Pound Wise and Penny Foolish - How The Home Theater Business Can Learn From Luxury Sectors Still Trying To Bilk Consumers

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Rising temperatures mean vacation time for many people around the world and I am no different. Just last week I took my wife to a luxury resort here in California to celebrate her birthday. It's a stunning property that we have been going to off and on since it opened in 2002. Mission style architecture, ocean views and an organic farm that grows much of the food served on site only begins to describe the appeal. Easy access by car, thus no lines at LAX, cool summer weather and access to some of the best wineries in the world only makes the value proposition even more tempting. Upon arrival - and thanks to one of the few useful perks that come from having an American Express Platinum Card - my wife and I were upgraded to an absolutely huge room complete with an ocean view and a fresh fruit amenity. Things were really looking up for this long weekend getaway.

My wife and I hadn't stayed at this resort for nearly two years despite its upside, as physically the property is five stars. Nobody argues with that when looking at the property - but the service is another story. Oh, the service is such a tragedy that you want to WILL it to be better. More than one bitter Angelino has mentioned how you can sit by the pool and wait an hour or longer to have someone even ask you if you want a fruity drink or a lunch menu. Regrettably, in the current deep recession, there are even fewer staff to meet the demands of increasingly needy guests. When asked for a New York Times at Sunday brunch at 11:30 I was not only told by a 16 year old host that "We are out," he also told me "Brunch is over" as he handed me the lunch/dinner menu. Brunch wasn't over, nor were they out of newspapers. He just wouldn't get one because he is lazy, mismanaged and doesn't care or understand about the luxury consumer unless he can communicate with them via texting. My wife and I started to get angry again as we were reliving the reasons why we didn't return to this hotel and were feeling foolish.

We ended our mediocre stay a day early and upon check out our bill was off by 11 percent in the hotel's favor. They missed applying a credit for a lunch and a few other small details. They were apologetic and seemingly really wanted us to return again; however upon closer look at the bill they charged $21 for an 11 minute phone call (there is no cell coverage there for anyone with service outside of AT&T), as well as $8 for one of those small, mini-bar sized bottles of Diet Coke. I had four of them during my stay. With all due credit to the hotel, when we checked out - they removed the phone call and other little zingers from my bill - but much of the damage was done. Nobody likes being played the fool and I was feeling that way. On the drive home I started thinking about how this nickel and diming seeps its way into the home theater business and how toxic it is toward keeping consumers from coming back for more and more high end, high priced AV equipment for their rigs.

There is one leading media server company that is absolutely dominant today selling unbelievably high priced, standard definition media servers. They have the guts to charge $1,000 for a 1 Terabyte hard drive for storage for clients who have drives that fail. Even ultra-rich people know that a hard drive doesn't cost $1,000 - it costs more like $150 and that they are being ripped off. What if the media server cost $9,000 instead of $8,000 and it came with a 10 year hard drive guarantee? Dealers would be able to sell on the fact that this luxury media server comes packed with the support that all computer companies should offer but don't. But no, they chose to grind their incredibly wealthy consumers, and many of these type of consumers don't like it. Mercedes Benz is making a similar mistake today by pulling their four year warranties for two year coverage that doesn't get you through even the shortest of MB Credit preferred leases. BMW is making a major issue of their four year warranties with Lexus and Acura laughing to the bank as consumers switch loyalties in the car market. One thing about this bad economy is that some companies act so shortsighted, which leaves wonderful market share opportunities out there to be had by forward thinking companies.

How a Herman Miller Dealer Does Customer Service Right
I recently had the inside of my house repainted. Many of the downstairs walls were scratched up after fostering upwards of a dozen Golden Retrievers (as part of my wife's and my charity work). Upon leaving, my painters pointed out that my Herman Miller Aeron Chair was spitting parts on the floor and looked enthusiastically broken - which it clearly was. They apologized to no end, but I blamed it on the extra 10 pounds that I have gained in the last two years (post fat-ass comments below) and quickly called the retailer that I bought the chair from - Jules Seltzer on Beverly Boulevard in West Hollywood.

The Jules Seltzer people wanted to know every detail about the chair including a number of dates, numbers and codes slickly hidden on the chair. Upon getting them all of the information they needed - they let me know that the $900 chair has a whopping 12 year warranty and that my part was ordered. They would be calling in a week to arrange for someone to come to my home at no cost and fix the chair.

I was blown away. The cost of a house call alone had to be $75 above and beyond the cost of the parts and the shipping of the parts. Because of this kind of fantastic service and support - I am a completely loyal customer. The next time I need more office furniture (and they have some really nice stuff) I am going to Jules Seltzer and likely nowhere else. They have simply earned my loyalty.

The home theater business is long past the Krell versus Mark Levinson audiophile comparisons from the 1990's. The high end consumer electronics business competes today directly with other luxury goods such as travel, cars, fashion and so much more. People with money today know that they can spend it on anything they want and expect more service, more goodies, and more upgrades - all for less money. It's the way of the new economy and likely is going to be how it stays for years to come. With HDMI connection issues, constantly changing firmware updates and other headaches associated with today's home theater systems - what if a top installer bought a dozen copies of a good, new Blu-ray movie and brought them along with a bow on them and a little card attached to the disc so that when the client gets home they get an unexpected present from their AV installer. "Here's a copy of (fill in the name of the movie) on Blu-ray. I thought you would like it - specifically chapter 7 where you will see your projector really shine. Thank you again for your business." Mr. Rich Client will remember this small but unexpected gesture of kindness and he will tell his other rich friends.

It's the little details that earn and retain the best, most high end clients. Today they can rightfully demand more value, more service all for less money. Costco and Wal-Mart can do the price thing better than any specialty retailer on the planet, which is perfectly reasonable when you are buying a 24 pack of paper towels - but when it comes to your home theater, people with money want the touchy-feely goodies and attentive service. The good news is that they simply aren't that hard to deliver.


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