Lg Watch Phone

LG Watch Phone

Table of Contents
Executive Summary3

The Canadian Market Launch4

Analysis5
External Influences5
Internal Competences and Deficiencies6-7
The Young, Affluent Professional7

Decision Criteria8

An Integrated Marketing Campaign9
Marketing Strategy9
Marketing Mix11
Product11
Distribution Channels12
Pricing Strategy12
Promotional Strategy13
Expected Results15

Appendix17

Works Cited21

Executive Summary

The consumer electronics industry is associated with rapid growth, leaps in innovation and fierce competition. LG’s attempt to release their latest technology, the Watch Phone, is crucial in order to secure their current position as one of the dominant market leaders. With a well-integrated and effective marketing plan, LG has the potential to change the market with a product that resembles a high-end timepiece in addition to the full functionality of a smart phone. After already having launched the product in Europe, LG is now faced with the task of expanding the device’s market to include Canada.
Having identified a clear target market, the promotional plan will focus on first raising awareness of this new product in the Canadian market. With significant financial resources for a large marketing budget, we recommend several forms of traditional means of advertising as well as joint advertising with telecommunications carriers. The product should be conveying an image of a stylish luxury good for young affluent professionals. Furthermore, pricing decisions reflect a skimming strategy and the product will be distributed with the “big 3” telecommunications companies in Canada.
Through an analysis of the internal and external environment as well as threats and opportunities facing LG, we are confident that the company is poised for success in achieving substantial sales within the profitable market we have identified. We estimate justifying our budget with 25,000 units sold and a profit margin of 25%. Ultimately, we want to attain robust returns for our shareholders and capitalize on this opportunity to make LG the number one household brand for consumer electronics.
The Canadian Market Launch

The LG Watch Phone is a revolutionary new product in the consumer electronics industry making its way to Canada for the first time since its preliminary launch in Europe last year. As this is a new product in a segment of its own, establishing this product as a success in the volatile technology industry will be largely attributed to the actions LG’s marketing team takes in the period leading up to the launch. Our job is to come up with a comprehensive marketing plan that will present the value of this product to our target market and ensure that this product will be successful in the Canadian market when it is launched. Having completed a thorough analysis of our external environment, our internal competencies and the needs of today’s consumers, we will identify a target market, a positioning strategy, and a marketing mix that will create high demand in the market, leading to an overall profitable launch and sustained product life cycle.
Analysis

External Influences

One of the major opportunities for LG Electronics is the fact that the portable consumer electronics industry is exhibiting the highest growth in comparison to in-home and in-car electronic products - in 2008 this segment captured 46.8% of the total consumer electronics market. In North America, mobile phone products are in greatest demand, recently accounting for 18.5% of consumer electronics sales. Additionally, experts observe that the industry has not been negatively impacted by the financial crisis and the prices for these electronics remain stable.
Furthermore, the portable consumer electronics market currently demands constant product miniaturization and integrating multiple functional features and multimedia in the device, which bodes well for LG’s Watch Phone. With this device, LG goes one step further, introducing the first wearable smartphone ever produced. This product is something that has great potential to catch on with the market.
In terms of opportunities that are exclusive to the Canadian market, it is important to mention that LG has been successful in Canada for many years and has established relationships with the telecommunications providers and other members of the distribution network. Finally, there is the opportunity to use Canada as the ‘test’ market, implementing the marketing plan and making the necessary adjustments before a future launch into the United States due to the similarities between these two markets. However, LG’s path to success in Canadian market is laden with threats. Firstly, although the industry survived the financial crisis without being severely impacted, it is unknown whether the prices for consumer electronics are not going to decrease in the near future. Moreover, it still has to be proven that the general public is ready for mass commercialization of wearable phones. Specific to Canadian market, the major threat is the fierce competition. Albeit no competition has the same product, the large players in the market have much lower prices in comparison to the Watch Phone’s European offering in their own products. In comparison with phones ranging from $0 to $199.99 on contracts and from $110.00 to $699.95 without it, LG’s European price of $1,290.00 on a 12-to-24 month contract seems enormous. There is a threat that the customer will not be willing to part with such money for the value that the LG Watch Phone provides them with.

Internal Competencies and Deficiencies

LG currently offers a variety of different products available through many different sources. Their products are available at most main retailers including Future Shop, Best Buy, and Rogers. Within the consumer electronics industry, LG produces mobile phones, televisions, and home appliances which are made to be observed as premium products. With the premium positioning of their products comes higher prices in general compared to competitors. LG generally incorporates television and print ads for their new product lines, which follows the industry standards. In addition to traditional advertising LG has been involved in marketing campaigns with both Avatar and Transformers.

Strengths:
LG is the 4th largest South Korean multinational conglomerate corporation as they have developed a strong brand identity and reputation of being an innovative leader in the consumer electronics industry. The company is currently the 3rd largest phone maker in the world with a large market share in the mobile phone industry. Their market share in the consumer electronics industry is 5 percent, which is comparable to industry leaders. This is accomplished by always introducing leading edge products by using high quality materials in their production. Also, LG has a significant amount of financial resources available for funding of promotional campaigns. In addition, LG has the advantage in production scalability from consistently delivering and producing a variety of trustworthy products from previous experience.
Weaknesses:

On the downside, LG faces the biggest problem of being new to the Canadian Market. LG is a company that has never been in the industry of producing watches. Watch enthusiasts may have doubts as to whether LG is familiar with the watch industry. They also like variety and often like to wear different watches for different occasions. There are currently numerous new functionalities for a watch and there may be concerns of this product being able to adapt to them. The Watch Phone is extremely expensive at the current price of $1290 on a 12 to 24 month contract in the UK and thus the price is high compared to competitors. Therefore, consumers must be enticed to leave their existing phone contracts to switch over. The Watch Phone may also be seen as inconvenient due to its size of being too bulky.

The Young, Affluent Professional

We have decided to target men in their 20’s up to the age of 40, who have been university educated and are classified as “young professionals” in today’s demographic segments. This market internally emphasizes the importance of stylish yet functional products that deliver a pronounced sense of achievement and convey the individual’s refined taste in the newest fads and technological advances.
Geographically, the consumers are urban/suburban members of densely populated cities in Canada. In the business world, a watch is regarded as an accessory to demonstrate wealth and power aside from the obvious function of telling time. Thus we are looking to specifically target university educated men with a medium to high income level and who have a clear desire to pursue further financial success. This age group is targeted due to its Generation X and Y characteristics that make the group more attracted to the Watch Phone. Both Generation X and Y are favorable potential consumers of the Watch Phone because of their use and acceptance of technology. More specifically, Gen X has the spending power while Gen Y has a strong love for digital electronics such as cellphones, digital music players and digital cameras. Based on the widely used psychographic system of VALS, the main behavioural segments we aim to target are the innovators, achievers, strivers and experiencers. The innovators are characterized as successful, sophisticated change leaders who are active consumers and also make purchases that reflect a taste for finer things. Similarly, achievers are also active consumers who favour prestige products that demonstrate their success in addition to the value in functional benefits. Thus a novelty product that incorporates the capability of a watch and a phone together along with a stylish appeal that can convey success will cater to the tastes and preferences of these two VALS segments. The lifestyle of strivers involves being trendy, stylish and displaying status. The experiencers spend high portions of their income on being fashionable and acquiring the latest in any trend. Another big advantage that the watch phone has is the ability to satisfy customers who are active in sports. With the surge of mobile devices, people are increasingly trying to incorporate the use of them in their daily sports activities. Similar to the arm band strap of mp3 players used by runners, the Watch Phone facilitates the use of technology while exercising, providing tremendous value to working professionals who also are health conscious and are actively attempting to stay fit (no pun intended).
Decision Criteria

The decision we make must be made to ensure that a few key criteria are met: 1. Our activities create widespread demand for the LG watch phone in the Canadian market 2. Our activities ensure profitability in the short term as the technology industry is rapidly evolving 3. Any decisions we make must parallel the mission and values of LG Electronics, Inc.
An Integrated Marketing Campaign

To be able to call the LG Watch Phone a success in the Canadian market proceeding the upcoming launch, we need to put into motion a full advertising campaign that will introduce the market to our revolutionary new product. This LG Watch Phone will be portrayed as the latest and greatest in the consumer electronics industry; this is a device that simplifies everyday life by being attached to your wrist at all times.
The LG Watch Phone will get widespread media attention through a variety of promotional mediums including television, magazines, and the Internet. This product will be priced as a premium product and will target those young professionals who lead a busy life and have a need to stay on the leading edge of technological innovation. Through the use of advertising tactics aimed at directly targeting the young, affluent professional, we put ourselves in a good position to have a successful launch in the Canadian market.

Marketing Strategy

A differentiated segmentation strategy would make the most sense for a product of this nature. Like many major mobile phone releases, there are often several specifications to choose from and could be distinguished through variety in data storage size, design (ex. colour and size), screen resolution and most importantly price. Further, service carriers in Canada will offer major discounts on the retail price of the phone if you decide to purchase a 3-year plan along with the phone. Consumers have the option of choosing between paying full price or a discounted price with a contract by the carrier. Service providers also give a variety of plans to choose from that allow each price segment a different offering. Experienced professionals most likely pay full retail price or sign with a plan.
The best positioning strategy would be to focus on product attributes that are most important to the target market. Due to the novelty and innovative appeal of the combination of a watch and a phone, the product largely speaks for itself. It makes sense for the product to focus on leadership, placing importance on dimensions of innovation, quality performance, design and reliability (See Exhibit A). Based on this strategy our positioning statement is as follows: “For young, affluent professionals who are looking for a sleek, stylish, mobile phone, the Watch Phone is a revolutionary smartphone that combines the convenience of a watch with the technology of a mobile phone unlike any traditional smartphone.”
Consumers will look at this product as one that will fulfill a psychological need. Many individuals in our target market will have both a phone and a watch, but a product that will integrate two very essential products in a young man’s life will be very attractive to that individual. The price will be set at a premium, which means that once they are aware and interested in the LG watch phone through our promotional campaign, they will take action by making a complex purchase decision in which a thorough information search will take place. This means that it is vitally important that the details of the product are readily available to all potential consumers.

Marketing Mix
Product
The LG Watch Phone is the first of its kind by having a wristwatch format with both the dual functions of a phone and watch. LG has a first mover advantage as a result of this. Benefits include features such as a touch screen, 3G connectivity, Bluetooth, web browsing, calendar, waterproof materials and a speakerphone. The Watch phone provides the convenience of hands-free features and text-to-speech.
We will market the LG Watch Phone as a specialty product. Due to growing competition in the consumer electronics industry, consumers have a variety of choices when considering a new mobile phone purchase. This environment induces consumers to be highly involved in the purchase by comparing different brands/models when considering their purchase. The product adoption cycle for the Watch Phone should be relatively quick, due to relative advantage, compatibility, observability, and trialability. The LG Watch Phone is consistent with consumers past need for mobile phones in this market with additional advantages such as being portable, stylish, and convenient. Consumers will have the ability to test and view the phone at several different distributors. It should be seen as a “fashion statement” and as a status symbol. Today’s consumer has a high affinity for brand names. The “Watch Phone” name should be associated with the LG product and have LG’s premium product status when it is launched.

Distribution Channels LG currently has the option to distribute through multiple carriers or a single carrier. It is best to stay consistent with LG’s current distribution model, by having the Watch Phone available through a variety of networks. The Watch Phone will have a selective distribution strategy through the 3 main carriers: Rogers, Bell, and Telus. These three hold 95 percent of the Canadian market share. Koodoo and Virgin Mobile also go against our product’s core values by advertising low cost phones with cheap plans. Rogers, Bell, and Telus are all well known to carry more expensive phones with high-end plans.

Pricing Strategy
Since the Watch Phone operates in the very unpredictable, fast moving technology sector, our main objective is to adopt a profit orientation to ensure LG profits as much as possible from this product before trends in the market diminish the demand for the watch phone.
This is a luxury product, meaning that demand for the watch phone will be inelastic when factoring in the price. Also, since there is no real comparison to the product in the market - we are the first-mover. This will allow us to set the price in a way that reflects the inelasticity of this market segment
The Watch Phone operates in a grey industry. On one side, the watch market is very monopolistic. The smartphone market on the other side is monopolistic as well, with a few key players such as Apple, Samsung, Blackberry, etc. The LG Watch Phone operates in a market of its own. It is a merger of the smartphone and watch markets - a market we call the “SmartWatch market” - which is a monopoly. This means that there is no price competition - at least until other companies start manufacturing their own rendition of a watch-phone. To take advantage of this, we will implement a price-skimming strategy.
We will set the price high initially to capture large margins from the innovators and early adopters, who are willing to pay the price premium in exchange for being one of the first to own such a revolutionary product. This strategy is very important to be able to recover the costs associated with R&D. Once competitors enter the market, competition will force LG to lower the price on the product, which is in line with our initial price skimming strategy. This will capture the rest of the market who were waiting for a more affordable time to purchase. As the European Launch had the phone at over $1,200 USD, we believe that with the traction the product has in the market, we can be flexible and drop the price down to $799 for the Canadian launch.
Promotional Strategy
As LG has a large budget for advertising and promotion, having to determine our plan of attack with regards to advertising becomes very simple. We can use an objective and task method wherein the budget is reflective of all promotional activities LG deems necessary to create a demand for the product.
To create the demand that we are looking for, we will use a variety of different mediums to pull our target market to the product:
1) Television Usage of 30 second television spots during evening prime time and sporting events will allow us to reach our target market, who are likely to be watching the news in the evening and their favourite sports teams otherwise.
2) Magazines
We will be promoting the Watch Phone in magazines such as Forbes and Wired. These magazines epitomize the type of consumer we are targeting, and portray the professional and tech savvy lifestyles that our target market thrives in. With approximately $600,000 in magazine budget, we should we able to get 4 full page ads throughout the year in Forbes and Wired (see Exhibit E)
3) Internet

Since this is LG’s revolutionary new product, the watch-phone will make a big presence on LG’s website. LG’s website will have a “composer” tool that will allow the consumer to “build” and price their product choosing from the various features available. We will make use of the interactive nature of the internet to create buzz through social media (including Facebook, Twitter, and YouTube), as well as show some of the finer details of the product to portray the quality of the LG Watch Phone.
Using a mixture of rational and emotional appeal in our advertising efforts will ensure success for this product. Allowing consumers to discover all of the previously unmet needs which can be met with this product, along with creating the sense of luxury, exclusivity and a fashion statement will help drive the demand for the Watch Phone.
We have recommended an advertising budget for the Canadian market of $5 million. In 2007, LG spent approximately $9 million on the advertising of their new product, the “LG Chocolate”. Taking into account the fact that this was in the United States, we predict a $5 million budget to be reasonable for the size of the Canadian Market. Included in this will be a $2 million endorsement deal with Canadian born Sidney Crosby. Sidney is an ideal choice for our celebrity endorsement as he is a Canadian icon who fits the description of our target market. He will make appearances in our commercials and in portraits on our website. Our budget will be broken down into three main categories based on a $3 million allocation after our celebrity endorsement expenditure, as illustrated in Exhibit C.

Expected Results

We did some calculations in order to predict our sales for the first 3 years after the release of the phone in Canadian market. We know that in 2008 consumer electronic sales in North America totaled $515 million. Furthermore, we know that cell phones constituted 18.5% of overall consumer electronic sales. For the growth rate for worldwide consumer electronics sales we used is 8% in 2009 and 10% in 2010. Fairly low growth rates are being used because of uncertainty instilled by the recent financial crisis. Also we introduce a “Watch Phone restrictive factor” that lowers the forecasted sales due to uncertainty of the real ability of such a novelty gadget to gain the necessary traction in the market.
Taking into consideration the proportion of Canadian population to the overall North American population, the LG’s market share in the consumer electronics market, and the percentage of LG’s cell phone sales in Canadian market that LG’s Watch Phone will account for, we are able to produce a fairly conservative forecast that still allow LG to break even and earn a reasonable profit. Looking at Exhibit B, the vertical axis represents the projected Watch Phone sales in Canada (in thousands of dollars). Then, the differently coloured bars represent projections for various Watch Phone sales percentages in relation to total LG cell phone sales in the Canadian market (these are indicated on the right; each color corresponds to a percentage of LG’s phone sales for 3 years after release; 2009-2011) (Exhibit F). With a profit margin of approximately 25%, our $5 million advertising budget is justified with 25,000 units sold in Canada. On the graph, we can see that only in the worst case (blue bar) for 2009 do we not cover our marketing budget being 1.5 thousand units short of the desired amount. However, in subsequent years we feel that we can now not only cover the marketing budget, but also generate solid profit.

Appendix

Exhibit A

Exhibit B

Note: Apple managed to secure profit margins of between 49 and 58%. According to this, we believe that a profit margin of 25% on our watch phone is reasonable. Given that LG had a gross revenue of 30,513 Billion and a cost of goods sold of 23,407 Billion, we assume a profit margin of approximately 25%. Thus, we estimate that the cost of materials would be $600 with a selling price of 799$ per watch phone.

Exhibit C

Exhibit D

Table 2
Worldwide Mobile Terminal Sales to End-Users in 2008 (Thousands of Units) Company | 2008Sales | 2008 Market Share (%) | 2007Sales | 2007 Market Share (%) | Nokia | 472,315.0 | 38.6 | 435,453.1 | 37.8 | Samsung | 199,182.0 | 16.3 | 154,540.7 | 13.4 | Motorola | 106,590.0 | 8.7 | 164,307.0 | 14.3 | LG | 102,555.4 | 8.4 | 78,576.3 | 6.8 | Sony Ericsson | 93,414.5 | 7.6 | 101,358.4 | 8.8 | Others | 248,189.0 | 20.4 | 218,604.3 | 18.9 | TOTAL | 1,222,245.2 | 100.0 | 1,152,839.8 | 100.0 |

Exhibit E

Exhibit F

Works Cited

1. MarketingCharts Staff. "Wireless Phone Advertisers Spent $4 Billion on Ads in ’07." Marketing Charts. N.p., 28 May 2008. Web. <http://www.marketingcharts.com/wp/television/wireless-phone-advertisers-spent-4-billion-on-ads-in-07-4739/>. 2. Duncan, Geoff. "How Apple and Samsung Cornered All Smartphone Profits." Digital Trends. N.p., 06 Aug. 2012. Web. <http://www.digitaltrends.com/mobile/how-apple-and-samsung-cornered-all-smartphone-profits/>. 3. Campbell, Ken. "Sidney Crosby to Sign Richest Endorsement Deal in NHL History." The Hockey News. N.p., 29 May 2010. Web. <http://www.thehockeynews.com/articles/33853-Source-Sidney-Crosby-to-sign-richest-endorsement-deal-in-NHL-history.html>. 4. LG. "LIFE’S GOOD: LG ROLLS OUT SECOND PHASE OF BRAND MARKETING CAMPAIGN." LG. N.p., 14 July 2010. Web. <http://www.lg.com/uk/press-release/lifes-good-lg-rolls-out-second-phase-of-brand-marketing-campaign>. 5. LG. "LG Raises the Bar with Innovative Products at 2009 Int 'l CES." LG. N.p., 07 Jan. 2009. Web. <http://www.lg.com/global/press-release/article/lg-raises-the-bar-with-innovative-products-at-2009-intl-ces.jsp>. 6. LG. "LG: Financial Results." LG. N.p., n.d. Web. 21 June 2013. <http://www.lg.com/global/investor-relations/financial-info>. 7. Grewal, Dhruv. Marketing. Toronto: McGraw-Hill Ryerson, 2012. Print.

Cited: 1. MarketingCharts Staff. "Wireless Phone Advertisers Spent $4 Billion on Ads in ’07." Marketing Charts. N.p., 28 May 2008. Web. &lt;http://www.marketingcharts.com/wp/television/wireless-phone-advertisers-spent-4-billion-on-ads-in-07-4739/&gt;. 2. Duncan, Geoff. "How Apple and Samsung Cornered All Smartphone Profits." Digital Trends. N.p., 06 Aug. 2012. Web. &lt;http://www.digitaltrends.com/mobile/how-apple-and-samsung-cornered-all-smartphone-profits/&gt;. 3. Campbell, Ken. "Sidney Crosby to Sign Richest Endorsement Deal in NHL History." The Hockey News. N.p., 29 May 2010. Web. &lt;http://www.thehockeynews.com/articles/33853-Source-Sidney-Crosby-to-sign-richest-endorsement-deal-in-NHL-history.html&gt;. 4. LG. "LIFE’S GOOD: LG ROLLS OUT SECOND PHASE OF BRAND MARKETING CAMPAIGN." LG. N.p., 14 July 2010. Web. &lt;http://www.lg.com/uk/press-release/lifes-good-lg-rolls-out-second-phase-of-brand-marketing-campaign&gt;. 5. LG. "LG Raises the Bar with Innovative Products at 2009 Int 'l CES." LG. N.p., 07 Jan. 2009. Web. &lt;http://www.lg.com/global/press-release/article/lg-raises-the-bar-with-innovative-products-at-2009-intl-ces.jsp&gt;. 6. LG. "LG: Financial Results." LG. N.p., n.d. Web. 21 June 2013. &lt;http://www.lg.com/global/investor-relations/financial-info&gt;. 7. Grewal, Dhruv. Marketing. Toronto: McGraw-Hill Ryerson, 2012. Print.