Adrenalin for LG Electronics’ brand

When Ryan Sheckler embarked on his skateboard performance at the LG Action Sports Championships in Los Angeles in September, he was taking risks with his "kickflip stalefish" manoeuvre over a steep ramp. But the high school pupil won the event and with it $30,000 (£15,500).

Like Sheckler, LG Electronics, part of South Korea's LG conglomerate, is taking risks by experimenting with its branding strategy. It, too, hopes to cash in.

Virtually unknown in the mobile phone global market until a few years ago, LGE is now the world's sixth largest handset maker and wants to move into the top three by 2006. But catching up with its much bigger compatriot, number-three-ranking Samsung Electronics - which has more than twice the global market share at 14 per cent - is an ambitious aim.

LGE now makes high-technology, high-value products and is focused on advanced design and convergence. But it realises it must adapt its image if it is to sell "cool" products and, unusually for a Korean company, it is starting to experiment with branding.

With a much smaller marketing budget than Samsung - global advertising spending for LGE's entire handset business is about $140m, compared with the $200m contract Samsung has just awarded WPP - it is targeting niche markets.

While Samsung advertising tends to concentrate on technology, LGE is focusing on fun. Asked what LG stands for, many would say "Life's Good", its brandcatch phrase, rather than Lucky Goldstar.

"Our brand is all about enjoyment, and we are trying to emphasise to the consumer that they should enjoy our phones," says Bae Jae-hoon, executive vice- president of LGE's handset division. "With 3G and now 4G, phones are becoming very sophisticated, so we are very much pushing user-friendliness."

While Samsung sponsors big mainstream events such as the Olympics, LGE is courting thrill-seekers and adrenalin junkies by backing alternative sporting events such as the Action Sports Championships, which feature skateboarding, inline skating, BMX and motocross.

"We are targeting consumers aged 13-18, because teenagers buy expensive products and lead trends. So when they buy our phones, everyone else will eventually follow," Mr Bae says.

As a relative latecomer to the mobile phone global market, LGE sees snapping up new customers before they develop loyalty to another brand as a way of helping it close the gap with Nokia and Motorola.

LGE was the world's fastest-growing handset producer in the first half of this year, increasing shipments by 72 per cent to nearly $20m or 6.3 per cent of the market.Handsets account for about a third of LG's sales.

Its five-year sponsorship of the Action Sports Championships - the marketing campaigns will cost LGE about $22m next year - will see its brand featured prominently at events around the world. Samsung spends about $200m over four years sponsoring the Olympics.

LGE hopes its association with action sports will convey a young, cutting-edge image. Its phones marketed during the action sports events come loaded with skateboarding games and hip-hop ringtones.

"The spirit of action sports is matched with LGE's corporate spirit - it's challenging to the extreme," Mr Bae says.

Action sports have 150m participants around the world, a number the company says is growing by 30 per cent a year.

According to research for LGE by East Marketing Group, 43m people born after 1979 and living in western Europe wield spending power of more than €61bn (£42bn) a year. Meanwhile in the US, there are more than 40m participants in action sports with more than $300bn in annual discretionary spending.

By comparison, baseball has lost nearly 16m participants in the US in the last decade, with the number falling to fewer than 11m.

Andrew Oh, a creative executive who was drafted into LG Electronics from LG Ad, its advertising affiliate, specifically to create advertisements for action sports, says the goal is to improve brand recognition among potential customers rather than sales.

"This is a sports sponsorship effort, and we use it as a marketing and communication platform to raise awareness of our brand," Mr Oh says. "We need to keep that platform global to ensure there is consistency."

In the lead-up to the 2005 championships in October, an action sports "tour" will take place across Asia, as well as in South Africa, the UK, Italy, France, Spain, Germany and Russia. LGE hopes to launch a Latin American tour in 2006.

The company is also focusing its efforts on China in an attempt to capitalise both on the relatively untapped and fast evolving youth market and the inclusion of a BMX event in the 2008 Beijing Olympics.

The action sports sponsorship will complement LGE's other branding exercises, Mr Bae says.

"Action sports are like taking vitamin supplements: they are not the carbohydrates or protein which make up our diet, but they're the extra bit that helps," he says. "We should still do conventional advertising, but also combine it with sporting events."

LGE's advertising for other products, especially overseas, is also unconventional by South Korean standards. In Australia, it markets its fridges and microwaves during sporting events with slogans such as "Official sponsor of cold beer" and "Official sponsor of half-time snacks", and its air conditioners are the "Official sponsor of staying cool".

In a similar approach to tapping into action sports, LGE hopes to target specific groups. It sponsors the Cricket World Cup, which was last year held in South Africa. Its South African revenues leapt by 200 per cent due to strong sales of flat-screen televisions and video players.

In cricket-mad Australia, its home theatre and DVD combination sales rose by the same percentage. In India, its flat-screen TV sales rose from 6,000 units in 2002 to 80,000 in the two months of the Cricket World Cup.

While the mobile phones marketed with the events were loaded with relevant games and tones, mobile phones sold in India came with cricketing games.

Chai Seo-il, marketing professor at Korea University, says that LGE is trying to build its brand equity and that its approach fits its size.

"Samsung has the resources to put lots of money into lots of different places, but LG is small so has to target their audience more specifically," he says. "They have to think smaller, but they are building up their brand very rapidly."

Samsung's more serious approach conveys a sense of greater trustworthiness, says Im Un-suk, brand marketing researcher at Oricom, an advertising company in Seoul.

"Samsung has a strong image of being number one and being trustworthy, so its marketing strategy is focused on trust, and that is why they appear conservative," Mr Im says. "But LG, being in second place in terms of Korean mobile phone makers, has to take a different strategy from Samsung. I think it will work, though."

HOW LG ELECTRONICS TARGETS NICHE MARKETS AROUND THE WORLD

• Having been slow to move into lucrative export markets for mobile phones, LG Electronics is trying to develop brand loyalty among newcomers to the technology, targeting teenagers through its association with “cool” action sports and equipping phones with the latest music and games.

• In India, the company appealed to cricket fanatics by installing cricketing games on its mobile phones and televisions during the Cricket World Cup.

• In Australia, LG builds appeal in the sports-mad country by labelling itself “Official sponsor of cold beer” and “Official sponsor of half-time snacks”. “

• Qibla” phones marketed at the Middle East indicate the direction of Mecca.

• LG uses humour in advertising - something that has always been tricky in South Korea.

In one ad, a teenager comes home with an awful tattoo, but instead of being shocked her parents - sitting under an LG air conditioner - respond: “That’s nice, dear.”

• In 2002, LG set up “digital family” living in a Harrods shop window in London for a few days so that passers-by could see how LG digital devices such as internet fridges might one day become a part of everyday life.