Whale Hunting In The Desert - $20,000 Plus AV Components Are Everywhere At CES

Whale Hunting In The Desert - $20,000 Plus AV Components Are Everywhere At CES

Many of the products at the January 2011 Consumer Electronics Show indicate that despite the poor state of the economy, companies are still looking to make sales of big ticket items. The market for these products is getting smaller and smaller due to the economy, but that doesn't appear to be stopping companies from trying to sell these high priced items.

20k_audiophiles_gulfstream_450.gifI called this article Whale Hunting in the Desert because of a book that I just read of the same title about Steve Cyr, the man behind inventing the modern casino hosting game in the 1990's at The Mirage. It was a fascinating read that covered the transition from old Vegas to new Vegas from the casino host's perspective. Cyr implemented database marketing to woo heavy hitters in from around the country. He used private jets to stylishly shuttle in the "whales" who can afford to lose the most - and boy did they ever. If you think a "comp" is free, then you have another think coming. Casinos don't comp you unless you've proven you can lose and lose enthusiastically. Once you do - you are good in their books and there are few luxuries that you cannot have, in order to get you back to the tables. Today in the world of high end, audio video companies are also increasingly hunting for whales as seen by many of the products on display at the recent Consumer Electronics Show in January of 2011.

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• See more stories like this in our Featured News sections.

Having worked at Christopher Hansen Ltd. in Beverly Hills and for Mark Levinson at Cello Music and Film Los Angeles in the early to mid-1990s - I am no stranger to the big ticket sale. I sold more than my fair share of Wilson WATT Puppy speakers, Transparent Cables, Mark Levinson electronic and well-over $100,000 Cello Music and Film systems that packed $50,000 amps, $70,000 Cello speakers and Vidikron 9-inch CRT video projectors packing $20,000 "line doublers." Closing the big ticket sale was the most fun you could have as a top audiophile salesperson and those are days that I remember very fondly. What concerns me today is that as we are coming out of a deep global recession, more and more companies are pushing $20,000 components to a smaller and smaller number of clients who can afford such audio jewelry.

At the recent CES trade show in Las Vegas there were countless products priced in the stratosphere from increasing numbers of companies who aren't always known for such high end products. As the sales guru that I studied, Tom Hopkins, always said: "You have to earn the right to the close" and many audiophile and videophile companies are simply just jumping into the uber-high-end game, with little to no game plan. VW came out with their Phaeton $70,000 luxury sedan built on a Bentley frame, but the car was mostly a failure as the luxury market wanted the cache' that comes from the likes of Mercedes-Benz, BMW and Porsche at the higher end of the market. It doesn't matter if you are a well-funded car company or an aspiring audiophile company - it's hard to crack into the ultra-high-end market without deep pockets, tremendous enthusiasm and lots of creativity. It can be done - just ask Lexus and Infinity or Kalidescape or Wisdom Audio on the AV side - but it isn't easy.

Another real-world problem that many, but not all, audiophile companies have that are trying to sell gear where the air is rare is: the traditional brick and mortar specialty AV dealers. These dealers, those who could possibly show and successfully sell such ultra-high-end products have a hard time justifying the investment that it takes to get them on the retail floor. Respectfully, these B-list audiophile manufacturers don't create the consumer demand needed to make the phone ring that often to justify parking $20,000 on a dealer's ceiling (at cost) or $15,000 (at cost) for a pair of speakers that may or may not sell for a lot less on Audiogon.com. Creating consumer demand is key to making these mega-products move. A-list audiophile company, Audio Research, knows this - which is why their 40th Anniversary two-chassis preamp will end its production run this spring. If you didn't order yours - then you'll have to buy one used, but that's at closer to retail for used than dealer cost. This is a smart way to keep the value of the product up as less supply paired with good demand equals high prices and high values for owners. Many Audio Research Ref 5 clients made the upgrade because their Ref 5 was so valuable on the used market. With unlimited amount of product in the market - it's hard to keep the values high. High values, stunning support and top performance keep ARC clients happy and loyal for decades; thus their position in the marketplace.

Read more about the realities of the AV market on Page 2.
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I spoke with one dealer at CES this year who is considered to be the
best dealer in the country for selling many of the best high end
audiophile and video products in the market today. He was looking at
adding a $40,000 plus amp to his all-star lineup. At one point he was
the top Halcro dealer in the nation and he has the well-heeled clients
who pop for such a stunning investment. He told me what it would take
(I can't help but to always be closing EVEN if it's not my sale) for
him to open the line and it was aggressive pricing and terms. If I were
this upstart AV company with a stunning legacy - I would do whatever it
took to open this dealer. Come up with terms for a year and pricing
that gets lower and lower for his floor demos the more units he sells.
It's worth it.

Another legend in audio - specifically speakers - is using the floor
plan model to build another AV success story for his resume. For
dealers who will sign on now - they will get very high profit margins
and enough speakers to more than pay for the demos in the first month
of sales. Who can turn that down? The answer is: barely anyone, as most
dealers I know have added this brand. Moreover, they are rolling out an
ad campaign and PR campaign the likes of which the specialty AV
business hasn't seen in a while, which will only get more people in to
hear these fantastic speakers. Trust me, they really are. They are
priced right (nowhere near $10,000 per pair) but they have that
unquestionable audiophile sound and they are already selling well.
Hell, my stockbroker called me to tell me that he bought a pair and
he's not even a hardcore audiophile, but the speakers sounded that good
at a local dealer who was showing them.

What Should Smaller Audiophile Manufacturers Do To Get Into The High End?
Not every company can be Krell, Mark Levinson, Transparent, Meridian, Audio Research, Wilson Audio
and the like. They can't even call on the same favors with dealers that
the people behind Wisdom Audio, Kalidescape, D'Agostino Audio and
others can from years past. Its absolutely an uphill battle.

The first thing these smaller audiophile companies need to do is to
create consumer demand. Get the ink needed from the top AV
publications. Promote, advertise and hype what you do and why it is
worth the money. Hand hold clients. If you can't make that pitch, then
don't expect to sell much. Do like Wilson Audio and fly big ticket
clients out to hear a reference system and close them for a dealer if
need be. Do whatever it takes.

Next - add meaningful value to the sale. At $20,000 for an
audiophile component - how about a 10 year tube replacement program?
How about a lifetime warranty? Albeit at a lower price, the parent of Emotiva is re-launching Sherbourn
with a $3,000 AV preamp that's potentially a world-beater. Get this -
for $3,000 you get a long warranty with a one-year, no-questions-asked
replacement guarantee. If your unit breaks - they send a new one
without any hassle. If you are selling a $40,000 projector - how about
a guarantee that if the price drops in one year from the time you
bought a unit, that you get a credit back? Consumers like added value
and if you want to woo the big fish you need to offer them the goodies
like you are an audiophile Steve Cyr.

If I ran a small audiophile
company I would seek a lender (private or a bank) that could floor my
top ten dealers with a full compliment of equipment for an extended
period of time. I would demand that I got top billing in the big
audiophile room. I would pay for top room treatments from the likes of
RPG or ASC. I would install lighting controls for the dealer. I would
fund the dealer to build a database of their best customers and pay for
them to receiver a full color mailing with a personal invite to the
showroom. I would make sure the room was top notch and lastly I would
leave him with "one-up and one-back," meaning that for every component
that was on the floor you had one ready to sell in the warehouse. The
effect of this on a sales team is undeniable. If a salesman knows he
has a fantastic room and the equipment in stock, he will make the sale.
It's too tasty. If I were the company making the gear and flooring it -
I might also use the bank loan to offer a 10 percent incentive for
people trading A-list gear in on our stuff for those that bought
multiple components.

It's not impossible to sell high end audio gear even as a new player
in the market, but just flying your flag up the flagpole with
referenced priced equipment isn't going to cut it in today's audiophile
marketplace. There are too many apex predators as well as well-liked
up-and-comers who are making their market share now. The key to success
is making a top level product, creating consumer demand and offering
value that makes it worth buying new from a traditional dealer. Without
this - audiophiles know how to buy on Audiogon.com - and they will. You
must deliver them top value, performance and style to land them and it
can happen as it does nearly every day for the top players in the game.

Additional Resources
• Read more audiophile news from HomeTheaterReview.com.
• See more stories like this in our Featured News sections.

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