :
Segmentation
Segmentation means the division of the market into sub categories for effective and efficient targeting of the consumers.
LG is following different segmentation strategies for its different products for the Air Conditioner it has divided the market first into two major categories:
- Domestic users ( In Houses )
- Commercial users.
Hence it is using different strategies to target these segments it has divided these broader categories further into repeat purchasers and one time buyers.
- Domestic users.
These are the biggest contributor to the sales of LG’s Air Conditioners as they comprise 60% of the total sales. These are basically the one time buyers and the chances of repeat purchases is less but still they are a major source of revenue.
- Commercial users.
These contribute 40 % of the total sales of LG’s Air Conditioners ,this is an important segment because they are repeat customers who are either upgrading to new models or ordering the similar ones as purchase before because of expansion. This market is further subdivided into various users groups and they are targeted specially according to their special requirements for eg. Health clinics are provided with the health care range of air conditioners which have better air purifiers.
Sub groups:
- Shops.
- Showrooms
- Doctors / clinics
- Factories
- Offices
- Educational institutes
- 3 star Hotels
- Restaurants
- Fast Food joints
- Banks
-
Telecom and ITES companies.
This subdivision helps the company to give best models regarding the specific requirement stated by the different customers like Faster cooling , power saving , healthier air ,features , price and better technology.
MARKET FOR LG’s AIR CONDITIONERS (size, market share, competitors etc..)
The market is Rs 30bn strong for air-conditioner and has recorded an impressive demand growth rate of 19% (compounded) between 1991 and 2002. The Rs12bn Central AC (CAC) market has had a rough patch in the last two years. Being dependent on user industries, it is highly susceptible to industrial growth cycles.
The present penetration level in India for air-conditioners is a miniscule 1-2%. This figure compares unfavorably to countries like the USA (35%) and Singapore (30%). Demand for room air-conditioners is fairly price sensitive.
The air-conditioner segment grown at 20 per cent this year, which is much higher than the growth rates for other consumer durables such as washing machines (at 5 per cent) and refrigerators (at 10 per cent). Another factor which has boosted growth is the decrease in prices of air-conditioners as companies were left with huge inventories last year. Buying an air-conditioner is increasingly being perceived as a necessary investment rather than a luxury.
All recent research done in the market has shown that the air-conditioner is rapidly moving up the list of household goods consumers intend to buy. Not surprisingly, many new players are making a beeline for the seven lakh units a year making air-conditioner market, while existing ones are busy redefining their strategies.
In this category of air conditioners sales are proportionate to the amount spent on creating awareness here the market leader is LG Electronics and is also the highest spender with an estimated expenditure of Rs 15 crore on the category. The company has recently launched its new range of Gold Fin air-conditioners. They are also looking to increase their market share to 31 per cent this year from 26 per cent and is targeting sales of 1.5 lakh units this year as compared to last years 1 lakh sales.
The various competitors are also planning to improve their position:
Siemens, for instance, has launched its premium range of air-conditioners in the market during April this year. The company is expected to launch air-conditioners in both window and split variants in select cities.
Whirlpool India also announced its foray into air-conditioners. The company is aiming to garner a market share of 10 per cent in its first year of operations.
Apart from new brands coming in, existing players too are doing their bit to grow the market through launches of new models, heavy discounts, offering attractive promotional schemes and increasing emphasis on improving the distribution network. Samsung India, for instance, is planning to grow the total number of customer retail points stocking its air-conditioners by 35 per cent this year. It's distribution network will also be strengthened with Samsung recently beginning local production of air-conditioners in India.
The Rs 1,000-crore Voltas Ltd too is looking to aggressively increase its share in the Indian air-conditioner market. It has recently launched a new range of air-conditioners under the brand name of Voltas Vertis. With this launch, Voltas, which has been strong in the institutional segment, aims to push up sales in the retail segment as well. On the distribution front, Voltas will be increasing its dealer and retailer network. It plans to raise the number of its exclusive outlets from 640 to 1,600 next year.
Voltas has also charted out an aggressive marketing strategy to increase its market share. This year, they will increase their spends on advertising and marketing from Rs 8 crore to Rs 20 crore, making them the highest spenders in the category.
Videocon too plans to step up its advertising efforts for air-conditioners this year. they are proposing to spend approximately Rs 4 crore this year. They will also launch three new TV commercials this year unlike last year during which they did not come out with any TVCs. The company recently launched 12 new models of air-conditioners and has also decreased the pricing for it ACs. The prices are benchmarked with the competition, especially looking at the aggressive prices offered by LG recently. As a consequence, there has been an approximately 10 per cent price decrease since last year.
Other major players in the segment include Carrier, Electrolux, Daikin Shriram, and Hitachi. However there is still a big challenge from the grey market, the grey market is still very active, simply because the price differential is too big. For instance, a 1.5 ton split air-conditioner in the grey market is available for Rs 22,000 to Rs 24,000, while otherwise, the price would be around Rs 15,000 higher. The grey market will continue until the price differential comes down to about Rs 3,000-4,000 from the current Rs 10,000-15,000."
Further, it has been found that the popularity of the grey market varies from region to region. For instance, in Delhi, more than 50 per cent of the air-conditioners are from the grey market.