The following is a summary of the main points discussed in this report.
This report examines Philips’ entry into the Indian market, including a concise overview of its history and emergence in India’s industry. It also highlights notable inventions that have contributed to Philips’ global reputation. In 1995, Philips introduced the ‘Let’s make things better’ campaign aimed at delivering quality products and ensuring customer satisfaction, but it did not achieve desired success. However, in 2003, Philips launched the ‘Sense and Simplicity’ campaign which focused on providing high-tech and user-friendly products. Not only is Philips a leading player in India’s lighting industry, but it also has a strong presence in global healthcare. Additionally, Philips now targets the younger generation with small technological devices. This report explores whether these changes in product strategy can revive Philips’ previous success.
“Many companies acknowledge the importance of design-led innovation, but our approach at Philips goes beyond that. We have a unique focus on simplicity-led design, which serves as a catalyst for even more ground-breaking innovation.”3 – Gerard Kleisterlee, President and CEO of Philips, in January 2006 ABOUT THE COMPANY
Philips, established in 1891 by Anton and Gerard Philips, is a renowned electronics company. It began in Eindhoven, the Netherlands, with a primary focus on manufacturing carbon-filament lamps and soon became one of Europe’s major producers. As the industrial revolution spread across Europe, Philips established its inaugural research laboratory which resulted in advancements in x-ray and radio technology. By the start of the First World War, Philips had already formed marketing firms in France and the United States of America. In the 1920s, they further expanded their operations into additional regions.
Philips’ research labs were involved in the development of radio and television technology in the mid-1920s. By 1927, the company had introduced its first radio and within five years, sold approximately a million radios. In 1930, Philips started using the star and waves logo on its radios and gramophones. Additionally, in 1933, it began manufacturing x-ray equipment in the US and launched electric shavers in 1939. At that time, Philips employed around 45,000 people worldwide. Its range of products includes coffee makers, silicon chips, cancer screening systems, among others.
Since its establishment, Philips has been an innovative leader in electronics. It has offered useful products like electric shavers, audio cassettes, video cassette recorders (VCRs), compact discs (CDs), and energy-saving lamps. As Philips’ business activities rapidly expanded during the 1930s, they sought a trademark that would distinctively represent them while avoiding any issues with imitation from other companies. This led to creating the combination of the Philips circle and word mark within the shield emblem.
Despite later consistent advertisements and a different communication approach to the outside world, the electronics industry faced significant changes globally during the 1980s. This period saw a notable growth phase for the consumer electronics market, with Philips introducing groundbreaking products like VCRs and CDs. Furthermore, new players entered the industry, initially underestimated. However, financial distress struck Philips during the 90s, posing a serious threat to its future. Jan Timmer took charge as Chairman and initiated a reevaluation of the company’s inefficient structure. The industry witnessed rapid transformations as several companies introduced superior quality products with higher reliability and value for money. Among Philips’ main competitors were Japanese companies.
These companies offered products at lower prices, specifically TV sets, as they achieved economies of scale, resulting in advantages in volume production. Thorn and RCA were eliminated from the market, leaving Thompson (France) and Philips as the only major consumer electronics companies in Europe. For Philips, this was a challenging period as it had to keep innovating to confront the threats and challenges posed by its competitors. However, over time, it became disconnected from the market, leading to decreased shareholder returns and share values.
Marketing activities at the product level on a local market basis were conducted until the mid-90s, resulting in various campaigns that did not accurately represent Philips as a global company. To establish a global presence, Philips introduced its first global campaign in 1995 with the tagline “Let’s make things better,” which also promoted unity among the company and its employees.
In 2004, Philips launched its “sense and simplicity” brand promise to communicate that its products are designed with the consumer in mind, offering advanced features and an easy user experience. By 2008, Philips had achieved the 43rd spot in Interbrand’s ranking of best global brands, experiencing an estimated value increase of 8%.
PHILIPS IN INDIA
Philips began its operations in India at Kolkata in 1930 as Philips Electrical Co. (India) Pvt Ltd with a staff of 75 people. Initially, it imported Philips lamps from overseas and set up its first lamp-manufacturing factory in Kolkata in 1938. Later, Philips decided to manufacture radio receivers in India to cater to the Indian market. After the Second World War, Philips started manufacturing radios in Kolkata, which proved to be successful and fueled their growth in the electronics industry. In 1957, the company became a public limited company and was renamed Philips India Ltd. Another radio factory was established near Pune in 1959.
In 1963, Philips introduced the compact audio tape cassette, which exposed consumers in India to this advanced technology. On April 3, 1965, Philips completed one million radios in India. In the same year, Philips pioneered the concept of son-et-lumiere shows in India by installing a lighting and electro-acoustic system at the Red Fort in Delhi. In 1982, Philips brought color television transmission to India. The following year, they launched Compact Discs, revolutionizing the way the world listened to music. In 1985, Philips inaugurated its consumer electronics factory in Salt Lake, Kolkata. In 1993, Philips entered the domestic appliance business in India. In 1996, Philips established its software center in Bangalore. In 1998, Philips introduced Flat Televisions and CD recorders, a first for India. Throughout the 19th Century, Philips consistently delivered high-tech innovative products with a renowned stamp of quality.
1891 – Light bulb
1920 – Health Care
1930 – Radio
1940 – Television Experiments
1950 – Bicycle lamp inspires Philishave
1960 – Audio Tape Cassette
1970 – First home VCR in 1972
1980 – Compact Disc Introduction
1990 – “Let’s make things better” campaign
1998 – Medical Might
2000 – DVD Recorder and Electric brush (Oral healthcare)
2001 – Senseo (Coffee maker)
2002 – HeartStart for the home (Cardiac patients)
2003 – Mirravision Mirror TV (Reflection of Research)
2004 – CT Scanner
2006 – Wake up light (helps in waking up)
2007 – Ambilight (TV) & Living colours
2008 – Eco classic50 Halogen Energy Saver
Today Philips provides products in three main areas:
Philips, a leader in the health equipment industry, provides essential tools to assist surgeons in their fight against heart diseases and cancer while also prioritizing the well-being of its consumers.
The second category is lifestyle.
Philips is known for their innovative Ambilight TV and DVD recorders, as well as their leadership position in lighting. Additionally, they have launched the exciting Senseo coffee concept.
Philips provides semiconductor and lighting products that are utilized in various spaces, including cars, offices, and sports stadiums. Their products are responsible for illuminating renowned landmarks like the Pyramids and the Eiffel Tower, as well as significant events like the 2004 Olympics in Athens.
Revitalizing the brand
As time passed, Philips expanded its range of technology products, which became confusing for consumers. To address this issue, Philips launched the ‘Sense and Simplicity’ campaign, aiming to simplify things for its customer base. Positioning refers to where a product stands in the market, whether it is a market leader or any other position. The crucial factor is where the brand stands in consumers’ minds, which depends on whether the product offers them value for money. Rejuvenating the brand involves placing the product at a higher level in the market through strategic efforts. After conducting research, Philips found that the most successful campaign was ‘Sense and Simplicity’ which focused on simplicity and offering high-tech products that provide value for money. This campaign has propelled Philips forward, and their progress was aided by the Simplicity Advisory Board (SAB). Additionally, Philips introduced the Senseo coffee machine, which was stylish and easy to use. The strategy for moving a product forward typically involves three stages: conducting research to identify weaknesses.
A right direction to be looked out for
Planning and Organizing
Philips faced a major problem in 2003 with too many different target audiences for a single product. The media investment was spread thinly among various product segments, leading to confusion in customers’ minds. To address this, Philips aimed to reposition itself with a clear vision and created the brand promise of ‘Sense and Simplicity’. Philips wanted to be the best in terms of technology and focused on clear communications about the benefits of its products. This strategy included improving the company’s image, enhancing communications, and refining its product and services. Advertisements were designed to help customers recognize Philips products, reinforcing the brand promise of ‘Sense and Simplicity’. This philosophy is evident in both existing and new Philips products as they prioritize easy-to-use high-tech solutions.
The user-friendly and easy-to-use products offered are the result of advanced research and customer feedback. The simple and straightforward message conveyed to the audience is based on input from the Simplicity Advisory Board (SAB), which consists of experts from various industries. These board members were carefully chosen for their specialized expertise in understanding simplicity and its application within our organization. An excellent example that highlights our new approach is the Senseo Coffee System, a collaboration between Philips and Sara Lee. This coffee system stands out with its sleek design, ease of use, and ability to produce exceptional coffee. Remarkably, over a period of four years (2001-2005), 10 million units were sold.
This product definitely showcased the simplicity strategy implemented by Philips. Other products in this category include:
– Chameleon, a lamp shade that can change into any color you desire.
– In Touch, a mirror that transforms into a touch screen message center, where you can leave messages or attach them to the fridge.
– Momento, a glass ball designed for sharing video memories.
‘Sense and Simplicity’ is not only incorporated by Philips in their products, but also in their workplace. For instance, in the field of medical products, Philips has developed the AmbientExperience, which aims to make medical scans less terrifying for patients. Philips strives to provide its consumers with an exceptional experience that fosters brand loyalty. Thus, effectively conveying this message to the target audience through appropriate channels is crucial. By employing the concept of ‘Sense and Simplicity’ in communication, the brand ensures that the message remains easily comprehensible to customers and avoids unnecessary complexity. Television advertisements and magazines are recognized as effective means for mass communication.
In September 1995, Philips launched a new global communications strategy aimed at improving people’s lives. The campaign emphasized Philips’ reputation as a provider of technologically advanced and high-quality products. The company believed that this campaign would enhance its brand image among consumers, promoting the idea of thinking and acting differently both as a company and as individuals. The name of the campaign implied that Philips would create innovative products that would compel consumers to make purchases and provide them with a memorable experience. This advertising strategy was more than just a campaign for Philips; it represented a shift in how the company operated compared to the 1990s.
Nowadays, Philips is highly committed to consumer contentment by offering high-standard products. Modern individuals perceive Philips as a company consisting of dedicated personnel who strive to make a beneficial impact in their day-to-day existence rather than merely being another manufacturer.
SENSE AND SIMPLICITY
The main focus of the ‘Sense and Simplicity’ campaign was to utilize Philips’ design and technology strengths in order to offer high-tech products that met customers’ needs and featured user-friendly designs. This campaign also aimed to streamline operations and improve efficiency. Although Philips lagged behind in some areas, it held a dominant position in the lighting and medical equipment markets. By aligning with Schiffman and Kanuk’s advice on brand perception, this campaign helped guide Philips towards occupying a unique niche in customers’ minds. As a result, the primary objective of the campaign was to associate Philips with simplicity.
Senseo – a coffee maker that was highly popular among coffee enthusiasts due to its user-friendly design with only one button.
HeartStart – a defibrillator designed for home use by patients.
Philishave Cool Skin – an electric razor.
The Perfective is an electric iron, the Perfectdraft is a beer pump, and the Intelliclean is a tooth brush system.
Can these strategies revive the diminished success of Philips?
Re-positioning its products would not rejuvenate Philips’ faded glory. Although it began with bulbs, the company has now shifted its focus to health care products in an effort to promote well-being. While the “Sense and Simplicity” campaign has been successful in clarifying Philips’ message to customers, efforts to target the youth with MP3 players and similar devices have not yielded positive results. Despite the push from the campaign, Philips’ profits are currently declining. However, in the lighting industry, Philips remains a leader in India, offering quality products with a minimum one-year warranty. The company has played a pioneering role in providing lighting solutions to India, but has also faced challenges such as the closure of factories in Kolkata and Mumbai in the late 1990s and increased competition from Chinese products. Government intervention with anti-dumping laws has aided CFL manufacturers, including Philips. Nonetheless, the lighting segment is thriving in India, particularly with LED solutions. Philips has supplied millions of lamps to entities like the Kerala State Electricity Board and the Indian Railways, as well as securing numerous street lighting and heritage property projects.India prioritizes energy-saving and does not opt for cheap fittings. In the 90s, Philips held a significant market share of approximately 15% in the television segment. However, in 2010, it decided to outsource its television segment to Videocon. This decision was expected due to intense competition from Korean companies, Samsung and LG, and Philips’ inadequate performance in television production in India. Additionally, these companies were offering televisions at lower prices, which was not a viable option for Philips. Unfortunately, the outsourcing strategy failed, resulting in a reduced market share of 3.5% for Philips. Nevertheless, in the subsequent year, Philips managed to sustain a 6% market share. To regain its former glory, Philips shifted its focus to product diversification by manufacturing DVD players, MP3 players, and headphones targeting the younger demographic. This repositioning proved successful as the consumer electronics and appliances market experienced significant growth, with a revenue increase from Rs.20,000 crores in 2005 to Rs.33,000 crores in 2010. However, during this period, Philips’ revenue from the consumer business declined from Rs.1091 crores to Rs.659 crores, and its consumer business contribution to turnover dropped from 42% to 28%. Despite these challenges, Philips remains committed to revitalizing its former success. A substantial portion of its revenues now comes from Audio Video Multimedia (AVM) products such as DVD and Home Theatre systems.Experts predict that Philips’ current market share of 24% in India may not last long due to the company’s plans to revamp its product offerings. In an effort to target a younger audience aged between 15 and 30 years, Philips has introduced products priced as low as Rs.150. This strategy aims to cater to the tendency of younger consumers who do not hold onto a product for an extended period of time. As part of this shift, Philips has revamped its personal care portfolio by introducing shavers, body groomers, and epilators. Additionally, the company has enlisted the popular actors John Abraham and Kareena Kapoor as brand ambassadors, marking the first time Philips has incorporated celebrity endorsements into their promotional activities. With approximately 75 ‘light lounges’ spread across 40 cities in India, Philips sells lighting products ranging from Rs.575 to Rs.45,000. However, despite its efforts to redefine the market, Philips lacks a clear-cut strategy for India.
Philips may want to discontinue or outsource its production of televisions, such as partnering with Videocon. Instead, Philips should prioritize consumer lifestyle products and offer customized options. For instance, they could develop an electric trimmer tailored for various skin types. By targeting the audience in this manner, Philips has the potential to increase trimmer sales. While Philips is performing well in the lighting industry, they should not allocate excessive focus to other segments unless it is after the lighting and healthcare sectors. Moreover, Philips should consider investing more in marketing, like their successful endorsements with Indian celebrities John Abraham and Kareena Kapoor. Celebrity marketing is a key to success in India.
Philips has the option to update its logo, which has remained unchanged for a significant number of years. In addition, Philips has the opportunity to develop a website for online purchasing of electrical products in today’s technology-driven society.
Despite being in existence since 1891, Philips has not achieved the level of success it initially anticipated. Although it is a leader in the lighting and healthcare industries, Philips experienced a notable shift after the introduction of its ‘Sense and Simplicity’ campaign. A distinguishing characteristic of the company is its ability to provide energy-saving and innovative products. Nevertheless, Philips is currently not performing as expected, despite its efforts to evolve its product offerings.
Brand positioning – Brand repositioning and communications – Philips | Philips case studies and information | The Times 100. 2013. Available here. [Accessed 08 April 2013]. Three Brand Innovation Success Stories | CloverView Blog. 2013. Available here. [Accessed 08 April 2013]. Marketing. 2013. Available here. [Accessed 08 April 2013].
Philips is undergoing a wide-ranging repositioning and expansion, as highlighted in various sources such as DNA India, The Times 100, and Business Today. According to these reports, Philips is driving change within its multinational organization by focusing on its brand promise. This includes research on brand repositioning and communications.