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Sales, Branding Strategies Are Key For Philips

Philips Consumer Electronics, which over the past year has developed a new field sales organization and split its Philips/Magnavox brand into two, hopes it can capitalize on its strategy and separate itself from the competition with new digital video and audio products it will introduce, here, tomorrow.

Tom Costello, senior VP of retail sales for Philips Consumer Electronics, North America and an 18-year veteran with Philips, has held numerous sales positions with the company. He has seen several attempts by Philips to match its worldwide reputation as a CE technological leader with larger, more profitable, market shares in the United States, only to see those attempts falter.

This time he thinks the company got it right. During the past year Philips has developed a fully-configured field organization that stresses retail support and education, with the key retailers being regional CE specialists. At the same time, the company split Philips and Magnavox into two brands to serve two specific demographic categories. And Philips is introducing digital products in the Philips line that are not only innovative, but separate themselves from the competition.

Costello outlined for TWICE Philips’ strategy going forward and how its brand position, products and organization should take the company to the next level.

Philips has always been known as a leading innovator in consumer electronics. Yet it has also been known as a disappointing performer when it comes to sales and marketing. How can it become as adept in those areas as it is on the technology side of the business?

“If you think back to Philips in North America over the years it does not have the same position in the U.S. as it does in the rest of the world. Our brand emphasis up until the middle of last year was Magnavox. We had Philips/Magnavox co-branded products. We thought it was the right thing to do as the company transitioned itself to the Philips brand, but [Philips and Magnavox served] two different consumers. The combination confused the consumer and the retailer. We had to separate the two.”

Who are Philips’ customers and retailers? Who are the Magnavox customers and retailers?

“On the dealer side, Magnavox offers a limited range of commodity TV, home and portable audio and VCRs. It is targeted for opening price points to compete against brands … sold in mass channels.

“Philips is the future. Because of our branding situation we changed our product portfolio. We added DVD recorder, LCD and plasma TV [products], which we claim is the largest line in the industry. We are emphasizing in digital TV our ‘pixel plus’ feature, full 4:3 and 16:9 digital PTVs and added Super Audio CD. These products allow us to begin to pursue [retailers with] upscale selling floors. Previously we didn’t have the products to do it.”

While Costello did not comment on consumer demographics, Philips provided a statement saying that target customers for Philips are young males, primarily 15 to 35 years old, with middle to upper incomes. They are looking for, the company says, “innovation in design and features and seek the newest and the best in technological improvements.” The other audience the Philips line is designed for is slightly older mid- to upper income consumers who are “successful in their careers [and] who want outstanding audio and video performance from the products they buy,” the company said. “Magnavox is for consumers who are typically older than Philips’, who are looking for good, reliable products, that are affordable and easy to use.”

What did you do to change your field organization to sell these two brands to different types of retailers?

“Our field organization really did not exist. We had some people who managed wholesale customers, while others handled specialty and premium markets. We did not have a field sales organization that sold regional CE specialty chains, like Good Guys, Tweeter, Ultimate Electronics, Fry’s and others. We also needed an effort to go to [national and regional] mass channels.

“We began to put together a sales team in April 2002, and we are the only CE company that is aggressively expanding its field sales team [in the U.S.] at this time. We have two types of executives that make the team: a regional sales manager and a retail specialist.

“The retail specialists provide sales support and education. They must get into the stores and help [retailers with] the last three feet of the sales transaction. They must have the floor sales guys at stores know more about Philips than our competitors’ products. They should spend about 100 percent of their time at retail locations to provide education, as well as gather feedback from retailers [on a variety of issues]. They focus on regional and independent sales floors, period.”

Last August you signed a partnership agreement with the Nationwide TV & Appliances buying group. How is that agreement typical of Philips new strategy?

“Nationwide is the type of independent TV/appliance selling floor that we are looking for. We have a great deal of programs with Nationwide. We have a similar relationship with Brand Source, which began early this year.

“The effect of this approach is that we are putting our people in the field, but that is not the be-all and end-all. We must do all the other things internally to make the strategy work [in the marketplace]. We have to put more emphasis on specialized product introduction teams. We must not only sell-in but sell-through. All aspects of our sales, marketing, advertising, finance, shipping, training operations, all of our support functions, must be committed and tailored to the needs of our introduction teams and customers.”

What are other keys to the success of this strategy? What has been the reaction of retailers to the plan?

“We have paid more emphasis on the deployment of what we think is a well-thought out channelized distribution plan. We must provide sub-lines to provide product differentiation to retailers, like other manufacturers do. The keys are planning, execution, commitment and communications. We have created the Matchline sub-brand for projection TV, flat TV and plasma sets. We are looking at more sub-brands now, but we still have work to do to broaden the Matchline line for ’02 and ’03.

“I have personally met with all of the retailers on our planning strategy. They support and endorse it. We do not want to surprise anyone. Every customer may not agree with every aspect of our plan, but they understand it and know our commitment to execute it.”

Larry Blanford joined Philips last year as president, after a career with Maytag. Philips and Maytag sell the same retailers. What has Blanford brought to Philips from Maytag?

“Larry Blanford is used to selling premier products and a premier brand. One thing about him: products are king. There are several ways to gain advantage in the marketplace. Bringing product quality and differentiation is his.

“For instance our DVD+RW [recording deck] does differentiate. It increases the average selling price in the DVD category for retailers. Every selling floor retailer is concerned about the rapid DVD price decline. With a $999 [suggested retail] price point we differentiate ourselves with a quality product in a commodity category. That adds to the reputation of the retailer and Philips [in the minds of consumers.].”

You have the right organization in place, proper branding and the right products for those brands. How tough or easy will it be to get this strategy to take off?

“There isn’t just one silver bullet to make this work, unless you are a company whose name begins with an ‘S’ and ends with a ‘Y.’ You have to work for a living to get sales in this business. You must have the right combination of people, local teams, and commitment to your plan, cohesive marketing plans, the right products and product differentiation to make this work. We think we do.”