As part of our look at Korea's top brands of 2018, under the Asia's Top 1000 Brands report, we asked Korea consumers to identify their top home-grown brands, and Samsung, LG and Naver emerged on top. Here, in-market observers discuss what's behind the success of these brands, and what it will take to uphold that status.
Nielsen’s research points to Samsung, LG and Naver (in that order) as the domestic brands with the strongest reputation in Korea. What do you think is behind their enduring appeal to local people?
Mike Forster, Geometry Global: These brands were pioneers in their respective categories and part of the Korean economic miracle which moved the country from a very low GDP to where it is now. Koreans are very proud of these brands particularly outside of the major cities which tend to be a little more international in outlook.
They also are the brands from the biggest domestic companies (chaebols) that provide or own many products and service categories in Korea that they are not known for elsewhere. For example they own credit cards, security products and art galleries and museums amongst many other assets. So it’s impossible to live a day without seeing these brands in Korea. Their success also allows a high marketing spend and retail display dominance. In what’s still a very collectivist society that means their enormous comfort and trust for these brands because of their ubiquity.
Lastly, they do produce international quality products.
Following catastrophes of the Korean War, the government supported the chaebol for the goal of South Korea’s economic development and succeeded in the rapid economic development nurturing internationally recognised brands such as Samsung, LG and Hyundai. These groups of chaebols relied heavily on close cooperation with the government receiving special treatments and opportunities and the word “chaebol” itself now represents distinguishing characteristics of the Korean economy and business.
Despite public criticism of their dependence on the monopolistic and oligopolistic positions based on government support, chaebol’s significant contribution to the economy is indisputable. And considering how South Koreans internalised a strong sense of patriotism from the sharp conflict of the two Koreas after the war, chaebols’ success in the global market meant more than just companies’ success. Their global presences embody South Korea’s status as a global economic power and thus were a source of national pride.
Kihwan Lee, Grey Group: The key reason for their appeal to local consumers is because they not only design consumer-friendly products but they also donate and design towards causes in need.
Samsung is the No.1 company that donates to society through various programs such as the Guide Dog project, eyeCan Project (which enables sufferers of Lou Gehrig’s disease or Lock-in Syndrome to access computers and to connect with the world without the help of others).
LG is known for launching products that Korean people need or appreciate. LG’s recent big hit item is Styler. Styler is a garment care electronic product for un-washable or hard to wash items such as suits, knitwear and delicate fabrics. Not only does it deodorize and de-germ but it irons out creases. Korean BBQ plays a big part in the everyday lifestyle of the people but this also entails a smoky and greasy environment so taking care of the BBQ odour on one’s clothes is an important aspect of their laundry. LG has managed to convert this insight—that people need something more than fabric refresher—to make Styler the must-have item for newly wedded couples as well as housewives and busy households.
Naver Corporation operates the leading Korean search engine. In actual fact, Naver is more of a web portal than a search engine like Google. Browsing the main page of Naver, you will find that their page is busy in comparison to Google. However, for Koreans, this cluttering of content is looked at as offering convenience. You can do so much within the page—checking articles from various sources, shopping and a lot more. Naver also keeps expanding their service to include short videos akin to YouTube and music streaming in order to stay relevant and up-to-date. As expected, this has all also penetrated the mobile environment too.
Chan Kim, JWT: The true backbone of the strongest local brands comes from consumer loyalty and trust. Nonetheless, familiarity to cultural attachment seems so powerful enough to endure local people, even perceived as patriotic. Because it all relates. The brand itself builds upon trust as simple steps from customer service, where experts in dealing with customers up front uses their language. When it comes to an online platform-based, Naver, it is one of the oldest portal sites and UIs in domestic market, locals feel much comfortable compared to other internet search engines. (80% of Koreans use Naver, 20% DaumKakao, less than 5% use Google.)
What would it take for LG to replace Samsung as the most esteemed Korean brand?
Forster: This is highly unlikely to happen and certainly won’t happen in the mobile phone category. One reason being that overall LG is considered by many consumers to be slightly less premium than Samsung. However, in certain areas LG are already seen to deliver better quality than Samsung. For example, in white goods.
Another thing in LG’s favour is that the owner family of the group has a cleaner public image than that of Samsung which helps LG here.
Moving forward the two companies have very different strategies. LG are showcasing AI Robot capabilities with a focus on IOT and the smart home. Beyond phones, Samsung are more focused on their semi-conductor business, the connected car and bio health. So it’ll be interesting to see what happens over the next few years.
SJ Kim: British brand valuation consultancy Brand Finance ranked the 500 most valuable brands in the world in 2018. Samsung ranked fourth with $92.3 billion dollars and LG ranked 88th with $16.8 billion dollars.
The gap certainly is not any different from how the Korean people actually perceive of the two brands. It proves that indeed, the first law of the marketing classic, “The 22 Immutable Laws of Marketing,” is true. It is better to be first than it is to be better.
Samsung is the undisputed number one brand perceived by Koreans. And although both Samsung and LG are engaged in a variety of businesses including electronics, construction, energy, chemicals and healthcare, they are mostly recognised for their electronics business. Samsung ranks first in semiconductors and mobile devices, while LG holds the top spot in refrigerators and washing machines. Samsung continues to appeal to young people with Galaxy S and Note, and LG to housewives with their household appliance brand TROMM.
By all means, this fact alone is not enough to predict the future of the brands. But one could safely suppose Samsung to be in a better position than LG concerning engagement with the young target.
At any rate, who will lead and take the top spot in the field of artificial intelligence, green energy, chemistry and healthcare, leading future growth, is of question.
Lee: Frankly, someday LG might replace Samsung, but in my point of view it is going to be a difficult task for them to achieve. About 15 years ago, Samsung & LG were perceived to be at the same level in people’s minds. But looking more closely there is a definite strategical distinction that was made by the two companies. LG decided to invest in product quality and Samsung invested in R&D. Due to this difference, the technological gap and therefore the reputational gap (that Samsung was the tech leader and more innovative of the two) kept widening, to the extent that nowadays Koreans think of them as companies in two different tiers.
Chan Kim: These two major companies, Samsung and LG, are competing in different fields and LG is more specialised in household appliances. However, it seems like there is a tiny gap in “newer” mobile industry (compared to other industries like retail, motors, and chemical).
They both do have similar technical skills/specifications but different in “branding” and this makes locals prefer the use of Galaxy S series of Samsung Mobile, not G series of LG mobile. It is like comparing Nike and Adidas.
What challenges do you see these brands facing in the future?
Forster: Challenges for these brands include being too domestically centered, meaning that some of their products aren’t as competitive overseas. Many online services are still optimized for Internet Explorer for example. Also the older patriarchs of the family firms are not always as in touch with international developments as they should be.
Competition from China (Huawei for Samsung) and in India, two key markets also provide potential issues.
For the individual brands:
For LG, mobile is a money pit and they need to decide whether they want to continue playing here.
For Samsung they need to ramp up their software capabilities.
For Naver, whilst they will continue to dominate in search they are falling behind in the video-based advertising offering compared to YouTube and Facebook. Younger consumers are increasingly using video channels for search and bypassing Naver. However, they’ve recognized this challenge and announced a 600 billion KRW investment into content during their 2018 Naver Connect forum.
SJ Kim: Korean conglomerates will continue their efforts to secure the top position in the domestic market as well as global market in terms of consumer perception.
Identifying and responding to market changes and consumer needs have been mission-critical for businesses and Korean conglomerates are well equipped to carry out such tasks.
However, in 2018, Korea is facing a whole new challenge that encompasses economic cooperation with North Korea and reunification of the two Koreas after 70 years of separation. It is difficult to know how quickly the economic cooperation will take place. And as it’s been so far, conglomerates will have their role in such process. From a long-term perspective, the value earned by a company that takes its responsibility seriously and fulfills its role will be enormous and will deliver unmatched value that exceedingly surpasses the value from simply winning its competition with Apple.
Lee: Global brands have their identity and brand character or identity that people are able to easily recall. Though people now know their technology is of high quality, Koreans do not only buy products or services with visible technology but also what I call ‘an invisible soul’. To work well in this market they need to build their identity and resonate with the people.
Chan Kim: Despite the patriotic spirit of Korean people, the country is now globalised enough to value luxury appliances such as Dyson. Consumer understanding of these products is much higher than it once was. We have seen a change in value and as a result, purchase behaviour, with more emphasis on design and luxury in both goods and services.
Do you ever see Apple superseding Samsung as Korea’s top brand?
Forster: No, not at all. While Apple is growing here and has a very loyal consumer base, this is mainly a franchise who want to differentiate themselves from the norm and the mainstream. The local brands will continue to dominate.
Lee: In effect, Apple could supersede Samsung in Korea. Sure it can be done, but it will be a mammoth feat to take the competitor’s home ground. Having said that, Apple has made some inroads because of their image which personifies innovation and being cool. When Apple first launched AirPods in Korea, most thought it would not be a success and the discomfort of wearing them was deemed to be one of the reasons. However, the opposite happened: many people did get AirPods because it meant they were then perceived as cool and trendy. In conclusion, I would say as the gap in technology continues to close, brands will need to compete based on their ‘soul’, not just on the basis of cost or features.