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Corporate branding doghouse: Naming
the game at Philips, the Dutch electronics
company that's lost in America.

In a recent hybrid branding effort, Philips tries to get some Nike coolness to rub off on them.

EINDHOVEN, THE NETHERLANDS, Jan 12, 2004. Naming consultants aren't in short supply, but you'd think so if you tuned into the saga of Philips, the $41 billion worldwide home electronics company--worldwide except for one country--the U.S. Philips started out by making the first light bulbs for the Eiffel Tower. But they might have been smarter to light the torch on the Statue of Liberty based on their difficulty getting a foothold in the U.S. market.

Why is Philips' American business in trouble? It's a long way to Eindhoven.

Philips found out in a recent branding study that 65% of American consumers don't even know that the company is in the consumer electronics business. My teenage son ventured that Philips was a type of screwdriver. Even though marketing experts are naming brand image as the single most important factor in this market, Philips is an engineering-driven company. Which means that first they spend billions of dollars inventing stuff, then they try to figure out a way to get consumers to care about it. For example, the company is planning to market a television screen that becomes a mirror when it's turned off. Naming the first market as boutique hotels, the company plans to sell it the screens a few years later to consumers for $4,000 to $5,000. Imagine the people lining up for this brand new idea. Once Philips actually builds this device, maybe some of their top executives could use it to take a look in the mirror.

Have jeans, will travel: American teenagers naming their price to let the company spy on their shananigans.

Philips has had a tough time coming up with products that capture the imagination of that all-knowing branding consultant, the American teenager. Apparently coming up with new products like digital cameras the size of a house key didn't do the trick. So in their diligent efforts to decode our teenagers' branding proclivities, the company is actually paying American teens to keep each other company at an authentic American-style home in Eindhoven that is crammed with electronic goodies and, of course, elaborate surveillance gear. Will they be naming names, or just playing along for the paycheck?

Naming their American brand Philips-Magnavox didn't help.

For Philips, one marketing flop led to the next. As a result, the company has managed to lose money on its U.S. consumer electronics business every year for the last 15 years. Beginning in the 1970's Philips began naming their U.S. products Philips-Magnavox. The formula was: Take an unknown European brand and marry it to an ancient U.S. brand and earn your stripes by going after the boombox market. In 1997, Philips disgorged a $250 million U.S. advertising campaign to promote flat screen TVs that they couldn't deliver to high end retailers, thereby handing the market on a silver platter to nimbler rivals. Actually they did deliver some of them, but consumers were glued to the ceiling when they found out that they cost $15,000! The company was an early developer of mobile phones, but while they conducted heated internal design reviews, competitors beat them to the street. Philips also took a run at digital cable boxes in the U.S., suggesting once again that well-engineered and designed products need serious branding and marketing help to break into new markets.

Naming a European to head American operations, now there's an idea for the company.

After giving Larry Blanford, an American who had been a top executive at Maytag's Worldwide Solutions group, three years to play repairman (at which he apparently was having some success), Blanford was asked to leave the company. He was naturally replaced by a Dutchman, Reinier Jens, who is now hard at work learning the fine points of American culture, like how to say Blackalicious and order at In-N-Out. According to Dutch technology analyst Bert Siebrand, "It's baffling that they replaced Blanford with a European, given that most of their past gaffes resulted from not understanding the U.S." And weighing in with a vote of confidence for Mr. Jens, Gerard Kleisterlee, Philip's corporate CEO, continues to threaten shutting down Philips' entire U.S. consumer electronics business if they don't show profits soon, which Mr. Jens says is completely unrealistic. You figure it out. Are all European companies this dense? Take a look at our story on IKEA, which suggests that the lightbulb is on at some of them.