27 March 2005

So near, Sony

Incoming Sony Chairman Howard Stringer has his work cut out.

Right now he is making all the right noises - cross company collaboration, renewed focus on innovation and customer centric products and services. Wait a minute, did he say customer centric products and services? Yes he did. Sony also said, and this time i think it was Ryoji Chubachi, that Sony was going to "put the consumer first". Whoa! this I gotta see!

Sony was successful because they shrewdly used the tools of the mass economy. They advertised repeatedly in the mass media of one, two or three TV stations, one or two newspapers and magazines and knew where consumers were most of the time. They also used mass production to achieve economies of scale, and they used distribution to penetrate mass markets. Competition was limited. Research and development was cutting edge. Customer retention didn't really matter. Markets were growing so fast, and the mass-economy tools were so powerful, that it is was fairly easy to acquire a new customer for everyone that was lost.

But today, the mass economy is dead. In its place, we now have the "Customer Economy." Companies no longer have the exclusivity to make the rules and control information by "positioning" products or promoting "brand equity" through advertising and PR like they did in the mass economy. Consumers are more knowledgeable and spoilt for choice.

In fact, the balance of power has shifted from the seller to the buyer. Customers are beginning to demand business be done on their terms, and they have more and more influence over the design and manufacture of products to meet their requirements. Look at Sony's below par performance of their MP3 player. It was less user friendly than a Trabant!

The Mass economy is over. Companies playing by mass-economy rules are going to do more than lose they game. They are not even going to be given the chance to compete.

This is how Bill Lamar, Jr., senior vice president of marketing at McDonald's put it last year, "Reaching our consumer targets is no longer TV-driven. The days of spending hundreds of millions of dollars on TV advertising are over."

So it's a relief to hear Mr Chubachi getting the message. Mr Chubachi will be in charge of the electronics division. He wants more focus on what consumers actually want. Sony's incoming president has gone on record as saying that the electronics giant's future products must be more in line with what consumers want.

Well, it's about time. No matter what Landor might say about the Sony brand, Sony has struggled to compete against rivals in recent years, losing ground in key growth areas such as plasma TVs. And that despite a $500 million marketing budget.

In January, Sony cut its operating profit targets for the current business year. Again. Further proof that brand equity, awareness and reach are unimportant to the success of a brand today. The only key indicator of a successful brand is profitability.

In fact, Mr Chubachi is so nervous that he also said recently that the squeeze on profits was likely to continue until the reforms were complete. In fact, he warned it would be difficult for Sony to hit its profits target for the 2006/07 business year.

He went on to identify three main weaknesses in Sony's electronics business - a decline in product competitiveness, an inefficient manufacturing structure, and a design process that did not place enough emphasis on what the consumer really wants.

"Right now there is a gap between what consumers expect from Sony, their image of the Sony brand and reality," said Mr Chubachi, who will be in charge of Sony's electronics division.

"A recovery will come when we can close that gap." Damn right it will. Problem is, Sony has only got half the message. Mr Chubachi went on to say that Sony would be able to develop more attractive products by improving communication between engineers and marketing staff. Hang on a minute, what about all that stuff about customers? Surely, if you want to sell the consumer something, it makes sense to ask him/her, what he/she wants? But no. Mr Chubachi then goes on to say, "We need to ensure the wishes of the designer quickly reach the consumer and that feedback from the consumer quickly makes its way back to the design stage," he said.

Mr Chubachi, try this. Carry out some research with your consumers. Ask them what they want. Take that to the designers and tell them to do it. Take it back to the consumers and ask if it's what they want. When they confirm it is, manufacture.


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