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LG's Prada Phone Turns One Year Old

LG Electronics has marked the first anniversary of the release of its Prada Phone, the high-end mobile phone developed in partnership with Italian luxury fashion label Prada. The phone has sold some 800,000 units worldwide, including 250,000 in Korea, generating W100 billion (US$1=W1,014) in operating profit.

When they cooperate with luxury fashion brands to develop premium phones, handset makers are usually looking to strengthen their brand image rather than increase their profits. But the Prada Phone is significant -- it has succeeded in enhancing both.

In December 2005, LG Electronics marketing executive Ma Chang-min waited for three hours in front of the Prada headquarters in Milan, Italy to meet a Prada executive, only to be told, to his disappointment, that the Italian company had little interest in developing a mobile phone with LG.

But Ma didn't give up. Unlike other companies which had asked Prada to simply design a phone, Ma suggested the two sides put their heads together to develop a totally new phone, the likes of which the world had never seen before.

In order to pique consumer curiosity, the company employed a "mystique" marketing strategy, providing as little information about the product as possible. To that end, it adopted a "three no's" policy -- no showcases, no TV commercials and no discounts.

First, instead of holding a product showcase, LG only told the press when it would release the phone -- and only when it was asked. Second, it didn't create any TV commercials, but placed ads only in newspapers and upscale magazines. Third, it offered no tantalizing price reductions at all.

"We have maintained the release price of W880,000 since it was released a year ago," an LG executive said. "Some sales agencies give discounts to their regular customers, but that's at their discretion; LG does not offer any reductions."

The company also changed its sales network and the way it displayed the product. It limited the number of retailers carrying the phone to 20 stylish Prada shops worldwide and 300 department stores. It had the phone displayed in a transparent box separate from other products when sold through wireless agents. The intention was to literally set the phone apart from other products and increase curiosity by not allowing consumers to touch it -- thus fueling their willingness to purchase.

The company also provides enhanced after-sales service for the Prada phone. If the phone breaks within a year after purchase, LG pays up to W200,000 in repair compensation regardless of whose fault it is.

An LG Electronics executive said, "The Prada Phone is a product for those 30 percent of consumers who want to belong to the upper five percent. We will maintain our 'mystique' marketing strategy."