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LG’s failed differentiation strategy in 3 examples [Analysis]

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LG’s recent exit from the smartphone business provides an interesting illustration of the importance of strategic choices in the differentiation strategy. LG was a highly innovative smartphone business and yet was unable to make a mark in the market. Its market share in smartphones has never exceeded 2%.

This article illustrates this failed differentiation strategy through 3 pseudo-innovative products: the G-Flex, the G5, and the G-Wing.

Differentiation must make sense to the consumer

In their book “Simply better“, Patrick Barwise and Sean Meehan develop the idea that it is better to be good at the basics than to seek differentiation at all costs. The only differentiation that counts is the one that makes sense, which honestly responds to a consumer problem and is not a marketing ploy.

According to the authors, customer satisfaction (and its corollary, loyalty) is more easily achieved when the business focuses on the essentials, i.e., meeting the customer’s basic needs.

Incremental innovation can only come when the foundations have been solidly laid.

However, this marketing strategy is often misunderstood, and the race to innovate takes precedence over common sense.


LG: a company that innovated for fun

This is precisely what caused LG’s downfall. The Korean firm has often tried to place itself on the smartphone market by innovating at all costs. Even if it means putting products on the market whose innovation brings little value to the consumer. The problem is that other giants (Samsung, Huawei) have made cheap, high-performance, all-purpose models their primary focus.

99% of consumers use their smartphones for general purposes. Therefore, cutting-edge innovations are likely to be perceived as excessive, especially if their price places them far above their mainstream competitors. Consumers will then logically fall back on classic, high-performance but no-frills models.

Marketing and innovation do not often go hand in hand. There is a permanent tension between these two spearheads: on the one hand, an invention that is too radical reduces the commercial prospects by risking to interest only a limited part of the market (the “early adopters” of the Rogers curve). On the other hand, marketers seek to appeal to the most significant number of people and look for strategies to conquer all market segments.

Clearly, LG’s marketers were unable to reason with their technical colleagues. The innovations put on the market were either too innovative or useless.  Here are three examples.


The G-flex, the ancestor of the folding phones

In 2013 LG launched a phone with a slightly curved screen: the LG G-Flex.

The promise was to offer a more immersive experience when watching a movie, reduce reflections on the screen, and better fit the face’s shape.

In practice, as the journalist explains in the video below, there was not any difference with a regular phone.

It was, therefore, a marketing ploy to try and “sell” the specificity of the smartphone under the guise of improvements that were not there.

 


The LG G5 – a modular phone

In 2016, LG released its modular phone: the LG G5. The idea was to allow buyers to “customize” their smartphones by replacing components with others. One accessory in particular (see video below) improved the smartphone’s photo performance.

Modularity and the ability to change parts yourself might also have seemed like good ideas.  But in 2016, the market was not yet ready.


LG Wing

The LG Wing was released in 2020, and the least we can say is that it is … unique. Watch the video below to see for yourself.

This smartphone is a real UFO on the market, a bit like foldable smartphones. Even if we can find some advantages to this rotating screen for specific uses, the problem remains that the innovation proposed will only make sense on rare occasions. Therefore, this product is aimed at a minimal segment of consumers, which is incompatible with a marketing strategy to win market share.

 

Cover image : Kārlis Dambrāns via Flickr.

 

Author: Pierre-Nicolas Schwab

Dr. Pierre-Nicolas Schwab is the founder of IntoTheMinds. He specializes in e-commerce, retail and logistics. He is also a research fellow in the marketing department of the Free University of Brussels and acts as a coach for several startups and public organizations. He holds a PhD in Marketing, a MBA in Finance, and a MSc in Chemistry. He can be contacted by email, Linkedin or by phone (+32 486 42 79 42)

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