LG Canada: Global stylesetters

Life has been good for LG Canada lately. In Q3 of last year, seven years after arriving in Canada, brand awareness for the South Korean manufacturer of glossy red steam washers, sleek HD LCD televisions, condo-friendly fridges and status-symbol cellphones jumped to 40% from 27% the year before. This jump (compared to three points in the U.S.) can be largely attributed to new president and CEO William Cho, who immediately set about shifting the subsidiary's focus from manufacturing and sales to marketing after he joined in January 2006.

Life has been good for LG Canada lately. In Q3 of last year, seven years after arriving in Canada, brand awareness for the South Korean manufacturer of glossy red steam washers, sleek HD LCD televisions, condo-friendly fridges and status-symbol cellphones jumped to 40% from 27% the year before. This jump (compared to three points in the U.S.) can be largely attributed to new president and CEO William Cho, who immediately set about shifting the subsidiary’s focus from manufacturing and sales to marketing after he joined in January 2006.

With 21 years’ experience at LG in Europe and the U.S. under his belt, Cho wants to make LG Canada’s number one electronics company by 2010. To that end, he has set ambitious annual growth targets of 30% and a revenue target of $1.1 billion for 2008, up from $900 million in 2007.

Big carrots call for big sticks, and Cho, who received a global LG Man of the Year award for driving six-fold growth in appliances over two years in Germany, wields an integrated marketing approach that takes its lead from consumer insights. To realize his vision, he wooed VP marketing Andrew Barrett from JWT in October 2006. Barrett, who brings local experience from Molson and P&G, has since grown the marketing team from nine to 16, and will add another nine by the end of the year.

Their signature play is eye-catching visibility via unique events, mass advertising and web initiatives as well as marketplace ubiquity, as they leverage their products’ stylish design and energy efficiency in retail partners’ efforts. Programs catering global campaigns to local markets run across every consumer touchpoint. ‘Prior to a year and a half ago, we would have bits of marketing here and there, none of which looked the same,’ says Barrett.

And it happened fast. Four weeks after joining LG, Barrett launched the Chocolate phone in Canada, ‘our first attempt to reorient the whole company’s approach on marketing.’ In the process, LG Canada blazed a trail on the branding front for LG global.

The starting point for Chocolate was an insight into consumer behaviour, namely the ‘Bragging Bob’ type who needs to have the it-phone, whether or not he uses its advanced features – an attitude also applicable to his female counterpart, ‘Social Sally.’ This led to a new positioning for LG as the brand for ‘style-conscious Canadians fascinated by technology,’ which in turn suggested a natural messaging link with the world of fashion.

The campaign began with a buzz-building exercise in bars and restaurants in Toronto to identify brand ambassadors, who received invitations to the product launch, a fashion show at the Windsor Arms hotel. Post-show, the same nightspots were dominated with Chocolate materials created by LG AOR Y&R’s Toronto office, reinforcing the LG buzz brought back by the select few. The initial launch was followed by three more PR-worthy events, including a runway show at Whistler during the Telus Ski and Snowboard Festival in April 2007, and shows in nightclubs in Toronto and Montreal. Some attendees were flown in after winning an online contest at Lg.ca.

To strengthen LG’s fashion orientation and extend it to all product categories, then-LG Canada media AOR Mediaedge:cia partnered with the TV series Canada’s Next Top Model. In a feat of scene-stealing, LG flat screens, phones and premium appliances like the TV fridge were integrated into all 10 episodes. Toronto-based MindShare, which took over from Mediaedge:cia in January, will carry the partnership into the series’ second season.

Flat-screen and HD TVs are also hot right now. The main marketing push is the Red Couch campaign, a global effort consisting of three TV spots produced by Y&R’s New York office (which splits the global remit with London). The spots transport a family of HD TV viewers – and their couch – into the fashion show, golf game or bobsled race they’re watching, with the tagline, ‘Don’t just watch it, live it.’ Barrett took the golf execution literally, constructing a golf hole in Montreal during the President’s Cup last September and hooking up with Quebec Breakfast Club, which provides breakfast for children in schools, to raise money for the charity and score attention for the line.

Consumers are also upgrading appliances for a variety of feature and style motives, showcased by the marketing. For instance, a contest for the 30′ French-door fridge, in which consumers went to Lg.ca to guess the number of bell peppers inside, showcased its capacity. The pepper-stocked fridge appeared on Breakfast Television in Vancouver, and broke all records for LG online efforts, raising mailing list subscriptions by 576%.

And by using colours like candy apple red and navy blue and innovative technologies like steam washing that also use less water, even the lowly washing machine is making a fashion statement in LG ads.

Canada’s approach aligns with the global mandate to put marketing before manufacturing, as outlined by corporate CEO Yong Nam in January 2007 – one year after Cho initiated the strategy in Canada, and two months after Chocolate. ‘Many other subsidiaries are just starting to get onto that approach, which is why a lot of our best practices are getting picked up,’ says Barrett, adding that since last fall, unaided brand awareness in Canada has grown to 48%. ‘We are the fastest-growing LG brand in the world, we are the most developed brand amongst the G8 countries. We’re really on fire.’

Cho and Barrett’s target segmentation of style-conscious, tech-curious consumers has also been picked up globally; in the second half of last year, consulting firm McKinsey & Company identified the ideal LG brand articulation as ‘the perfect harmony of fashion and technology, fused together for premium seekers.’ By then Barrett and Cho were busily launching the Shine phone at Birks locations in Toronto and Montreal.

‘The positioning that we coined a year and a half ago has become the global positioning,’ says Barrett. ‘We started a big part of it here.’

It comes as no surprise, then, that Canada will lead the way on LG’s touchphone launch, expected Apr. 1. If the strategy works in Canada, Barrett anticipates it will be picked up around the world.

We joined Barrett and Cho on the red couch at LG Canada headquarters in Mississauga, Ont., to shine some light on the noise around the brand.

What were your first impressions of the challenges for LG in Canada?

William Cho: LG Canada had good revenue and significant progress, but there was room to improve. So I set out to make our company the leading brand in terms of revenue and market share, as well as make LG a true premium brand in the Canadian marketplace.

Another area was to make this a much stronger marketing company. Although we have great product leadership, our marketing activity was so weak that Canadian consumers perceived LG as a very quiet company.

Was LG noisier in Europe and the U.S.?

Cho: Ten years ago we were not so noisy [anywhere]. But when I first came here, Canada was quieter than other subsidiaries.

Andrew Barrett: Outside of Korea, Australia and India, the brand was pretty quiet a few years ago. And then a few geographies started to invest and see some significant change. When Mr. Cho arrived here, LG had been a push-focused company: distribution, get the product on the floors in the stores. It was time to turn it into a pull company.

Is this push-to-pull shift something you have put into play in other places?

Cho: When I started in Germany, I worked as a product manager for home appliances. We had relatively small revenue and our profitability was low. I started conducting intensive market and consumer insight surveys, and we extended our marketing campaigns together with our retail partners. For example, I created the LG showroom in retail environments. At that time the colour silver was trendy in Germany, so we brought in silver [products] so people could look at and feel this line. With that marketing effort, home appliances occupied 45% of profits of the entire German subsidiary.

Since I laid out our vision for 2010, I have also laid out the five key changes for us to revolutionize this company: sales, marketing, HR, service and infrastructure. Among these, [becoming a]

marketing-oriented company is one of the most important. I put all the marketing personnel into one department. This creates a synergy path to make sure the brand identity has the marketing efficiencies. Then we can have one consistent message, as well as selective push marketing, driven by pull marketing, with our retail partners.

Is Canada a model for LG subsidiaries because of its growth?

Cho: I think so. We have created the best practices, from Andrew’s leadership and our communication [method], the integrated marketing approach, to consumer insight-led marketing communications and moment-of-truth enhancement through the online and retail collaborations.

Can you elaborate on this approach?

Cho: Let me take the example of the Shine phone. First of all, we did the segmentation work in mobile devices, which can be grouped by six or seven different segmentations. We found that ‘Bragging Bob,’ one of these segmentations, is our target consumer. We found that the USP [was] not only style but also technology, such as the two-megapixel camera and video telephony. Combining this target segmentation with the USPs the target likes, we tested and modified the global ad, which was developed in Europe, [to include] technology and male taste. Then we tested this modified global ad and proved the point.

With this proven record, we approached the program, which touches every consumer touchpoint from TV to PR and events and online and point of purchase sales in the retail experience. We use the TV as an awareness enhancement. We use online and PR to drive the consideration set, and we use our POP and in-store activities to improve purchasing stages.

What part does consumer behaviour play in your growth?

Cho: Obviously, the flat-screen TV market is growing exponentially. The consumer tends to upgrade home appliances with a ‘trade-up’ tendency, and with evolving mobile phone technology we see a lot of opportunities too. Although [the sector] has been struggling a little bit, I see a lot of growth potential in notebooks. Our product portfolio, [split] 30/30/30 into mobile, appliances and consumer electronics/IT, will [meet] this growing potential.

Barrett: We spend a lot of time understanding consumer behaviour and letting it lead our activity. Two years ago, our market research budget was zero. This past year we spent $0.5 to $0.75 million in market research. In 2008 we’ll spend in excess of $2 million.

We’re [also] spending time in consumers’ homes. Whenever our global CEO comes to a city, the first thing he does is go on three home visits. Our whole company’s making this transformation.

Cho: All managers pay at least two store visits per month, to see consumers’ behavior and what’s going on in the field. All of us are working as marketing people, giving input to marketing initiatives. Even the service department is an important marketing tool. When they get angry calls from consumers, there is an opportunity to calm this voice into an opportunity for the next purchase.

Why do you grant your VPs so much autonomy?

Cho: The autonomy is key to implementing the marketing strategy. We align with each other in terms of strategy. Implementation, how to deal with those marketing initiatives, is all on Andrew. He has much more local expertise than me. So that is all about autonomy and empowerment.

Who are your most important partners in Canada?

Cho: Rather than who we are partnering with, I believe how deeply we are partnering is more important. I go to partnership meetings with all the major retailers and talk about how deeply we’re engaged in marketing activities. We talk about our key performance indicators, the in-store market-share target in particular, the model mix and, from our side, how much marketing support is needed for them to sell more product.

[The carriers] like to realize their service roadmap in our product roadmap. So it is always successful if we align our product roadmap down the road two or three years to their service roadmap. That is the perfect harmony.

How does your philosophy of ‘fast innovation, fast growth’ translate into your marketing strategy?

Barrett: When a new technology comes out, we do the marketing in a very big way, and we do it very fast. We choose the vehicles based on where consumers are making their decisions.We know that about 60% of consumers go to the manufacturer’s website before they go to a store. So we have to be heavy online. We also know that we can develop competitive advantage in what we do there.

We do PR and big events because the consumer is looking for third parties to make endorsements or recommendations on technology. So we have to do events to get the appropriate attention for the brand.

The other thing we’ve consciously chosen on every marketing program we launch is to do something that’s never been done before – in our industry, ideally, and in Canada, most likely. That obviously leads you into things like online and events – I don’t think anyone in Canada has built a 70-yard golf hole in the downtown of a city before. Events are a way to do things that people notice. It’s a lot harder to be innovative with a TV ad.

Is experiential an opportunity for some uniquely Canadian marketing within a global campaign?

Barrett: Yes. In all of the marketing that we’ve done, I would say 15% has been global pickup and 85% has been domestically created. We sometimes get assets globally that we can leverage, but, for example, the Shine phone went into Europe 10 or 11 months before it came to Canada, so we had to decide when the right time was for our market and how to make a big deal of it. The Shine phone had a ‘Born to Shine’ tagline, we took that. We took a spinning phone from another part of the world to put on our website and built everything else uniquely for here. Red Couch came with three commercials, and all the online stuff and events we did locally.

How do you decide when to pull out all the stops for a product, and is there any limit to how big it can go?

Barrett: When I started here, we were a 12-week marketer, and we need to become a 52-week marketer. Much like the restaurant business, we have 13

four-week periods a year. We need to do something significant in every one of those periods. I sit down at the beginning of the year and figure out what key technologies we’re going to be launching through the year, when the key seasonal peaks are. Then it’s timing, and we do a bunch of quick research to figure out where we think we’ve got a consumer wow, and if it’s there, then we build a program. We could build a big program on anything.

How in sync is it with the U.S. launches?

Barrett: TVs will be similar. Appliances’ seasonality is different because the U.S. gets warmer sooner than Canada, so spring cleaning tends to happen a bit later here, and the air conditioner business happens a little bit later.

Cellphones we’ll often lead. The things we did on Chocolate and Shine were ahead of the U.S. We’re bringing touchphones to Canada in a huge way Apr. 1, across many cellphone models at all of our carrier partners. We’ll be ahead of the U.S. on those, because clients like Rogers are ahead of U.S. cellphone carriers.

What’s your biggest challenge right now?

Cho: [Due to] the big growth, we should have built our warehouse capacity a bit earlier. And our service infrastructure: we get a lot of calls when we sell out of a lot of products.

Another is managing the company culture. Since we’ve grown so fast, some areas are going though growing pains. I have hired more than 120 people [out of a total 270 employees] since I joined. I have to manage the existing culture and the incoming cultures, and [develop a] marketing-oriented mindset.

What are you doing to build employee engagement?

Barrett: Mr. Cho wanted me to make the brand as noisy inside the building as outside. We’ve added new employees who knew almost nothing about LG when they joined. We had to get people to believe we’re going to be number one by 2010. So we had to create a lot of internal momentum.

Every single program that we took to market, we took internally with the same level of vigour. So when we did our ‘Show us your set’ promotion, [in which] someone could submit to win a TV based on showing us their dilapidated old TV set, we had all the employees engaged with a website. They were reviewing the submissions and voting on the top 10 sets of the week posted on our website. By participating in that program, they got a ballot in a draw to win their own TV set. We did the same thing with Shine phone, and we set the pepper fridge promotion up here in our lobby and on our website internally; you could try to figure out how many peppers were in the fridge and you had a chance to win just like a consumer out in the marketplace.

That got noise internally, and it made every employee feel like they knew what every program was going on in the field. Now, when you walk through the building, everyone talks about the programs; everyone feels like marketers.

How are you communicating your environmental positioning?

Barrett: Our focus is on building technology that uses less energy and at the same time gives superior performance. We communicate that through our website, in terms of the Energy Star ratings and other product functionality. [Public affairs manager Frank Lee] spends a fair amount of time talking about that. It’s a good proof point as to the superior technology in our product. A direct-drive motor eliminates the need for belts and hoses, therefore you can turn the drum more easily, therefore you need less water, less electricity. We’re in the process of working on how we’re going to make that a larger part of our communication.

Cho: Hopefully we can use our tagline ‘Life’s good’ as ‘Life’s green.’

What’s the next big opportunity?

Cho: I see a lot of opportunity in all of our product businesses. We can expand our presence where we have not been engaged, for example, in the [hotel] lodging business and commercial areas like retail signage, the [residential condo development] market. As well as some areas which are still invisible, like business opportunities in HVAC [heating, ventilation and air conditioning].

We live in a connected world. Considering the coming convergences, since we build all our products, and we are strong in appliances and consumer electronics and mobile communications, we can be a total solution.