How is the Christmas market playing out this year in light of the ‘credit crunch’ and economic gloom?
The mobile industry has been, and will continue to be, affected by the current economic downturn. For the first time our sector will be hurt by recession and cannot rely on growth to avoid the negative impact. Pundits who say otherwise are wrong, and haven’t been looking out the window.
The effect has been a re-alignment of the most popular tariffs; typically everything has slipped down a rung as the customer looks for value. In prepay the story is similar, with the expectation that more features will be available at a more competitive price.
One of the most important results of the financial climate is credit is more difficult to come by, while companies and their insurers are taking longer to approve less. As ever, it is the distributor and small dealer communities which suffer the most from this.
Has LG Mobile reined in its Christmas forecasts for the UK from, say, six months ago?
Quite the contrary – we have been even more bullish. This hasn’t simply been bravado, however; you are only as good as the products you have and thankfully we have brought out a succession of great handsets which have been supported by the channels in the build up to Christmas.
We have seen a succession of increased forecasts for a number of key products – Renoir, Cookie, KS360 – and this explains our rising market share.
How does the recession inform your product offering, and how well positioned are you for the market now?
LG is extremely well placed in the UK market, given we are addressing customers’ need for value.
Times are hard and have been throughout the second half of 2008. That has informed our approach to what we offer via our network and retail partners. The LG Cookie at Carphone Warehouse is the best value touchscreen device, as well as a beautiful phone. The KS360 houses the best value chat or messaging offer on Orange, with a truly innovative approach to the customer desire for simple and effective connection to their social community sites.
The KC550 is the best value 5-megapixel offering and supports the continuing success of the LG Viewty. You can see the pattern here – value, for both our channel partners and for the customer.
What is LG Mobile’s UK market share now? What is its 2009 target?
We are currently standing at around nine per cent on units sold and 10.6 per cent on share of value in the market. This has been growing for some time and will continue to grow through Christmas.
Given the quality of our handsets and our desire to build share profitably and not at any cost, I believe our share of revenue will always be ahead of simple units sold.
To move into 15 per cent territory in 2009 is the obvious next step.
The market has all but lost Motorola; Nokia and Samsung are tussling for number one spot, and Sony Ericsson is competing with them on price and range. At the same time, the iPhone has had a huge impact on a single network at a very specific price point, and HTC and BlackBerry have stepped up. Where does all of that leave LG Mobile?
Clearly, the demise of Motorola is a significant moment and sad in many respects – not least because of the impact on individuals working there. I think it is a very risky strategy to think you can shut up shop for a period and then trust customers to come back and start buying some months later – what will those customers have been doing in the meantime? I think this is compounded by the decision to support a couple of channels and turn away from all of the others.
With regard to the other handset manufacturers, the battle between Nokia and Samsung has been interesting and this – coupled with Sony Ericsson’s attempt to keep pace – has undoubtedly led to the considerable erosion of profits in some of these companies.
LG’s strategy of ensuring we remain healthy and able to re-invest is the right one; we are seeing the fruits of that in our Q4 performance and the plans already laid for next year.
The issue of polarised distribution, where one handset or manufacturer partners with a particular network, is on the increase, although I am not convinced such moves entirely benefit the customer.
It was perhaps necessary for the players you mention to construct and offer these sorts of deals, to enable them to register on the scale against the main four manufacturers. But nevertheless it is a phenomenon we can’t ignore.
For the full interview with LG’s John Barton, see Mobile News issue 429
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