LG L Series Market Research and Consumer Behaviour Analysis

LG L SERIES BRIEFING

Structure

Market and industry analysis

Current mobile retail

The mobile phone sector faces problems

Slowing technological development

Far too many stores

Classic symptoms of maturity

Replacement cycles will be pushed out

Sim-only contracts will break the link between handsets and

contracts.

The next few years will be tough for mobile phone retailers

The weak economic environment can only make matters worse.

Mobile phone market

Some 91% of people now have a mobile phone

Some 41% of those with an Internet connection now have a smartphone

Tablets, such as the iPad, also allow mobile access to the internet

Competition over tariffs has led to a fall in revenues for the network

More people now have a post-pay than a pre-pay contract.

By the end of 2011 58% of those online had a post-pay phone.

Networks have been cutting the subsidy on pre-pay phones.

They are also now promoting SIM only contracts

Which have a significant cost advantage over post pay contracts.

That will lead to the divorce of handsets and contracts.

Still place for growth

FIGURE 1: Mobile phone spending, 2006-16

SOURCE: Ofcom/Mintel

Customer profiles by retail

FIGURE 2: Profile of mobile phone shop customers, December 2011

SOURCE: GMI/Mintel

Online vs traditional shopping

FIGURE 3: Profile of online and in-store shoppers, December 2011

SOURCE: GMI/Mintel

Latest phone acquisition

FIGURE 4: Nature of latest phone acquisition, December 2011

Base: 1,896 internet users aged 16+, who use mobile phones

SOURCE: GMI/Mintel

Market Consequences

The days of the specialist mobile phone shop are numbered

Technological development is slowing down

Removing the need to upgrade one’s phone so often

The Sim only contract opens up selling handsets to many other retailers.

The more they become commodities, the more suitable they are to sell online as well.

Convergence of technology will undermine the status of the mobile phone as a standalone product.

But only one retailer seems to understand the implications of current trends – Carphone Warehouse.

Retail Implications and trends

The dominant trend in electronic gadgets is convergence.

These days one gadget will do the job of several just a couple of years ago

The smartphone can be:

Camera

MP3 player

games player, satnav

e-book reader

Network’s retail outlets because all they are really interested in is the utilisation of

their networks.

This trend will continue, but it is hard, as ever, to read where it will go.

No-one knows yet whether the Tablet (eg iPad) is the way forward – after all it has

the drawback that you can’t make phone calls with it.

But the trends towards miniaturisation and ever greater power in an ever smaller

space must, surely, continue.

Opportunities

When renewing their contract only 16% visit the network providers’ and 9% will browse shops first.

Networks have a slick operation to contact customers early and tie them in.

As the mobile phone becomes increasingly commoditised there is less reason to visit a store.

So it is time that the retailers themselves fought back.

Retailers are already seeking to create in-store engagement

Arranging flashmob events at flagship stores

Using profiling to text and invite winners to in-store gigs

speaker events based on their declared listening or browsing behaviour.

It will become increasingly hard for mobile phone shops to justify their existence, so it will be essential to

generate excitement and interest to pull people in.

there are too many mobile phone shops

They need to extend their range and there needs to be fewer.

A smaller number of larger stores can then become destination outlets

A store which in particular responds to the needs of the younger generation with visual appeal

The right instore ambience would help provide a point of differentiation and reason to visit

Another possibility might be to partner with fashion retailer given that mobile devices are generally

considered fashion accessories in their own right and have high ownership levels among the younger

audience.

Threats

Consumers are cutting back: food and clothing.

Looking to be more conservative in how much they spend.

They are still prepared to spend on iPads and the smartphone

is still an aspirational product.

But the uptake of smartphones would have been quicker if we

were not in the middle of an economic downturn.

The current squeeze on incomes is likely to lead consumers to

take on cheaper contracts and to spend less on any phone they

buy.

PEST

Political Standard-essential Patents and FRAND

Economic The Europe economic recession;

Inflation and floating currency;

Social Smartphone lifestyle is that customers rely on their

smartphone as the daily basis;

Social network and communication style perform better on

smartphone;

Technologic

al Smartphone requires high technology;

The development of the 3G and 4G networks;

SWOT

Strengths Good product quality;

Cheaper than other brand;

less serious and more playful;

Long history and fully experiences on electronic product production.

Weaknesses lack presence and loyalty in the UK mobile phone market;

no star product in mobile phone market;

consumer’s low intent to purchase an LG phone;

have no real technological edge vs competition;

Opportunities Smartphone market hasn’t fully developed;

Customers likely to change phones after the contract expiry;

Threats Customers likely to buy Stylish product to show their personality;

Other brands loyalty is solid, such as Apple, Blackberry.

Ansoff

market

product

old new old home electronics Electronics selling around the world;

Prada phone in the Europe market; new All the electronics range of

production in the south Korea. Smartphone: L3, L5, L7;

Porter’s 5 Forces

Threat of New Entrants - Low

Technology (High)

Investment (High)

Brand identity (High)

Power of suppliers – High

Switching cost (Low)

Threat of supplier entry (Low)

Power of Customers – High

Switching costs (High)

Options Variety (High)

Customer requirements (High)

Threat of Substitutes – High

Other cellphones (High)

Computer (High)

Telephone (Medium)

Letters and Mails (Low)

Competition within the industry – High

- Competition is high within the smartphone industry

- High-technology requires

- Appropriate marketing strategies are needed

The networks

There are four Mobile phone network operators (MNOs)

O2 – owned by Telefonica (spain)

Vodafone

Everything Everywhere – a joint venture between Orange (France Telecom) and T-mobile (Deutshche Telecom)

3 – owned by Hutchison Whampoa.

Mobile phone Virtual Network Operators

Tesco (linked with O2)

Talkmobile operated by Carphone Warehouse (Linked with Vodafone)

Virgin Mobile

Lebara

Brand and marketing analysis

Brand and MC SWOT

Strengths

• Competitive price (better deal)

• Produced by TV screen manufacturer

Weakness

• LG mobiles lack the ‘social proofing’ of other mobiles

• Lack of differentiating story

• Small budget

Opportunities

• Targeting at people who want to change

regular phone to smartphone (entry-level)

• The growth of Android OS

Threats

• Strong competitors

• Most pepole choose smartphone base on brand

Internal

external

Positive

Negative

Brand challenges

• Lack of specific targeting

• Ads lack USP and don’t reflect style:

• Modern design? Not unique feature

• Large screen? All smartphones have it

• Brand wheel is generic

• Searchability is low (need SEO)

• Promotion is not very attractive (O2 Arena too)

• Three handsets: find how we communicate with consumers which one is the one for them

• Their facebook is not very interactive

• Not engaging activities (contest is generic)

• No response to critics

• No dialogue

MC current status

• Using TV programmes to Engage with teens (integrated multi-platform marketing campaign promoting the ITV2 seven-part series ‘The Exclusives’)

• LG Mobile to sponsor multi-platform campaign across Bauer Media’s print, radio and online platforms –

• LG Arena events and activities

• Target style conscious female consumers instead of “pub geeks”

• Early technology adopters as it looks to differentiate itself in the crowded smartphone market.

• Seek digital interaction but not very engaging.

Understanding purchasing behaviour

Purchasing behaviour

The decision on what brand or model of smartphone to buy is not easy

43% of consumers prefer to ‘Speak with a sales person in-store’.

Consumers increasingly expect an element of free content that could include:

Introduction of a trial period (after paying a deposit, of course) so that customers

could test the functionality, reception, features and usability of the handset.

The dummies in-store give little real idea of the tactile properties of the phone

Let alone the feel of the keys or what it is actually like to use.

Stores can become ‘knowledge centres’ for mobile phones (and all associated

products).

Electronic products may be becoming more user friendly, but they can still appear

daunting .

Even those that manage the basic operations need guidance to get the most of it.

Free instore or even online tutorials might help the user through the process of using

their mobile

Implications

Stores could maybe become more like social community hubs where people can meet and exchange ideas and interests.

They need to feel less intimidating and more down to earth when it comes to listening and understanding the problems that users might encounter when it comes to utilizing their phones to their full potential.

With 58% of consumers now having a post pay contract competition in the market is switching to renewals (upgrades) rather than first contracts.

Only 20% of consumers are on their first phone or contract.

Those who renew are more likely to stay with their network provider.

Those who switch network tend to be in the younger age groups.

Renewals over the phone are most likely to be done by the networks.

Attitudes towards purchase

FIGURE 5: How next phone will be chosen, December 2011


SOURCE: GMI/Mintel

Decision making process

Some 20% of phones were bought online without going to a store first..

Very few people go on to buy online after having visited stores.

The young are most affected by peer pressure, being much more likely to be

influenced by adverts or advice from friends.

Those looking for advice tend to go to the independents (eg Carphone Warehouse).

There is evidence of the increasing commoditization of the product as the desire for

advice on phones seems to be diminishing.

FIGURE 47: How next phone will be chosen, December 2011

Base: 1,896 internet users aged 16+, who use mobile phones %

Browse online before I decide what to buy 29

Visit the website of my current network provider 19

Visit the store of my current network provider 16

Call my network provider over the phone 15

Browse shops before I decide what to buy 9

None of these 12

SOURCE: GMI/Mintel

Consumer behaviour

FIGURE 42: Process of buying mobile phone, December 2011


SOURCE: GMI/Mintel

The size of the target

FIGURE 16: Trends in the age structure of the UK population, 2006-16

2006 2011

(proj)

2016

(proj)

%

change

%

change

000s % 000s % 000s % 2006-

11

2011-

16

0-4 3,496 5.8 3,883 6.2 3,898 6.0 +11.1 +0.4

5-9 3,490 5.8 3,508 5.6 3,892 6.0 +0.5 +10.9

10-14 3,751 6.2 3,500 5.6 3,515 5.4 -6.7 +0.4

15-19 3,996 6.6 3,832 6.1 3,571 5.5 -4.1 -6.8

20-24 4,024 6.6 4,359 7.0 4,182 6.5 +8.3 -4.0

25-34 7,897 13.0 8,385 13.4 9,257 14.3 +6.2 +10.4

35-44 9,262 15.3 8,660 13.8 8,081 12.5 -6.5 -6.7

45-54 7,834 12.9 8,705 13.9 9,095 14.0 +11.1 +4.5

55-64 7,150 11.8 7,330 11.7 7,428 11.5 +2.5 +1.3

65-74 4,971 8.2 5,501 8.8 6,344 9.8 +10.7 +15.3

75-84 3,440 5.7 3,540 5.7 3,829 5.9 +2.9 +8.2

85+ 1,276 2.1 1,446 2.3 1,681 2.6 +13.3 +16.3

Total 60,588 100.0 62,649 100.0 64,773 100.0 +3.4 +3.4

SOURCE: Office for National Statistics/GAD/Mintel

Purchasing trends

FIGURE 18: Mobile phone subscriptions: Contract vs pre-pay, 2005-10

SOURCE: Ofcom/Mintel

Mobile phone ownership

FIGURE 2: Personal ownership of smartphones, basic mobile phones, and/or portable media players, December 2011-January 2012

Base: 2,000 internet users aged 16+

SOURCE: GMI/Mintel

Ownership by age group

FIGURE 39: Personal ownership of smartphones and basic mobile phones, by age, January 2012


SOURCE: GMI/Mintel

Interest in upgrade

FIGURE 3: Plans for purchase or upgrade of consumer technology

products in the next three months, January 2012


SOURCE: GMI/Mintel

Ownership by geography

Market share by OS

FIGURE 41: Mobile phone ownership by platform provider, January 2012

Base: 15,000 mobile phone users aged 13+

Notes: figures are based on a 3-month average to January 2012 and reflect the primary handset used by mobile phone users SOURCE: comScore MobiLens/Mintel

Market share by Brand

FIGURE 42: Mobile phone ownership by handset manufacturer, January 2012

Base: 15,000 mobile phone users aged 13+

Notes: figures are based on 3-month averages to January 2012 and reflect the

primary handset used by mobile phone users

SOURCE: comScore MobiLens/Mintel

Plans for upgrade

Plans for purchase or upgrade FIGURE 43: Plans for purchase or upgrade of mobile phones in the next three months,

by age, January 2012


SOURCE: GMI/Mintel

Desire for OS

FIGURE 44: Desire for future mobile phone operating system, December 2011

Base: 1,905 internet users aged 16+ who have a mobile phone

SOURCE: GMI/Mintel

What consumers look for…

Some 43% of people access the Internet on their mobile.

The most common use is social networking sites.

Almost everyone who has used their smartphone to access the Internet has visited a shopping site.

Younger people use the smartphone for entertainment and communication.

Older people focus more on services – news and shopping.

Phones 4U has by far the youngest profile – perhaps reflecting its price-led image. (Note that the sample size is quite small and so less reliable for than for the others).

Network stores attract younger customers.

Attitudes towards technology

Three-quarters of adults (74%) say they find it difficult to imagine life without the internet.

Female consumers are more likely to take (45%), rather than dispense (23%), advice about technology products.

The reverse is true for male internet users, with 42% of men saying that people come to them for advice and information on technology products, and only 29% would rely on the advice of their friends and families when looking to buy something.

Mintel’s research highlights a generational divide, where the under-35s appear at ease with today’s technology products, are knowledgeable about what is available, and are also confident that others will know quite a bit about technology products and so trust them for advice.

Consumers behaviour and trends in the Internet

Internet behavior

FIGURE 26: Websites visited on smartphone, December 2011

Base: 849 internet users aged 16+, who access internet with a

smartphone/blackberry At least

once a

day

Not every

day, but

at least

once a

week

Not every

week,

but at

least

once a

month

Less

often

than

once a

month

Never

% % % % %

New sites eg BBC News 40 26 13 12 8

Online magazines eg ask men,

vogue

4 10 15 21 50

Online video eg BBCi player,

You Tube

19 39 23 14 5

Blogs 9 18 15 20 37

Online maps/GPS services eg

Google maps

7 30 34 22 8

Social networking sites eg

facebook, twitter

59 19 7 5 10

Shopping sites eg Amazon,

ebay, ASOS

21 50 23 5 1

Online supermarkets eg Tesco,

Ocado, Asda

4 27 28 25 16

Brands’ own sites eg L’Oreal,

Apple

4 14 24 33 25

Other 22 18 15 16 29

SOURCE: GMI/Mintel

FIGURE 27: Frequency of sites accessed by smartphone, 2011

Base: 849 adults who access the Internet through their smartphone

SOURCE: GMI/Mintel

Activities done in Internet

Internet activities

FIGURE 6: Online activities performed in the past three months, January 2012

Base: 1,983 internet users aged 16+ who used a computer, smartphone, and/or

tablet to access the internet in the past three months

Note: Results are a net of online activities performed across computers,

smartphones, and tablet computers

SOURCE: GMI/Mintel

Activities in Internet by device

FIGURE 7: Top ten online activities performed in the past three months, by device,

January 2012



SOURCE: GMI/Mintel

Online time spent

FIGURE 54: Average minutes spent online per visitor per month, by gender and age,

March 2012

Base: all internet users aged 15+

SOURCE: comScore/Mintel

Top Sites in UK

Top ten web properties

FIGURE 55: Top ten web properties by audience reach, March 2012

Base: all internet users aged 15+

SOURCE: ComScore/Mintel

Activities done online

FIGURE 61: Social and sharing online activities performed in the past three months,

by device, January 2012



SOURCE: GMI/Mintel

Gender specifics

FIGURE 62: Social and sharing online activities performed in the past three months,

by gender, January 2012





SOURCE: GMI/Mintel

Gender specifics

FIGURE 66: Information finding activities performed online in the past three months,

by gender, January 2012





SOURCE: GMI/Mintel

Gender specifics

FIGURE 69: Online shopping activities performed in the past three months, by gender,

January 2012





SOURCE: GMI/Mintel

Who is our target?

The 15-24s

Target characteristics

Under-25s are the major driver of online and mobile sales

Effectively targeting them with marketing campaigns and offers is crucial

Interaction is the new buzz word in this respect

Fashion-themed challenge apps providing an engaging way for brands and retailers to connect with their core audience and raise their brand credentials

Sales of clothing and footwear among under-25s will increase by 10% between 2011 and 2016 to achieve a value of £11.2 billion

Under-25s’ share of the total clothing and footwear market is set to drop marginally

Population decrease

FIGURE 2: Projected numbers of 15-24-year-olds in the UK, 2006-11 and 2011-16

SOURCE: Office for National Statistics/Mintel

More than one in five (22%) under-25s are currently out of work

The rising cost of living and the difficulty for youths to get a toehold on the property ladder is forcing more youths to remain in the family home

But under-25s are most preoccupied with their appearance, with the majority believing it is important to look well-dressed and be attractive to the opposite sex.

Young females are the most fashion-obsessed

Teenage girls from the AB socio-economic group stand are the most avid fashion purchasers

Six in ten young women include New Look within their repertoire of clothing outlets and its popularity peaks among 15-19s.

Difference between youths in their teenage years and early twenties:

Teenage are free to buy new garments frivolously as they are yet to take on the substantial financial burden of living independently

Over 20s spent half (53%) of their income on rent or mortgage repayments and bills

Over a third (36%) of under-25s view shopping for clothes as an enjoyable social activity to share with friends, rising to four in ten (41%) females and almost half (47%) of teens.

A fifth of teenagers like to buy clothes with their parents because they are willing to pay for items

There is scope for retailers to enhance the experiential element of their retail environment, for example by adding interactive features or by hosting fashion-themed entertainment events exclusively for youths to stimulate sales from these wealthy social shoppers

It is important for one in five 15-24s to win the approval of their peers by mainly buying clothing that they know their friends/boyfriend/girlfriend will like

In-store competitions and fashion-orientated challenges whereby shoppers can win rewards such as discounts or entry into competitions would provide good incentives

Data from Ofcom indicate that close to six in ten (57%) under-25s – equivalent to some 4.7 million youths – use the internet via their mobile phones. This represents an increase of 18 percentage points since 2009, and is 25 percentage points higher than the national average.

Some 57% of youths prefer to go shopping on their own because it is quicker and easier

In today’s hectic society, shoppers want to maximise every spare minute

It is vital for retailers to make the shopping process as streamlined and convenient as possible.

The installation of ‘tweet mirrors’ in fitting rooms, which capture pictures of customers in different outfits, and

allow these to be shared with friends via social networking sites or email, will enable these solo shoppers to

get feedback from their peers and help them with their purchasing decision.

In today’s hectic society in which time-pressed young consumers desire a boundary-free shopping

experience, the convenience and flexibility of using a smartphone to make fashion purchases at any time

and almost anywhere, will lure increasing numbers of youths into buying with their mobiles.

Social shopping sites, such as Shopwithyourfriends.com, which allow consumers to browse for clothing online

in real-time with their friends, have burst into the e-commerce arena in 2011. Shoppers can share each

other’s screens, discuss potential purchases and, most importantly, advise each other on what size and styles

should be bought. These recommendations from trusted peers can help to drive sales. ASOS has been using

Shopwithyourfriends as part of a competition mechanic whereby shoppers create and upload their own

‘lookbooks’ and vote for their favourite, providing valuable insight into what clothes are being purchased to

wear together.

Skype has become the latest vehicle to be used in the rapidly advancing multichannel retail technology, with

ASOS debuting online style sessions through this application on 23 November 2011.

British luxury brand Burberry became the first label to stage a ‘tweetwalk’, working in partnership with

Twitter, livestreaming its London Fashion Week runway show to the masses. It posted photographs of the

models in each look from backstage on the networking site moments before they hit the catwalk. The brand

has also designed a “Buy the Runway” function for its iPad app, allowing a select group of customers to

purchase clothing as they watch the show.

To encourage higher levels of consumer spending in the youth market, retailers and brands must discover

innovative and compelling new ways to attract their clientele. Interactive and radical new retail features

take the in-store shopping experience to a new level and are likely to draw in younger shoppers through

their novelty factor.

The youth population in the UK is set to diminish over the next five years, with the number of under-25s projected to fall by 438,000 between 2011 and 2016, to stand at 7.8 million, with 15-19s experiencing the sharpest decline.

Youth unemployment has reached crisis point in the UK, with the number of 16-24s out of work breaching the 1 million mark, drastically reducing the spending potential of this age group.

Despite the fragility within the job market, under-25s have the most optimistic view about their financial standing and have a positive outlook on the future.

The emergence of social shopping into the e-commerce arena, whereby friends can share screens and browse for clothing together in real-time, demonstrates the blurring of the boundaries between online and in-store shopping.

Evolution within bricks-and-mortar stores will help to add excitement to the retail experience. Revolutionary store designs, compelling displays and interactive elements will help to encourage spending from the youth market.

Under-25s are devoted shoppers, with six in ten (58%) really enjoying the clothes shopping experience and four in ten (41%) spending a lot on clothes (TGI). Mintel’s research reveals that over six in ten (62%) 15-24s make fashion purchases at least once a month.

FIGURE 46: Expenditure ranking, by age group, September 2011

SOURCE: Ipsos MORI/Mintel

Fashion is top priority

FIGURE 3: Expenditure priorities, by age group, September 2011

Base: 968 adults aged 15-24


FIGURE 50: Frequency of clothes shopping, by gender and age group,

September 2011

Base: 968 adults aged 15-24


FIGURE 5: Retailers shopped at in the last 12 months, September 2011

Base: 960 adults aged 15-24 who buy clothes


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LG L Series Market Research and Consumer Behaviour Analysis

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