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| June 17 , 2004 |
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By Jennifer L. Schenker (IHT) AMSTERDAM: The Dutch electronics conglomerate Philips prides itself on being innovative: It invented the rotary shaver, played a crucial role in the creation of the audiocassette, the CD and the DVD and has filed more than 100,000 patents since it started as a light-bulb manufacturer 113 years ago. But Philips has so far failed to invent the right brand image, one that will help transform its technological edge into products that become runaway best-sellers. For about 15 years, Philips has been unable to grow, with annual sales remaining stuck at about E30 billion, or $36 billion. Attempts to improve its cachet, including the introduction nine years ago of the slogan "Making things better," have not succeeded in making things significantly better for Philips, analysts and branding specialists say. "Philips has a long history of innovation," said Paul Jackson, an analyst with Forrester Research. "But they have always failed to turn that innovation into significant products" to appeal to a younger, hipper audience. The Philips brand is well recognized in Europe, but it is associated more with toasters than new technology, and the name is not well known in the United States, analysts say. What Philips needs, the company's chief executive, Gerard Kleisterlee, acknowledged, is not just a new advertising campaign and a rebranding exercise but a transformation. Kleisterlee and Andrea Ragnetti, the first executive to hold the title of chief marketing officer at Philips, have hatched a plan to do just that. Their idea, presented to a small group of journalists on Tuesday, is to create an image for the company that will help sales grow, and to present a unified face to the consumer even though the company's product lines range from light bulbs and shavers to MP3 players, semiconductors, medical equipment and flat-screen televisions. Kleisterlee and Ragnetti explained that the company wanted to focus on three ideas: "designing around you," "easy to experience" and "advanced." Since high-tech gadgets are often complicated to set up and operate, Philips will make simplicity the most important theme. The company says that will not be just a tagline in its advertisements but the goal for the products it makes, the services it offers and the way it operates its business. Kleisterlee announced the company's plans in a Webcast and e-mails to its 165,000 employees on June 7, in preparation for a rebranding and advertising campaign that will be introduced this year. The company did not say how much it was spending on the program. The company is backing away from attempts to appear hip, an effort that analysts and branding experts agree has flopped. Its consumer electronics products do not resonate with teenagers the way that gadgets from companies like Sony do, said Paul O'Donovan, a consumer electronics analyst in the London office of the technology consultancy Gartner. "It is kind of like your uncle trying to be cool; it is usually embarrassing - that is how it comes off - and the harder it tries, the worse it gets," said Danny Altman, managing director of A Hundred Monkeys, a branding consultancy near San Francisco that was briefly involved in a Philips-Nike joint U.S. advertising campaign. Kleisterlee acknowledged that the company's image was more akin to "solid like my parents." "How cool can a company be that gains 20 percent of its revenues from medical diagnostic equipment?" he asked. Kleisterlee, who became chief executive in 2001, has spent most of the past three years trying to restructure Philips. He has reduced the number of employees by 55,000, sold off about 20 businesses and cut back the number of divisions to five, moves that analysts say have helped make Philips more competitive. After reporting losses over the past few years, Philips is starting to return to profitability. For the first quarter of this year, the company reported a net profit of E550 million, reversing a loss of E69 million a year earlier. It was the fourth consecutive profitable quarter for Philips. Kleisterlee said he was focusing on the next step, making Philips a high-growth company. Better marketing will lead to better margins and more growth, he said. While Philips is Europe's largest consumer electronics maker and the world's third-largest, that business now represents less than one-third of what Philips does. Other businesses, such as the medical devices division, are showing promising growth. So Philips also plans to start marketing itself as a "health care and lifestyles technology company," said Kleisterlee, concentrating on the people who already make up about 80 percent of its customer base: educated men and women 35 to 55 years old with higher-than-average incomes. Kleisterlee points to a defibrillator that can be used at home to help revive heart attack victims as an example of the type of product that fits into the advanced-but-easy-to-use theme. The company's line of Senseo coffee machines and gadgets that combine cameras and music players into a keyring device also fit the theme, he said. International Herald Tribune Copyright © 2003 the International
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