Philips, which has been the least successful of the major consumer electronics companies is now to trying to tell the CE industry how to be successful. The future of consumer electronics is “emotion and experience”, according to Philips chief executive Rudy Provoost, who delivered the opening keynote speech at this year’s IFA show in Berlin.
Provoost urged the ICT industry to move away from what he called “old convergence” which is “too much about the electronics and not enough about the consumer”.
In the past Philips has failed in several markets including Australia and the USA, and it was only four years ago that SmartHouse was told by a Philips board member that the company had earned a reputation for “being good at inventing products but lousy at marketing them”.
Now Philips is desperate to emulate the success of brands like Sony, Samsung and Panasonic. In the US, where Philips four years ago admitted to me than the company had gone 15 years without making a profit, an unknown brand Vizio has beaten them by taking the #1 slot in the flat screen TV market. This is despite the fact that Philips loves telling the world that it has superior technology.
At IFA, Philips Chief Marketing Officer Lucas Covers said that Philips’ “Ambilight” range of televisions, which create a glow of colour around the set that changes along with the colours on the screen and sells at a premium, already represented a share of 25 percent of its TV sales in value. “We want to grow that number,” Covers said.
Philips’ consumer electronics business represents a major chunk of the company’s sales, but is only marginally profitable. In the past it has been unprofitable more than profitable. The “Aurea” must help to boost profits in the second half of the year so that the business can meet its financial targets.
Rudy Provoost, head of Philips’ consumer electronics business, said the company was looking for ways “to put new fuel in the engine” with the release of the “Aurea” television. The new 42-inch “Aurea”, which Philips will promote with a $80 million marketing campaign, will retail for around $7,000 in Australia.
Philips commissioned a short movie from award-winning director Wong Kar Wai to promote the “Aurea” television and has taken advertising in “Vogue” and “Wallpaper” seeking to position the TV set as an exceptional product.
Philips’ consumer electronics business represents a major chunk of the company’s sales, but is only marginally profitable. The “Aurea” must help to boost profits in the second half of the year so that the business can meet its financial targets.
Rudy Provoost, head of Philips’ consumer electronics business, said the company was looking for ways “to put new fuel in the engine” with the release of the “Aurea” television.
“We simply have to make sure that all the building blocks are in place… (and that) the commercial successes are there to underpin the financial commitments,” he told Reuters at the sidelines of the IFA consumer electronics fair, Europe’s largest such fair, being held in Berlin.
Philips in July reiterated its margin target for earnings before interest, tax and amortisation of 3 percent of sales for its consumer electronics business, even though the business only posted a 1 percent margin in the second quarter.
Consumer electronics represented about 39 percent of group sales in the second quarter, but contributed just 7 percent to core earnings.
“I have often said that the term ‘CE’ should not refer to consumer electronics, but to consumer experience or even consumer emotion,” he said.
“Consumers want the latest tech gadgets, but increasingly they are making intelligent choices about their own personal wellbeing, that of their families, their homes and the global environment itself.”
Provoost explained that Philips will not only focus on traditional technology, features and performance benefits, but directly address the emotional interests of consumers and their lifestyles.
“Consumer electronics is no longer about assembling boxes containing electrical components to perform a specific function. Nor is innovation solely about adding additional technology and functions,” he said.
Provoost mapped out four quadrants which he believes represent the balance consumers are looking for: their Space, their Mind, their Body and their Appearance.
By focusing on these four domains, Philips reckons it can address the emotional, and not just technological, needs of its customers.
When designing any new product, Provoost said that the company needs to ask the questions: How can we enhance the Space they inhabit? How can we offer rich new experiences to help improve their state of Mind? How do we help consumers live healthily to enhance the Body on the outside and their Appearance on the outside?
He went on to showcase a range of new Philips products that demonstrate this philosophy.
These include the Aurea TV which boasts an ‘active’ frame, the LivingColors lighting system which allows users to set ambient lighting to any colour, and the Philips-Swarovski Active Crystal range of designer data devices.
“Technology and innovation will continue to be our drivers, but will be applied with ‘consumer-centricity’ as its foundation and in, perhaps, a different way to how we have done it before,” said Provoost.
Provoost rounded off by challenging other players in the industry to adopt the same approach and put the consumer above the electronics.