Hot chocolate

With mobile phones becoming more important as fashion accessories than ever before, manufacturers are constantly striving to produce the next must-have handset. Following the success of Motorola’s Razr, LG Electronics seems to have the mobile

In the cutting-edge world of mobile phones LG’s Chocolate model is this year’s hottest handset, and the Korean group hopes the stardust will help boost its overall reputation. But can a ‘cool’ phone really establish an entire brand and drive sales of other appliances? Asks Robert Lester

With mobile phones becoming more important as fashion accessories than ever before, manufacturers are constantly striving to produce the next must-have handset. Following the success of Motorola’s Razr, LG Electronics seems to have the mobile of the moment with its stylish Chocolate model. Now the Korean company is hoping the phone’s popularity will rub off on its domestic appliance products, such as televisions, washing machines and microwaves.

LG Mobile is launching white and pink versions of Chocolate to capitalise on its early sales success (MW last week). The company has sold 2 million Chocolate phones outside Korea since its launch in May and claims it is selling 100,000 units a month in its home market, where the phone was launched last October.

Chocolate is the biggest seller at Europe’s largest mobile phone retailer Carphone Warehouse, and Gartner analyst Carolina Milanesi says/ “It’s a nice little phone. It might not have all the fancy bells and whistles on it, but it looks good and people are more interested in phones that look good these days. Fashion is becoming more important.”

Build the brand with chocolate

And she adds: “There’s no doubt that the Chocolate handset will help build awareness of the LG brand as a whole.”

LG Electronics appointed Euro RSCG to handle its 30m pan-European advertising account at the end of 2004. Much of the agency’s work thus far has been for the mobile division and it is behind a £3m television, outdoor, print and online campaign to support the launch of the new coloured Chocolate phones.

One source close to the company thinks it has neglected its core business in favour of mobile phones, which it launched in the UK less than three years ago. “LG has spent an awful lot of time in recent years focusing on mobile,” says the source. “It’s fair to say that it has largely ignored the rest of the business.”

LG Philips LCD, a joint venture between LG and Dutch company Philips, reported a record loss in the second quarter last month after weaker-than-expected World Cup sales. The world’s second-largest flat-panel maker reported a net loss of 322 billion South Korean Won (180m) in the second quarter, compared with a W41bn (2m) profit a year earlier and the W276bn (150m) loss expected by analysts.

LG Mobile UK head of marketing John Bernard admits mobile phones and LCD/plasma TVs will now be the company’s main areas of focus. He says LG Electronics wants to be in the top three consumer electronics brands in the world by 2010 and adds: “We definitely think we’ll get a halo effect from Chocolate. If you have compelling, aspirational products it rubs off on other areas of your business.”

Finally getting noticed

Bernard (right) says Chocolate has already helped LG exceed its brand awareness targets this year and adds: “LG is very much a leader in technology in lots of different markets and now people are starting to get it. We were the biggest company you’d never heard of but now we’re being noticed.”

Milanesi believes LG Mobile must improve the rest of its range so that the other models do not look like “ugly ducklings” compared to Chocolate. Motorola followed the Razr with its Pebl and Slvr handsets but so far Chocolate is the only phone in LG’s premium Black Label series. However, as well as the newly coloured models it is also extending the Chocolate range with a model called Chocolate Platinum. Bernard says LG will follow that with the launch of a brand new handset to sit alongside Chocolate in February.

LG is the dominant player in CDMA, the mobile transmission technology used in the Americas and parts of Asia, but is a latecomer in the GSM market. GSM is the standard technology in Europe and is used by two out of three mobile subscribers worldwide.

Strategy Analytics associate director Neil Mawston does not think LG can challenge the likes of Nokia and Motorola until it improves its distribution network. “GSM has been more of a struggle for LG,” he says. “It can come up with as many cool products as it likes but it will struggle to gain market share while its distribution is weak. Its product portfolio is also weighted towards the high end so it is missing out on the entry-level market.”

Open market remedy

LG previously only made handsets for operators but at the end of last year it began selling phones on the “open market” through retailers such as Carphone Warehouse and Phones4U. Bernard points out that Chocolate is an open market phone that is not exclusive to one operator and he thinks that this strategy will help remedy its distribution issues. He adds that entry-level and mid-tier phones are LG’s “bread and butter” but says they are less high profile because they are not advertised as heavily.

Meanwhile, LG has turned to sport to build its brand in the UK. It signed as the first official partner of Fulham Football Club in a deal worth close to 1m last year (MW August 4, 2005). The company also has an official partner deal with Liverpool FC and sponsored ITV’s Formula 1 coverage last year.

LG’s biggest rival, Samsung, is pursuing a similar strategy and signed a record-breaking £50m shirt sponsorship deal with Chelsea FC last year. The source close to LG says: “LG only sees one competitor in the market and that is Samsung. It has taken its sponsorship lead from Samsung but its sponsorships don’t generate much exposure.

“Samsung has Jose Mourinho as a brand ambassador, while LG signed up Coleen McLoughlin to promote Chocolate. It’s all a bit downmarket and cheap and cheerful. LG does not have the money Samsung has but it could have done something a bit different.”

LG was itself linked to a number of high-profile football shirt sponsorships, including Manchester United and Tottenham Hotspur, last season. But, for now, Chocolate is taking care of raising the profile of the brand. Whether it can help sell washing machines remains to be seen but, at the very least, it is making LG’s more famous rivals in the mobile phone industry sit up and take notice.

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