Today more than ever, electronics companies are looking for ways to stay viable and competitive in these times of unprecedented economic hardship. Noteworthy retailers like Circuit City and Tweeter have filed for Chapter 7 liquidation. Manufacturers of brands that are sold in both big-box and specialty retailers are cutting anything and everything they can to stay relevant or even alive. But things won't always be in such dire straits and, when the environment for electronics improves, the specialty AV business will need to deal with one of the most disturbing and shortsighted trends in the business today: the specialty audio/video manufacturers' love affair with the "dealer push" model of marketing, a trend that started long before the AV business showed signs of trouble.
Many companies looking for an easy way out of marketing their products to consumers think that salespeople control every element of what a consumer buys and can therefore push the company's products or brands, as opposed to the company itself presenting consumers with a compelling reason for purchasing their products and thus driving them to the retailer.
The AV business is trying to operate on the theory that it can function like the alcohol trade, with the vodka brand in the martini lounge's well being the biggest seller, whether it's Grey Goose, Belvedere or Absolut, but this is a false premise. Without question, every retailer and installer/integrator has his or her favorite products and brands, but consumers still hold most of the cards when it comes to the majority of both mainstream and specialty AV purchases in venues ranging from the audio salon to the big-box dealer to Costco or Wal-Mart. While CEDIA-type installers are often a cut above big-box retail salespeople in terms of industry experience and insight, even they don't have the power to make or break a brand in the long term, because they only represent a small sliver of overall product sales.
Generally speaking, all levels of AV retailers and installers thrive when consumers are beating down doors because of a happening new technology. Today's consumers are in love with Blu-ray and Nintendo's Wii, but the first generation of flat HDTVs five years ago is an even better example of what drove consumers into the stores in record numbers to spend large sums of money. Compare Tweeter's market capitalization in the first few years of flat HDTVs vs. the present time where Costco and Wal-Mart have made plasma into a commodity sale that was no longer "special." Tweeter went from three-quarters of a billion-dollar market cap stock to a completely finished company in just a matter of years. When Tweeter could offer a unique entertainment experience, people reached into their pockets (okay, into the equity of their houses) to buy beaming new HDTVs and their profits soared. It was then that a midlevel dealer like Tweeter needed to up its game to gain market share, but it allowed the big-box stores to capitalize on the consumer demand for HDTV. This phenomenon meant that HDTV was no longer a specialty product and the results for Tweeter were catastrophic, despite its market share opportunity.
While snobby audiophiles often cringe at the mention of Bose, Dr. Bose's speaker company is the single best example of a company that understands a holistic and consistent multi-channel marketing strategy. Bose markets directly to consumers in venues ranging from enthusiast media to The New York Times to TV infomercials to the Internet to direct mail to airline catalogues and far beyond. And they don't abandon mainstream retailers by any means, yet they also own and control their own retail stores, including branded stores in shopping malls and outlet stores. To put it bluntly, Bose is probably the most successful AV brand in the world, one of only two that mainstream consumers recognize. Try telling a rich, non-audiophile that Bose isn't good when he has been staring at the Bose sound system in his older Mercedes Benz or in the dashboard of his new Ferrari. He might look at you a little strangely. He thinks it sounds just fine - moreover, the fact that Mercedes and Ferrari feel Bose is good enough for their cars implies a seal of high-end approval.
An ambitious AV salesman can try to convince someone that there is something better, but when a client comes in with a specific brand in mind - a brand that has been marketed directly to that consumer, that buyer is predisposed to spend money on a specific product. Few sales staffers have the guts or the talent to try to dissuade the customer from his chosen path. Audiophile salesmen take on these challenges out of a sense of religion, if you will, but audiophile customers have all but completely migrated to Audiogon.com to buy and sell used gear, leaving the specialty AV dealer wondering where his business went.
Mark Ormiston, President of Defintive Audio in Seattle and Bellevue, Washington, one of the most successful specialty audio and custom installation companies in America, says, "Companies looking to get into Definitive's product lineup can ask for all of the dealer push they want and, in many cases, they will get it from my staff, but without a foundation of consumer demand, it makes the sales process much more difficult for everyone on my team." Ormiston goes on to say, "Even for many successful regional dealers, local ads are quite expensive in traditional media like radio, newspapers and television. We look to our brand partners to help drive even a small amount of highly qualified foot traffic into our stores via their own marketing efforts. It's just a lot easier to sell a pair of B&Ws or Wilson Audio speakers to someone who already knows they might want a pair."
Without question, having a strong dealer network is the backbone of any truly successful specialty AV company. Training dealers, selling products to salespeople at very favorable accommodations and even just breaking bread with the guys at the store can be the foundation of the type of relationship-based sales that turns million-dollar companies into ten-million-dollar companies. However, without creating new clients for often lofty yet unknown brands, the audiophile and specialty AV manufacturers will be in big trouble if their captains think their dealers will do all of their marketing for them. In the luxury world, consumers have so many other places that they can invest their hard-earned money than specialty audio/video. Why should a highly modified $15,000 plasma win out over one from Costco when the difference could mean a Hermes bag for the wife or a Pebble Beach golf trip with the guys from the country club? We are long past the days of the question of which amp is better: Mark Levinson or Krell? Today, the consumer electronics business has lost the "specialty" preface that it always had when it was booming decade after decade. The specialty AV and home theater brands must foster demand with new and existing clients, just as they must also woo a dealer's favor. Consumers again need to be given good reason to bang down a dealer's door and invest in the Meridian Digital Theater or Classé' AV preamp over the handbag or the golf trip, because in the end, as badly as specialty AV manufacturers want dealers to push their products on their own, the consumer is still king.