Sony, Philips adjust image to push sales

Two of the world’s largest electronics brands, Sony and Philips, are gearing up for battle in the consumer electronics market after both, despite an historical boom in consumer spending and new technology, have watched sales of their consumer electronics goods decline.

Both are reviewing their advertising strategies as part of their effort to boost sales. Sony has appointed Fallon to handle its £70m pan-European consumer electronics business (MW last week) in place of Saatchi & Saatchi, the agency responsible for the “Go Create” campaign. The move has led to speculation that Sony will axe the “Go Create” approach, which was criticised by the industry for focusing too heavily on the interactivity between the company’s IT-led products, and not enough on entertainment and fun.

One agency insider says Sony wants to position itself as a leader in cutting-edge technology in IT-led consumer electronic products, as well as maintain its established name in the home entertainment market. He says: “The campaign did not tap into Sony’s potential to be fun. IT is a new area for Sony and it wasn’t confident about it.”

While Sony’s attention has been focused on interactivity, Philips has been attempting to enhance its reputation in home entertainment. Analysts claim that historically, consumers have associated Philips with domestic appliances while the City has been pre-occupied with its semi-conductor business. They suggest Philips has in the past been confused about what sort of corporate image to project. The company has appointed the global network DBB, which already handles advertising for its consumer electronics range, to create a £50m corporate branding push.

Slow growth in the electronics market has affected Sony’s overall figures. It reported a 40 per cent decline in operating income to Y134.6bn (£702m) for the year ending March 31, 2002, with sales up 3.6 per cent. Sales for the electronics division, which accounts for 65 per cent of Sony’s business, fell by three per cent for the same period. Sales of consumer electronics have continued to decline – down 3.9 per cent for the second quarter to September 30. By contrast, the games division, which includes Sony PlayStation 2, recorded a 3.1 per cent rise.

Philips had been bearing up well, having reported a 20 per cent increase in sales to ââ¬37.862m (£24.13m) for 2000, but for the year ending December 31 2001 it reported a 15 per cent decline. Sales across Philips’ consumer electronics division were also down by six per cent for its latest third quarter to October 15. Both Philips and Sony have blamed their performance on poor market conditions and restructuring costs.

The UK consumer electronics market is highly competitive, with more than 130 brands fighting for a share. Last year Sony was the only brand to increase its share of the market by value, up by 1.7 per cent to 20.6 per cent for the 12 months to November 2000, according to Mintel. Nevertheless, electronics giant Matsushita is ahead of both Sony and Philips as the leading provider of audio-visual equipment.

According to GfK Marketing Services, the consumer electronics market in the UK is worth £4.4bn. Colour televisions has the largest share of the market with £1.6bn worth of sales, with audio equipment accounting for £607m. Sales of DVD players at £349m are set to overtake sales of video cassette players, worth £364m, by the end of the year.

Sony will not comment on whether it plans to scrap “Go Create”, but many in the industry say the company has to reassert its position as a manufacturer of quality products for home entertainment if it wants to increase sales of its consumer electronic products globally. An agency insider says Sony is keen to bring the humour back into its advertising as well as position itself as the brand that produces tools for both work and play.

The challenges facing Philips not only concern consumer electronics but the company as a whole. An agency insider says that a relatively new senior management team is doing its best to shed its confused image. Within the electronics trade the company is well-known as an innovator of new technology and is credited with developing the first recordable DVD. It may well be this image as an innovator that the company adopts.

A Philips spokesman says the company is considering which direction the new corporate branding campaign will take. But an agency insider says the review is likely to spell the end of the “Let’s make things better” created by Euro RSCG Worldwide.

The same agency insider says that historically Sony has marketed itself better than Philips and that this has affected consumers’ perceptions of the brand: they tend to associate Philips with domestic appliances more than innovative technology.

A technology fund manager says Philips and Sony have lost their way in their bid to be all things in the electronics market, and it is this that’s taking its toll on the bottom line.

The two electronics giants have to decide what aspects of their business they need focus on to push themselves out of this sales rut, and then adopt a branding message that better reflects their positioning. Perhaps that will mean Sony will suddenly develop a sense of humour in its advertising, while Philips will begin to tell consumers of its industry reputation as an innovator.