Philips' Demuynck Plots Analog, Digital Courses

By Greg Tarr On Sep 24 2001 - 6:00am




Guy Demuynck, Philips Consumer Electronics Mainstream products group worldwide CEO, told reporters during a recent trip to the Internationale Funkausstellung (IFA) that he is less than satisfied with the marketing accomplishments of his United States operations, but change is in the wind.

Speaking candidly during a session with U.S. journalists, Demuynck said he is not satisfied with the U.S. sales company's market share position in digital television and its attempts to expand its distribution reach into higher end U.S. specialty retail stores.

"I think [the struggle to expand the Philips' image as a higher end manufacturer] has a lot to do with us not being consistent enough in the past… Branding has become extremely important, and is something that must be undertaken consistently and with a very clear objective of where we would like to go," he said.

The company is working on a number of initiatives to "line up the Philips digital portfolio with a number of qualified high-end retailers and dealers" which will be made clear in the near future, according to the Philips CE worldwide CEO.

Demuynck's remarks followed closely the remarks made by new Royal Philips Electronics CEO Gerard Kleisterlee, who stated at a pre-IFA press conference that "the age is past" when Philips "developed breakthrough technologies yet stood back while others exploited them more aggressively in the marketplace."

Kleisterlee said he sees Philips' future resting on four key pillars or competencies: display, connectivity, storage and digital video, and the mandatory accompaniment of marketing leadership with those technical competencies.

He added that Philips is undergoing a resurgence of marketing as a discipline throughout the company, and will soon make changes to its brand identity, while placing heavy emphasis on the youth market. He also stated that the Internet will take on increasing importance to the CE industry, predicting that when it really takes off "as a TV-driven medium, you will see the dawning of a new consumer age."

As for the immediate future, Demuynck said Philips is changing its advertising theme to "better, more, easier" as it attempts to maintain a consistent marketing effort that is more focused on new products for today's market.

Demuynck said that gradually, Philips' branding strategy will evolve to a phase where the Philips trademark is used to sell primarily digital products, while Magnavox will be used to handle primarily analog devices that have a more mature market status. Gone is the joint Philips Magnavox trademark.

"The question we are often asked is, 'what are digital products?' We have defined digital in terms of large televisions, for example, as televisions based on new panel technologies such as LCD, LCOS, plasma and HD-ready PTV products," Demuynck said. "Also, everything with optical technology will be digital, such as everything with CD, CD recording, DVD, DVD recording and Super Audio CD."

Analog products that will eventually be transitioned over to the Magnavox brand include such areas as small-screen TV, VCR, mostly non-CD audio products, etc.

"These [Magnavox products] are all driven primarily through mass merchant-oriented channels, in which I could see the commodity part of audio [boom boxes, some CD boom boxes] that is primarily analog, still having a big presence."

Demuynck added, "we will have to see" how much longer the analog big-box business continues to make sense for the dual-brand strategy.

"If it doesn't make sense any more, then I can see no reason for Magnavox to exist," he said. "It will be up to us and our American retail organization to prove that there is still a market for these kinds of products," Demuynck said. "If we come to the conclusion that the Magnavox brand in our portfolio and with what we want to do, doesn't make sense any more, then I think we should capture that value of the Magnavox brand by looking at a number of alternatives [including selling the trademark]."

Demuynck said that despite the recent partial divestment in Marantz that saw Philips reduce its position from majority ownership status to help Marantz embark on a more independent road, Philips plans to continue to use the company as a strategic marketing partner.

He cited the recent launch of Super Audio CD using Marantz as an example of how Philips may choose to bring expensive new technologies to market first under the Marantz label, before moving them into the Philips line as the market evolves.

"We still have a very good relationship with Marantz and we are still consulting Marantz in products and standards development," Demuynck said.

As Marantz continues to take its own direction to market, Demuynck said Philips would not look to pursue some of the "niche market" segments in which Marantz specializes, such as dedicated higher end audio components.

"You will see some components from us [such as integrated DVD audio/video systems, DVD+RW decks and CD-R/RW recorders], but not on the same terms as Marantz," he added.

As it moves its image and product assortment more upscale, Philips will maintain businesses that are more commodity-driven and primarily analog based, using the Magnavox brand.

As for breakthrough new technologies, Demuynck announced a new TV picture enhancement technology called Pixel Plus that, "Uses advanced signal processing to increase screen resolution and create high definition picture quality in a conventional set."

Demuynck also announced several other products from Philip including a 32W-inch plasma display, and a pair of dedicated LCD TVs in the 15-inch and 20-inch screen sizes.

The company also launched its first DVD+RW recorders, and Demuynck announced for the European market the first DVD+RW PC drive, that ships in October. In SACD he said two new players would be added in Europe this year to the high-end SACD 1000 (US$1,999). One will be an SACD/DVD player, priced about $640, and that a U.S. version, with progressive scan output, will debut at CES 2002 at the same price.

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