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Vizio Fights To Stay On Top; Evolves Price Point Strategy

Recent first-quarter flat-panel TV market share reports indicate Vizio has stepped up once again as a top-three North American flat-panel TV brand for unit shipments, and company executives vowed to solidify that position amid an intensified competitive backlash.

The opening price point strategy that helped build the brand in a few warehouse clubs and discounters 18 months ago has now evolved into making Vizio an added-value line, offering better featured products at aggressive prices alongside the established leaders.

Although this is not the company’s first time at the top of the LCD TV market share charts, company executives told TWICE that this may have been one of the most challenging periods it has faced.

Established brands, the company said, have mounted aggressive marketing campaigns targeting mass merchants that have taken on Vizio to keep the upstart at bay.

According to recent first quarter 2008 market research from iSuppli and DisplaySearch, Vizio ranked second, ahead of Sony and behind Samsung, for combined LCD TV and plasma unit shipments. It ranked third in LCD TV in a tight unit shipment race.

Instead of sticking with the low-cost strategy that set the brand apart in recent years, Vizio’s evolving strategy has led it to improve the quality of the products, expand the assortment and maintain a value price point (if no longer an opening price point) compared with the top brands in the category, said Jeff Schindler, Vizio business operation and marketing VP.

Schindler points out that following Vizio’s success, “lots of smaller brands have emerged with prices lower than ours.”

But Vizio continues to gain share, he said, because the brand is known to consumers through the company’s brand-promotion efforts and word-of-mouth support. The latter, Schindler said, continues to be the company’s biggest driver.

“Because of what we’ve accomplished, the established brands have had to react to us,” Schindler told TWICE. “We have a big target on us now. If we had come up with low-priced, lower-quality products, they wouldn’t care, but because our products have been so good, at a great price, that is becoming a real threat.”

Schindler said that retailers who carry Vizio have been offered better and better prices on big-name products, opening the market to a wider range of consumers.

In reaction, Vizio is increasing its assortment of lines, including a recommitment to plasma, offering more screen sizes, high performance and more competitive prices to bigger-name LCD TVs. The company is also building its assortment of 1080p flat-panel models, with some of the company’s first 120Hz LCD offerings slated for the summer.

In plasma, the company will add the 32-inch HD screen size as an alternative to highly competitive LCDs. It is also relaunching 42-inch HD plasma, he said, after the majority of its plasma business had shifted to 50-inch models last year.

“We really believe in plasma technology and think it has some advantages over LCD, even though in the retail environment plasma will glare more with the light,” he said. “We want to keep plasma alive and keep a good balance. We are going to hit aggressive price points with 32- and 42-inch. We really think this year it’s a good strategy for us.”

Schindler said he expects a large percentage of Vizio’s volume in 32- and 42-inch plasma to come from Wal-Mart. “Our sales mix in Q1 was 9 to 10 percent plasma, but we are expecting that to double in the coming quarters as far as a percentage of our mix.”

The company’s key accounts today include Costco, Sam’s Club, Wal-Mart, Circuit City, Sears and Dell.

“Our channel strategy is warehouse clubs, discount retailers and then traditional retail,” said Schindler. “That’s why we’ve announced so many new products this year, because we are designing our mix for those three channels.”

Stepping up the 50-inch plasma category, the company will introduce a 1080p model with Silicon Optix’s Realta HQV processing in the third quarter at an under $2,000 price point, he said. The company is still gauging demand for possible 60-inch plasma offerings this year.

In LCD TV, 1080p resolution is taking on a much larger presence, Schindler said.

“The mix in Q1 was 20 percent 1080p,” Schindler said. “In plasma we will have both 1080p and 720p coming in July, and in LCD 42-inch has really shifted. In Q2 our 42 LCD shipments are almost 100 percent 1080p, at $999 in some accounts.”

As for supply of products headed into the fourth quarter, Vizio said it is downplaying rumors that its big name competitors will try to restrict its access to display panels.

John Morriss, Vizio partner management VP and former HP and Compaq displays executive, was brought in to establish new LCD panel and ODM strategies, as well as some strategic partnerships.

“The whole goal is to ensure that we have the right product at the right time and the right price and really drive a seamless end-to-end value chain,” Morriss told TWICE. “There are a lot of rumors out there that we are not going to have supply, which is absolutely not true. I’ve been spending a tremendous amount of energy across all of these specific panel makers and some of the key components suppliers to ensure that we do have adequate supply. Luckily, I’ve known a lot of these guys for years and years at the top management level and we’ve had a lot of good dialog.”

“By size, by SKU, by growth trend, we’ve got good panel allocation commitments from all the key guys, and I have a few back up plans in place for key SKUs that weren’t there before to make sure that there is not a supply issue this year,” he said.