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Bang & Olufsen To Extend Reach With New Marketing Programs

Bang & Olufsen America (BOA) expanded its retail base to 58 B&O-branded stores from 52 during the past 18 months and has helped its stores to diversify their product offerings to include video displays and get into the the custom-installation market.

These changes contributed to a 15 percent boost in retail-level B&O sales for the fiscal year, ended May 2004, to $70 million. The company is operating in the black, said Kim Gravesen, executive VP of B&O America.

But that is still not enough.

During the CEDIA Expo, the company announced multiple marketing programs to support B&O stores in extending their reach inside and outside their trading areas. One program lets B&O stores operate as distributors of B&O products to custom residential installers outside the stores’ trading areas. Another program targets B-to-B markets. A third program, called a “shop-in-shop” program, will support B&O stores in setting up sales outlets inside other upscale retailers. A fourth will give stores the tools to develop relationships with builders, architects and interior designers.

The company will continue to open new stores, but “very slowly,” said Gravesen. “We want to find the right owner-operators.” All told, only 15 of 58 B&O stores are owned and operated by B&O America. All future stores will be independently owned.

To extend their reach outside their trading areas, B&O stores will operate as distributors of B&O products to custom residential installers that the stores will seek out. The installers, who “will be allowed to sell product,” must be approved by B&O America, Gravesen said. “BOA will approve relationships with installers after the store sets it up.”

B&O stores “already have relationships [in their trading areas] with installers who install what Bang & Olufsen stores sell,” Gravesen noted. “Now we are going to new geographic markets.”

“The typical store has a 10-mile reach,” and most stores are concentrated in major metro areas on the East and West Coasts, he said. That leaves “a huge [geographic] market potential that we’re not tapping.”

To help stores boost custom-market penetration within their trading areas, B&O “will give dealers the tools to set up relationships” with builders, architects and designers, Gravesen said. Such tools would include templates for contracts with builders.

Also to boost their trading-area presence, stores will be allowed to set up branded selling outlets within other upscale stores. “Before, we had product placements in furniture stores, but now stores will train a furniture salesperson or put in one of their own salespeople [in the furniture store],” Gravesen explained. Shop-in-shops could be built within any home-related store or in other types of upscale stores, such as Bentley dealers, he noted.

Shop-in-shop outreach “will be a local initiative, but we hope to give them [the stores] leads,” he noted.

In another venture, BOA will directly target the healthcare industry, the hospitality industry and other B-to-B segments, but the products “will be sourced locally” by a BOA store, which will also schedule installation, he said.

Long term, BOA wants 90 to 100 B&O-branded stores in operation, but the pace will be “slow and steady,” he said. The company hasn’t “aggressively pushed recruitment for the past two years because of the economy,” but the company plans to boost recruitment efforts sometime in the future, he said.

Also over the long term, BOA wants to sell the stores that it owns.