LG Improves Customer Service with the Help of Channel Partners

Summary:

When LG brought 15,000 channel partners on a single platform to get to know its customers better, it probably didn’t realize it, but was creating an industry first. 

About 1,300 kms from India’s national capital, in a small, unassuming township called Jharsuguda, Mr and Mrs Iyer enter one of LG’s outlets and buy a fridge. An LG GL-205XFDG5 single-door refrigerator. 

Almost instantly, a laptop at LG’s plush headquarters in Noida, flashes up: Mr and Mrs Iyer, LG GL-205XFDG5, single-door refrigerator, Jharsuguda. 

About 400 of our trade partners are exclusive LG showrooms (known as Brand Shoppes) and the rest are distributors. Together they constitute over 80 percent of our turnover

Two years back, looking for this information was akin to finding Neverland—it didn’t exist. All that the multi-brand electronics retailer would know was that a fridge was sold in Jharsuguda—and only a month later. 

It’s the same story everywhere. With a sudden surge of demand from smaller cities and towns, many companies have had to come up with more product models and a wider network. This increased the importance of trade or channel partners. But in the chase for greater sales, organizations have forgotten who their real customers are. 

Not Daya Prakash. As the Head-IT of LG Electronics Prakash, has spent over a decade with the company—and with a not-so-efficient sales information system. Although the system is the norm across the industry, Prakash realized that it was time to change the way the industry worked.

Life Isn’t So Good

Prakash has seen LG grow from a few hundred crores in revenue to Rs 16,000 crore in 2010-2011. Today, its products are among one of the most-sought after in the market. 

But operating a retail electronics business out of 1,000 authorized service centers with over 700 trade partners, over 12,000 sub-dealers and more than 450 exclusive LG brand shops, and various multi-brand outlets is no walk in the park.

“About 400 of our trade partners are exclusive LG showrooms (known as Brand Shoppes) and the rest are distributors. Together they constitute over 80 percent of our turnover,” says Prakash.

It was this major chunk of its sales arm that worried Prakash. “We were efficiently capturing secondary sales (trade partner). But, were clueless about tertiary sales—the end customer. In terms of stock, we had end-to-end visibility of ‘sell-through’ data but not ‘sell out’ data,” says Prakash.

This was affecting their outreach to the market. Year after year, says Prakash, LG was unaware of how many units of which model were sold to which end customer and where.

In the white goods market, great customer experience is probably the only yardstick to measure a brand’s success. To be able to service their customers better, improve customer loyalty, and hone their market research, knowing their customers is an imperative.  

Also, LG’s practice of hiring agents (internal as well as external) to collect customer data from its trade partners was time consuming and highly inaccurate. It would take the company about two weeks to a month to collate data. “We slowly realized that we were spending months in analyzing sales data—not consumer data,” says Prakash. 

So, in order to give its customers a face and a name, Prakash realized that LG needed to capture the actual sell-out information in real time—with customer data. “We also needed to begin predicting our trade partner’s stock to get a better hold of the market situation and to build a viable sales and production strategy,” he says.

It’s not everyday that a company decides to break from the mold and venture on its own in a direction nobody else has gone. Prakash needed a lot more than guts.

Stacked Together

The three elements that essentially made up LG’s trade cycle were: The company itself, its trade partners, and end customers. The plan was to bring all these elements onto a single platform. 

So Prakash formulated a Web interface to essentially facilitate two-way communication between LG and its trade partners called a Sell-out Management System (SOMS). 

Now, any sale happening at the partner’s end is immediately captured in the system. SOMS provides information on stock replenish dates for every individual trade partner, captures market dynamism, and identifies real market trends for LG. It also registers every single end consumer once they buy a product—in real time. Customer data that flows back to LG is immediately passed on to the customer service department. This empowers the post-sales service team make custmer experience memorable and delightful.

About 400 of our trade partners are exclusive LG showrooms (known as Brand Shoppes) and the rest are distributors. Together they constitute over 80 percent of our turnover

Out of Stock

Every change is close to a revolution.  And is met with resistance. “It’s hard to thrust a new way of working on an external customer. Its like making aliens understand about your system. It took a long time for them to accept that SOMS was created to help them,” he says.

So, Prakash cooked up a new strategy to win users over: Tame the home-bred horses first. This would help build confidence as he went up the value chain. “We began implementing SOMS with LG Brand Shoppes first. Then, we used them as prototypes to exhibit the system’s benefits to the distributors,” says Prakash.

Soon enough, LG’s partners realized that SOMS could form a reliable base to monitor their ROI for the business they do with LG.

Also, LG’s management couldn’t overlook the benefits of the project and eventually got deeply involved with it. “LG’s senior management got involved in the communication process with the trade partners about the changes that would ensue. They ensured we received due support from our partners,” he says. 

End of Season Sale

Today, LG has been able to increase its market share, a fact that can partially be credited to SOMS. The system has also helped the company increase its sales.

Armed with real-time information updates, LG Electronics’ sales staff is enabled with instantaneous decision making. “The time required to collate customer data has drastically reduced from a few days to a few minutes,” says Prakash.

It has improved marketing, pre-sales and post-sales service capabilities of the company. Today, fast-moving models in specific markets are re-fueled according to demand. And LG knows what works in which market. “Be it Diwali or Dussehera, LG Electronics’ forecast accuracy has improved by 50 percent to an extent when it’s able to meet market demand even during seasonal spikes,” he says.