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Sony's Molyneux Outlines Goals Of Dealer Programs

3/12/2012 12:01:00 AM Eastern

NEW YORK – Sony’s unilateral pricing program
(UPP) – which covers 140 upscale products – and
its companion “strategic investment program” with its
retailers are designed to improve profitability and its
communication with dealers and consumers.

During a press briefing at the Sony Building, here,
last Thursday Phil Molyneux, Sony Electronics’ president/
CEO said its UPP — starting April 1, the beginning
of Sony’s fiscal year — involves 140 products,
which includes the company’s Alpha, EX- and HX-Bravia
lines, selected headphones, RS receivers, HX and
TX projectors, 4K products, Sony tablets and “pretty
much all of our premium products.”

While they are premium products, the 140 SKUs under
UPP are out of “tens of thousands” of Sony Electronics
products available by April 1.

Penalties for those retailers that do carry these Sony
products and do sell below the UPP would include
Sony “not shipping products to retailers for a certain
period of time.” However, the program is being implemented
“in collaboration with our partners,” Molyneux
said.

UPP, which he described as being “one tool” in
achieving better profitability applies “to all channels,
online and physical stores,” he said, including Sony
stores. “We play by the same rules.”

As for the importance of this program, and similar
ones in the industry, Molyneux said, “This is always
a tough industry, especially in the U.S. Recent financial
results for retailers and manufacturers show how
tough it is. We must switch to the value of the product
versus driving volume” as a strategy.

Sony is emphasizing those products that can generate
profit, so its 2012 TV line will have 22 models,
compared with the 40 in the 2011 line.

“But that does not mean that we are pulling out of
TV. It is the center of the living room and of home entertainment,”
Molyneux said. “We have to rationalize
the number of SKUs to generate profits.”

As for TVs specifically, when asked about entering
the OLED market, Molyneux said Sony has the “capabilities
to enter the market” if needed, but does not
have plans at this time. Sony does sell OLED pro products
up to 25-inch screens, and has used the technology
in professional camcorders. He reminded that it
showed its Crystal LED at International CES, “so we
have that option.”

The “strategic engagement program is designed
to change the game,” the Sony CEO said. “What we
want is for retailers, in collaboration with us, talk about
the value of the product to the consumer and the benefits
… of a $399 tablet. We are in a negative spiral.
We need to explain to consumers that these products
have functions and values, and focus on that.”

There has been some conjecture about Sony’s program,
as well as similar types of plans from Samsung,
Panasonic and LG, that it might result in more derivatives
in lines for specific retail channels. Molyneux said
the opposite is the case with Sony. “The number of
derivatives we are taking into fiscal 2012 is greatly reduced.
We are clear about our products and what we
expect from our retailers … so that need is reduced.

As for Sony’s “strategic investment program” with
retailers, which also begins April 1, Molyneux said
that since he became president on Sept. 1, 2010, he
has studied the relationship it had with its dealers. He described Sony’s approach to the marketplace as
“fragmented” and said, “We were paying for participation
vs. paying for performance.”

And over the past nine months, “we have developed
a comprehensive criteria for retailers to work with us,
collaborate with us … to drive value of products, services,”
and to collaborate on a common message for
Sony and its dealers “in terms of visibility, control of
inventory — what is selling — to set up a better working
framework.”

The goal of UPP and the “strategic investment program”
is “not to drive volume through price discounts
but to engage dealers [and explain to consumers] the
value [and features] of our products. That should result
in better margins for dealers and for Sony, so we can
invest more in R&D for future products. The consumer
benefits because dealers will be able to provide a better
effort on explaining what the experiences” Sony
products can provide.

UPP has been part of the Alpha line since 2008
and was described as “very successful” by Molyneux
and when asked why it took until 2012 to broaden the
program he responded that the “strategic investment
program” that has been developed enables Sony to
offer “focused promotions” among other advantages.

Molyneux also said that Sony would be willing to take
a smaller market share in TV to make this work. “Corporately
our objective is to move from 40 million unit
sales in TVs to 20 million to reduce losses and make a
profit.” He added that Sony was as of a few years ago
“chasing volume” and now with the new programs set
to begin “we can change the game with value retailers,
stabilize our business and get profitable growth.”

Sony has also cut costs by cutting the number of layers
of management at the company. In recent months
300 employees were laid off. “The benefit is not only
cost reduction and profitability but to act with more
speed and accountability.”

Sony Electronics’ structure was redefined under
“five core pillars,” Molyneux explained. “There is a new
sales organization to our strategy — a brand activation
and communication team; integrated messaging from
the shop front to the media; a revamping of [Sony’s]
service organization; a consolidation of product marketing
— changing our culture to think about consumers
in our daily schedule — [and a change] in our corporate
communications to include social media, to come out
with a consistent voice” to communicate with retailers
and consumers.

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