BRAND HEALTH CHECK: Philips - Philips must sharpen branding of CE group

Philips Consumer Electronics (CE) contributes about a third of group revenues but is the worst performing division in the Royal Philips Electronics Group.

The CE division markets a large product range including audio and video systems such as DVD players; plasma, wide-screen, and projection TVs; and computer monitors and hi-fis. It has to contend with a myriad of competitors such as Sony, Samsung and Panasonic. Even when Philips develops something truly break-through, it only has a few months lead time before competitors copy the idea and match its products.

Philips has also been content sometimes to license its break-through technology to competitors and has been outsourcing some manufacturing and R&D work. Last year, it set up a joint-venture company with China Electronics Corporation to make Philips mobile phones in an effort to stem losses in that sector.

Gerard Kleisterlee, president of Royal Philips Electric Group, said in a statement: "This approach means we will continue to sell Philips branded mobile phones, while now benefiting from lower costs, a reduced asset base and significantly diminished risks."

While this may be a safe, short-term option, longer-term, outsourcing product lines and licensing leading edge technology to competitors only adds to consumers' misperception that Philips is slow to innovate. Marketing and branding is another challenge. "Several times we have failed to reap the benefits of our early investments in technology," Kleisterlee said.

"For some time, our marketing has not been up to standard. We will be tightening the consistency of the 'Philips brand experience' so that those who buy and use our products will recognise them clearly as being from us."

It also doesn't help that its other five divisions also use the Philips brand name and shield emblem logo. Divisions such as Philips Lighting and domestic appliances market's more ubiquitous - and relatively low-tech - products such as light bulbs and kettles. While these products may turn a profit, it does little for Philips' image as an innovator and an upscale brand.

VITAL SIGNS
All figures in millions of Euros
                                1999      2000     2001
CE Sales                       11,152       255    1,751
Profit/Loss                    13,060       410    4,281
Profit/Loss of Philips group   11,052      -649   -1,371
Source: Philips annual report

DIAGNOSIS

ANGELINE TAN, Marketing comms manager, Ikea Singapore

Has the wind(mill) gone out of this Dutch giant?

It sounds as though it has a lot of catching up to do if it is going to reposition itself in the forefront of technology, design, and branding.

What exactly is the "Philips brand experience"? What is its promise to the consumer? What does it want its consumers to take out of its brand?

Does it want to be everything to everybody? Should it stick to what it knows best and leave the rest to the others? This brand has been totally eclipsed by the other brands out there. And not surprisingly, it's the Asian giants who are making the loudest noise.

In this marketing-savvy market, one should avoid recycling one's communications.

The consumers are a jaded lot. Look at the clutter around them. Look at your competitors. Look at Sony. But don't emulate (Marketing 101). Find out what your strengths are, what makes you unique (again, the voice of Marketing 101 resonates). But they may be working on something fantastic already. I hope so. Not that I don't enjoy the fact that the Asian brands are making great strides, but it'd just be nice to see this sleeping giant make a come-back.

I think Philips is just going through a temporary slump. Something fantastic may already be in the pipeline.

JEFFREY WANG, Strategy planner, Leo Burnett Singapore

Light bulb or MP3 player? Steam iron or plasma TV? Need versus want?

This epitomises the core of Philips' current dilemma.

More famous for their low-tech appliances than top-of-my-Christmas-list tech toys, the brand is struggling to move from being an 'I need' to an 'I want' brand. There are two key challenges facing Philips. Firstly, the brand promise needs to evolve. As a challenger brand, in a category led by the likes of Sony and Panasonic, Philips needs to speak with more confidence. Philips needs to make the leap in perception from low-tech domestic goods to high-tech goods with sex appeal. The good news is that there is a foundation of trust already established at the low-tech end.

It is probable that people believe in the brand as a provider of solid, reliable and quality products. So there is credibility and opportunity for brand communication to turn up emotion and desirability.

But how can Philips support a new brand promise? At the end of the day, the product speaks for itself. While the brand does have credible innovation stories to tell, with the first writeable DVD player etc, the speed of imitation has already rendered such news old. Strong and effective marketing of signature products that deliver on the brand promise are necessary to ultimately sharpen its edge.

TREATMENT

Tan's treatment

- Dare to stand out from the competition. There are enough Sonys, Panasonics et al in the marketplace today. Just be yourself. Be Philips.

- Understand your target market. Make your consumer's life easier, not more complicated. Be their friend.

- Find a great marketing partner or agency who understands your brand and has a passion for your business and industry. Find someone who also understands the art of listening.

WANG'S REMEDY

- The brand should engage in youth marketing tactics.

- The brand should allow opinion leaders to test drive signature products to create a buzz and build street credibility. Truly efffective advertising occurs in heated debate among tech heads and early adopters. Furthermore, these days, the dads are asking their sons for advice on electronic appliances so the brand needs to maintain a bond with this target group.