Pioneer Changes Its Car Audio Strategy

Manufacturer planning to unveil new GPS category during 2008 CES

By Amy Gilroy -- TWICE, 8/20/2007

NEW YORK — Pioneer said it is shifting its car audio strategy to meet new challenges in the 12-volt marketplace and will launch a new type of GPS device in time for the 2008 International CES in Las Vegas.

In an interview with TWICE, Pioneer said it plans to offer a new type of "hybrid" portable GPS device that is a cross between a typical personal navigation device (PND) and in-dash car navigation.

Ed Sachs, president of Pioneer's mobile entertainment group, explained, "For us, competing with PND suppliers is not where we're heading. We spend 6 to 8 percent in R&D, and we look for leadership positions." So to steer clear of the $199 to $299 PND market, the company hopes to introduce at CES a portable GPS with a larger screen than typical PNDs and with a "more flexible" hardware design as well as new software. Sachs said Pioneer is not planning to offer a "docking"-type portable that "mates" with an in-dash head unit.

The company is also looking at entering the growing OEM integration segment in car audio. "It's on our radar. We don't want to rush into the market with a me-too device," said marketing/product planning VP Larry Rougas, noting that Pioneer is aiming for a product that is easy to use and to install. Any new OE integration entries probably will not be ready for CES, he added.

Although the traditional car audio market is depressed, Pioneer said company sales are up by 4 percent year to date compared with the period last year, and some categories are up by 20 percent. Single CD sales are down, as they are for the industry, said Sachs.

As the market leader, Pioneer said it is undergoing a strategic shift designed to raise consumer awareness about car audio, a category that has suffered as its core "young male" demographic has been diverted by other products such as iPods, cellphones and video games.

"There's been a dropping in awareness in our category with the 16- to 24-year old male, which has been the forefront of our category for years," said Sachs.

Instead of trying to fight the trend in iPods and other gadgets, "We're thinking, let's work with that and show consumers how we can integrate that into the vehicle. We're not only trying to raise awareness to the consumer, but also to the dealers," he said noting that some retailers will turn away difficult installations, such as in a new Mercedes-Benz. "There's nothing more damaging to this industry than to have a consumer take the time and energy to get into a car and go to a retailer to be told, 'Sorry, there's nothing we can do for your vehicle,' which is absolutely wrong," Sachs said.

Pioneer said its answer is to launch a Web portal for Pioneer dealers only that allows dealers to chat in real time and share installation tips. Pioneer said the site, launched in July, has attracted 300 dealer users who act as a community in exchanging ideas. This site is called the Mobile Electronics Line (MEL).

The company also encourages use of the site through incentives such as a trip to NASCAR racing events.

In addition, Pioneer shifted its advertising this year away from a focus on product and technology in favor of a lifestyle approach to target via demographics specific male groups. Pioneer is openly inviting other suppliers to join its efforts to broaden consumer awareness of autosound.

The company claims it was responsible for 30 percent of the trade advertising in car audio eight years ago. That figure has changed because GPS makers and auto companies now also advertise. But Sachs noted it was "tough to do all the [industry's] advertising by yourself."

When asked for Pioneer's reaction to the possible merger announced between Kenwood and JVC, which could create the No. 1 car audio company (see TWICE, Aug. 6, p. 1), a place currently held by Pioneer, Sachs said he would welcome the merger in part because of the advertising it could bring to the market.

"We look forward to seeing this type of arrangement … as opposed to more and more offshore Taiwanese-based plug-and-play-type companies that don't provide all the other ancillary services that a Kenwood, JVC, Sony and Panasonic bring to the market," he explained.

Although the Consumer Electronics Association is predicting an overall decline in car audio after in the long term, Sachs said the market has room for growth if it is addressed properly.

"The biggest thing going on in my mind with [the car audio core] demographic is how they all want to be part of group but stand out individually, which is interesting. They all want to be on MySpace and Facebook but they go to great lengths to individualized their pages and stand out in that group. The interior of the automobile allows them that same opportunity. It allows them to bring their music into the vehicle and other accessories and then bring their friends into the vehicle and show off," he noted.