The president of a leading consumer electronics manufacturer is all over a guest demonstrating a new digital still/motion camera, with a tiny flip-top LCD screen. The whole unit can fit in the palm of your hand. In putting the camera through its paces, taking full motion video and still shots, the president of the company breaks out into a big grin and says, "This is cool, huh?"
That's the effect that Panasonic, the company in question, is striving to attain. The product demonstrated is the SD-based AV 30, which will ship in April in two versions, one at $299 suggested retail and the other at $399, and will have improved frames-per-second capability when recording video vs. last year's version. And the guy with the big grin is Andy Takani, president/chief operating officer of Panasonic Consumer Electronics.
Takani and senior VP of merchandising Mike Aguilar are faced with two critical questions as International CES opens this week: How do you take a brand that has been in the United States since the early '60s and has products in almost every consumer electronics category and change its image? Why would you need to do it?
The simple answer to the "How" question is a $100 million advertising and marketing campaign with the tag line "Panasonic — Ideas For Life," which began last fall. The "Why" answer is a little more complicated. With the move to digital products across the board Panasonic is trying to freshen its image among those in younger demographic segments. Or as Takani said, "Generally speaking we want to make Panasonic more visible and stimulate more of a cool brand image, vs. a family-oriented brand. Our brand should be cool and sexy."
Of course the devil is in the details, and when you are dealing with a company whose parent is Matsushita Electric Corporation of America, that generates more than half of its $8 billion-plus sales in the U.S. selling CE products, there are plenty of details.
Instead of coming up with a step-up brand for Panasonic, Takani emphasized the following: "I believe this is a moment that we had better focus on Panasonic, rather than some other brands, because branding is so much more important in the digital era than ever before."
TWICE met with Takani and Aguilar at Panasonic's CE headquarters in the U.S., here, just prior to CES. The Panasonic execs discussed the branding strategy, how it has effected distribution of its products, and the Panasonic ONE home networking effort debuting at the show as well as other technology that they hope will make the Panasonic brand, in Takani's words, "cool and sexy."
TWICE: Why is branding in consumer electronics so much more important in the digital era?
Takani: In the digital era you have almost the same product. It is difficult to differentiate between products and brands. Today consumers look more toward the brand — Do you trust it or you don't? With the "Panasonic — Ideas For Life" campaign during November and December [of 2002] we are spending more than double what we would normally spend in advertising on the entire product area. Our advertising should focus more on the younger generation and should be more oriented toward women. I think we didn't put the emphasis on women and the younger generation in the past.
How does this branding campaign change the distribution of Panasonic products?
Aguilar: What we have been concentrating on is channel strategy related to new technology. Because, in conjunction with the new, cool products, we are coming out with an awful lot that we can't place on every retail floor and expect them to sell, especially a camera like the AV 30. Unless there is a salesperson who can sell the features, a retailer can't sell it. We are carefully studying not only how to introduce products, but we are studying how those models evolve, and when they mature, how they roll into other areas of distribution.
There will be a constant evolution of new high-end technology introduced in specialty channels and rolled down as the market gets wider.
Isn't that difficult for Panasonic to explain to your retail base?
Aguilar: That would have been difficult to explain in the past, but we are finding today that with the introduction of new digital technology, that's not the case, particularly with our new DVD-RAM recorder [model DMR-HS2]. Several mass merchants told us they can't sell the higher end deck because they don't have anyone to explain it. This unit has a hard disk recorder, DVD-RAM, a PCMCIA slot that will play SD, Compact Flash and other forms of media, so it takes a lot of time to explain it. The name of the game now is that [retailers] want to buy something that they can effectively sell.
You changed your retail sales organization this year. How has that fit into this branding effort?
Takani: With our regional coverage we can focus on regional or independent [retailers] separate from the big chains. We have different tiers of distribution that service different types of retail customers.
How do distributors get put into the mix?
Aguilar: We have always used distributors, we've used telemarketers too, as well as our local sales operations. So all three are intertwined to serve the smaller dealers.
What about R&D development at the company now. How does that change?
Takani: We need local research and development here for the U.S. market. As a unit of Matsushita we spend more on R&D than anyone in the industry. However it doesn't mean that we are spending [it all] on this market. We have capabilities here, but each market [Matsushita] is in has its own technology. Look at HDTV, it is different in the U.S., Japan and Europe. What we are trying to do, since the U.S. is the biggest CE market in the world, is to have more power to develop product ourselves in the U.S.
How important, from brand positioning to actual sales, is it for Panasonic to be the first to sign a PHILA agreement with the cable industry?
Takani: This was very exciting news for us. As soon as we announced the agreement we had a big meeting with our executives in Japan as to how to proceed. To be the first to introduce [PHILA] to a market of 70 million or so households in the U.S. is exciting. For HDTV, cable is the key.
What has been the reaction of your retailers to the announcement?
Aguilar: The level of excitement surprised me. Dealers literally can't wait to introduce new technology that gives them something interesting to sell. While they realize that ATSC tuners are nice to have, it is part of the total solution. The fact that they can tell the consumer that their [HDTV] sets will not be outdated, there will be no cable box and an easy hook-up is great.
What surprises will you have for International CES attendees this week?
Takani: Well we will display blue laser at CES and show its capabilities, as a technology but not as a product that will be shipped immediately. This is one technology, of several, that will be in a new booth design for the show that will be part of the Panasonic ONE exhibit there.
What is 'Panasonic ONE'?
Takani: Panasonic ONE stands for Omnifunctional Network Environment. We will show an A/V server at the booth that is a high point of the show for us. Panasonic ONE makes a statement for us that we currently have in our line, and will have in the future, components of a home networking system that are user friendly and deliver high performance. We now are delivering plasma video displays, SD products, digital camcorders and cameras that can be part of ONE.
Speaking of SD, it is a core technology of Panasonic. Are you happy with the performance of SD so far, and how many types of SD-based products will you ship during 2003?
Takani: Are we happy with SD's performance in the marketplace? Personally, no. We now have 32 SD-based products in the line now and will have at least 50 during 2003 that will run the gamut.
Will you introduce TVs with SD slots this year?
Aguilar: Several of our TVs will have PCMCIA slots and we'll pack them with card adapters. The reason? We are a major supporter of SD, but if a customer years ago bought a digital still camera that uses Compact Flash we don't want them to find a reason not to buy a Panasonic brand. In the future we are looking to TVs with SD slots.
Speaking of TV, what is your best estimate for the HDTV market during 2003?Takani: We think the whole industry will have strong sales. We saw strong growth during , becoming the biggest growth category in the industry. For Panasonic, ever since we introduced HDTV during 1998 and we were the first in the market, we have been on the leading edge of technology. As we discussed with the PHILA situation, we want to connect terrestrial digital to cable digital TV. In digital TV we want the consumers to think of Panasonic first. We have been gaining share in HDTV. That's one of the reasons why we have had good sales overall. So we are optimistic.
Over the years some have said that any one calendar year in CE is worth four in most others, in terms of change. What do you think?
Takani: [He laughs.] In some sense I would say that the consumer electronics industry is a 'dog year' industry, seven years for every one calendar year!
For instance when we introduced a leader model DVD player at CES [in 2002] it was supposed to sell for $179 at retail. By the spring we introduced it at $149, because prices were going down, but it was designed with all its features to be at $179. By the summer we changed it to $119 and now, after [Thanksgiving] major brands were down to $99. So a product designed for $179 was selling by the end of the year at $99. So I would say the CE business is a 'dog year' business!