Samsung India's Zutshi: With LG leading the market and Sony in brand recall, Samsung has a lot of catching up to do

There are two ways you can look at Samsung Electronics India. Look at it from a mere numbers perspective, and it's clear that it has to play aggressive catch-up with another compatriot chaebol LG (India), which, with Rs 6,500 crore in revenues (compared to Samsung's Rs 4,900 crore) is the numero uno of India's consumer electronics industry. Its market domination is across the consumer electronics spectrum: from home appliances to mobile handsets. But look at Samsung outside of India, and you find in it the world's fastest growing consumer electronics brand-one that even revered rivals like Sony are now learning to fear. It's a company that has successfully graduated from being a contract manufacturer to one that's driving innovation in the industry. Indeed, it is Samsung's model that rival LG is trying to follow (though not exactly copy-cat) globally.

Little wonder then, the distant #2 in India has a big chip on its shoulder. "We're defining the way to the market here in India," says Ravinder Zutshi, who recently got promoted as Deputy Managing Director, Samsung India. Call it corporate big-talk, or even plain bravado, but it is hard to miss the company's ambitions or its blue elliptical logo, omnipresent across every electronics shop and across product categories from high-end plasma televisions, colour mobile phones, computer monitors, digital cameras to washing machines. "From a product and technology perspective, we have no competition. Not even from Sony here," says Suk Ha Oh, President & CEO, South West Asia, Samsung Electronics, who took over in February this year after a not-so-happy churn at Samsung India that saw the exit of many key executives under charges of graft and fraud.

Competitors aren't exactly trembling in their pinstripes, but they are certainly sitting up and taking note. "In high-end products, they're moving ahead of competition," says a CEO of a rival multi-national home appliances company. Samsung India has the scale, the size and, more importantly, strong new products, and now it is moving in for the kill. "We're the best, and becoming #1 is just a matter of time," declares Oh.

From Logo To The Brand

"In India, LG is the market leader. And Sony is still perceived to be a better brand," says Vineet Nigam, consumer durables analyst at credit rating agency ICRA. Though no one at Samsung India will even as much as nod in agreement at this statement, it is clear that it wants to be more than a mere price-warrior chaebol brand, with invariable comparisons to LG or its own humble beginning as a black and white television supplier to Sanyo way back in the 1970s. It wants to stand right next to Sony in brand imagery, something it cannot do by merely outselling it, which it anyway does almost 10 to one today! And nothing irks top Samsung officials more than LG and Samsung being spoken in the same breath, in brand terms. "Our only brand competitor here is Sony," claims one top Samsung executive.

Globally, Samsung has muscled its way to the top league of the world's consumer technologies companies, rubbing shoulders with Philips, Apple, Sony, Nokia and Canon. And its brand, which ranked #21 last year on BusinessWeek-Interbrand's annual survey of the world's most valuable brands, has moved from just cool-and-hip to almost cult status. Now Samsung India is on a mission to ensure that its brand catches up with its revered global image, whatever that takes.

To start with, it is changing the way it sells. But not by pulling out of the mom-and-pop multi-brand stores (it can't afford to; they account for the majority of durables sales in India), but by moving products into its own upscale brand shops. Almost 73 such Samsung Digital World, Home and Plazas (classified according to decreasing store size) dot more than 30 cities, and there are plans of doubling both stores and cities covered by the end of this year. "Today, the consumer is conscious about the retail environment. The need is there for the industry to look at consumers' brand interaction at the store level," says Rohit Mathur, head of retail marketing at Samsung.

Soft Sell

It's an expensive gamble, gobbling over 10 per cent of Samsung's annual marketing spend, which stands at a mammoth Rs 250 crore. And if it works, it will elevate Samsung's brand image and provide it a differentiation in the market. "Samsung is a confused brand here. Every January they say no brand massification and then by April they're back to the discount game," says a key competitor.

"From a product and technology perspective, we have no competition. Not even from Sony" Suk Ha Oh President & CEO, SW Asia, Samsung

There is some truth in that. For, the thought even within Samsung is that unless the company is able to leverage its Korean parent's innovation pipeline, it runs the risk of ending up as just another brand in the Indian marketplace. That's because just about anybody in the industry, especially a bigger player (in India) like LG, can overspend and undercut its way to market dominance. "Lifestyle products will increasingly drive the consumer mindset towards brands in consumer electronics. And, unless we drive it through high-end technology and design products in a controlled retail environment, the consumer will not look at us as a preferred brand," says Zutshi.

Almost 13-14 per cent of the company's sales already come from these brand stores, and the goal is to sell one in every five products through the Samsung Worlds, Homes and Plazas by the end of this year. "We want to sell more high-end and high-value products; and for that our front-end sales force should be able to communicate well with the consumers," says Sanjay Rai, Vice President, Management Innovation & Samsung Marketing Academy (SMA).

Set up just six months ago, the SMA is an attempt to create a product- and brand-conscious consumer-facing corporate culture that permeates right down to dealer's sales personnel. It has a budget of more than $1 million (Rs 4.40 crore), and growing. "Once SMA came into my fold, I started reporting directly to the CEO- something I wasn't doing even as head of management innovation in implementing six sigma," adds Rai, pointing to the importance and focus the company accords SMA in its brand plans. Another first for Samsung and a far cry from the industry practice of treating after-sales service as a revenue centre, is Samsung Service Plazas. "For us, service is a cost centre, part of managing the customer-relationship-management chain. We earn through selling the product; why rip off the customer for choosing your brand?" says R. Srikanth, Vice President (Service).

The company has set up seven sprawling (over 2,500-sq. ft. each) service plazas in downtown locations in as many cities. Here a consumer can walk in with the product-mobile phones, cameras, printers and laptops-and get on-the-spot service, and often at prices lower than published rates. Samsung's pouring big money here, considering that it costs in excess of Rs 2-crore to set up a single service plaza, and that a dozen more are planned for 2005. "Many customers who walk in chat with our executives on new technologies, new products or even query about functionalities of products they may already own," says Srikanth. The unstated hope: That customers will keep coming back for more products.

Also central to Samsung's strategy in India, much like globally, is to weave in consumer-relevant technology as an overarching attribute to its products and brand. So you have refrigerators, air-conditioners and washing machines with bacteria- and virus-fighting technology in the 'Silver Nano' series, flat televisions that come with DNIe technology for sharper picture and contrast, and mobile phones with interface in eight Indian language. The overarching idea: Build "a multi-product, intra-product co-opted brand" that is at once able to take on rivals as varied as Nokia, Electrolux, Sony, LG, Philips, Hewlett-Packard and Canon.

"Mobile phone leads the Samsung brand today," says Anuj Kapoor, General Manager (Telecom Business), Samsung. And it's not hard to see why, what with the mobile phone category almost personifying brand Samsung's coolness among young, design-conscious, technology-savvy and very high-involvement consumers. Samsung is trying to stay at the forefront of technology, whilst trying to build lasting brand advantage. It has proved that it can work, globally. The test in India has just begun.