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Johnston Lets Dealers Shape Elite Line

In town to unveil the newest offerings in Pioneer’s standard and Elite home theater and new added “home cinema” lines, Russ Johnston, Pioneer marketing and product planning senior VP, said his company continues to grow the high end of its business by listening to the needs of its Elite dealers, who have become more and more focused on custom installation and system integration.

Johnston said his company recognized that its Elite dealer partners require a broader product offerings and a more specialized class of products to meet the channel needs.

Using a team of distributors assembled several years earlier, the company is now offering the video and audio elements these dealers require, while maintaining the company’s focus on the areas it does best. (See Kuro story on p. 14.)

The following is question-and-answer interview with Johnston covering elements of the latest evolution of the Elite video products strategy:

TWICE: Why did Pioneer decide to add a front projector to the Elite line at this time?

Johnston: “We work with our Elite dealers very closely. It’s a very large portion of our business that continues to grow. Especially with our premium product strategy, they’re the ones resonating with the product mix the most. They’re resting everyday for us to even get into the opposite side — LCDs. The needed a Pioneer statement with a Kuro message in the secondary-room applications. They’re business in the custom install is really where their future focus is, because of the profitability. They can create the DNA of their brand by the types of installs that they do, and the clientele that they grow. So, when they jump from home theater to this media room or home cinema environment, we didn’t have an offering from a display standpoint. Plasma is the best-case technology for certain size ranges but once you get over 65 inches you need other technologies. We felt the [D-ILA] projector was the best application. This is our first step getting into it, so far, but our dealers are very, very happy with our move. We are using a third party source, but we intend to grow that business beyond where it is today. We feel we have best-in-class position for what that product is in the $5,000 to $10,000 range.”

TWICE: How were the new Elite Signature Series Monitors designed to better address the custom installation business?

Johnston: “We’ve always offered for the Elite dealer [Imaging Science Foundation] calibration, so that dealer can go in and tune the panel, but integrators are not only tuning the panels, they are also attaching them to control devices. So, we’ve opened up more of the picture settings and RS-232 commands. From an industrial position, we’ve also learned a lot more about IP control from remote destinations. We are bringing that into the home now so an installer can monitor or perform set up through a PC connected to the panel.”

Eighty percent of the monitor strategy was making sure the customer had a panel that looked great in the home. But from the consumer standpoint we wanted to make sure the customer felt good about the purchase, and knowing that they bought the Ferrari of Pioneer. So we’ve given it this new nomenclature to give it a classier feel.

TWICE: Sony recently announced a unilateral pricing policy for select high-end products. Has Pioneer considered such action to help protect any of your products or lines?

Johnston: “We’ve studied it. Some dealers hate it, some like it. It doesn’t feel like it is the most comfortable environment if your product is well protected anyway with a channel strategy. We haven’t been asked to do it, though we do study it all the time because price is the first deterrent to taking a premium brand position if a product is being marketed outside of MAP. We can’t control price. But if you can’t control your distribution or price, then you lose control of your strategy.”

TWICE: How is Pioneer fixed for panel supply going into the fourth quarter of 2008?

Johnston: “We start production of our new panels this month, and we start delivering them into retail at the end of this month or beginning of next month. We were playing catch up only with 60-inch last year. That market grew a lot more than we expected, even though we were significantly more expensive than a 58-inch or even somebody’s 65-inch models. The Kuro strategy really paid off for us.

TWICE: Pioneer recently announced plans to jointly develop plasma panels with Matsushita and to purchase your panels from them going forward. How is that integration coming along?

Johnston: “The terms of the agreement with Matsushita and some of our third-party product strategy issues haven’t been disclosed yet. It will probably be the summer of next year before we start bringing some of that product to market. Our burden has been our tremendous overhead. We would have loved to offer more screen sizes, but that would have meant adding more lines, and for one line its $200 million to $300 million to bring in new glass sizes. So, from a North American strategy standpoint the decision was great news.”