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Philips – Marketing

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    EXECUTIVE SUMMARY

    This is a project report on Philips and its entry in the Indian market. This report gives a brief introduction about the history of Philips and how it entered the Indian industry. It also includes the key inventions of Philips for which it is known worldwide. Philips started a campaign named ‘Let’s make things better’ in 1995 which wasn’t a success till the extent Philips expected it to be. This campaign basically focused on providing quality products in order to achieve a tag of customer satisfaction. After this campaign, it also launched another campaign in 2003 named ‘Sense and Simplicity’ which focused majorly on providing high-tech and user friendly products to its audience. Philips is a market leader in the lighting industry in India and also the health care worldwide. It has also started focusing on small technological devices to target the youth basically. Further, this report deals with whether the change in Philips products work would help Philips to rejuvenate its faded glory.

    “Many companies recognize the role of design-led innovation. But we at Philips have gone one step further with a special differentiator in this area: we believe in simplicity-led design…which is our springboard to even greater innovation.”3 – Gerard Kleisterlee, President and CEO, Philips, in January 2006 ABOUT THE COMPANY

    Philips is one of the world’s leading electronics companies. The foundations of Philips were laid in 1891 when Anton and Gerard Philips established Philips & Co. in Eindhiven, the Netherlands. Philips began manufacturing carbon-filament lamps and had become one of the largest producers in Europe. After the industrial revolution in Europe, Philips’ first research laboratory started introducing its first innovations in the x-ray and radio technology. Even before the start of the First World War, Philips had established marketing companies in the United States of America and France. In the 1920s, the company expanded to new territories.

    In the mid-1920s, Philips’ research labs were involved in the development of radio and television technology. The company introduced its first radio in the year 1927 and after a span of five years it sold about a million radios. In 1930, the company started using the star and waves logo on radios and gramophones. In 1933, it started manufacturing x-ray equipment in the US. In 1939, it launched electric shavers. By this time, Philips employed as many as 45,000 people worldwide. It has a very diverse range of products such as coffee makers, silicon chips, cancer screening systems etc. Philips has been a leader in innovation of various electronics since it has been established and also has a range of some very useful products which include Electric shaver, Audio cassette, Video cassette recorder, Compact disc and Energy saving lamps. During the 1930s, Philips’ business activities were growing at a rapid pace and thus the company wanted to find a trademark which would uniquely represent Philips and also to avoid any issues with other firms trying to copy its activities. Hence, it came with the combination of the Philips circle and the word mark within the shield emblem.

    While later it had been consistent in its advertisements and communicated differently to the outside world. The 1980s was a very crucial period for the electronics industry due to which various changes took place worldwide such as, it was a phase of high growth for the consumer electronics market, many innovative new products which were majorly introduced by Philips such as VCRs and CDs and also new entrants in the industry were entering for the first time and hence were underestimated. During the 90s Philips had gone through a serious financial crisis posing a real threat to the future of the business. Hence, there was a change in leadership then as Jan Timmer was appointed as the Chairman who further embarked upon a reappraisal of the inefficient structure of the company. The industry was experiencing rapid changes as many companies were coming out with better quality products with higher reliability and value for money. The major competition for Philips was companies from Japan.

    Such companies offered products at lower prices, particularly TV sets, as they gained economies of scale which in turn provided those advantages in volume production. Companies like Thorn and RCA were eliminated from the market which left Europe with Thompson (France) and Philips only as major consumer electronics companies. This was a very difficult time for Philips. It was surviving only because it continued to innovate in order to face the threats and challenges it was facing by its
    competitors. But gradually it lost touch with the market which also reduced shareholder returns and share values.

    Until the mid-90s all marketing activities were carried out at product level on a local market basis. This brought in many different campaigns which did not represent Philips as a global company and thus to establish a global presence it introduced the first global campaign in 1995 under the tagline “Let’s make things better”. This campaign also brought a feeling of togetherness within the company and its employees. In 2004, Philips launched a “sense and simplicity” brand promise through which the company wanted to convey that it provides products which are designed around the consumers and are also easy to experience as well as advanced. In 2008, Philips was ranked the 43rd most valuable brand in Interbrand’s 2008 ranking of best global brands and also its estimated value increased by 8%.

    PHILIPS IN INDIA

    Philips began its operations in India at Kolkata in 1930. It was established as Philips Electrical Co. (India) Pvt Ltd with a staff of 75 people. It started off with a sales outlet of Philips lamps imported from overseas. The first Philips India lamp-manufacturing factory was set up in 1938 in Kolkata. Further, Philips decided to produce radio receivers in India in order to make such products widely available for the Indian consumer. After the Second World War, Philips started manufacturing radios in Kolkata. This product was performing well in the market and this was a major point when Philips started developing and grows in the world of electronics. In 1957, the company was converted into a public limited company and was renamed Philips India Ltd. In 1959, another radio factory was established near Pune.

    In 1963, Philips invented the compact audio tape cassette and thus the consumers on India were exposed to this high-tech invention. On 3rd April, 1965, Philips completed one million radios in India. Philips in the same year pioneers the concept of son-et-lumiere shows in India with the installation of such a lighting and electro-acoustic system at the Red Fort in Delhi. In 1982, Philips brought the colour television transmission to India. The next year it launched Compact Discs and changed the way the world listened to music. In 1985, Philips inaugurated its consumer electronics factory at Salt Lake, Kolkata. In 1993, Philips launched its domestic appliance business in India. In 1996, Philips Software Centre was established in Bangalore. In 1998, Philips launched Flat Televisions and CD recorders which were the firsts in India. Throughout the 19th Century, Philips continued to provide high-tech innovative products with the renowned stamp of quality.

    KEY INVENTIONS

    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:

    a) Healthcare

    Philips is one of the leaders in providing health equipment’s which also
    helps surgeons with their battles against heart diseases and cancer. Philips also concentrates on well-being of its consumers.

    b) Lifestyle

    Philips innovates with their Ambilight TV and DVD recorders. The company has established a leadership position in lighting and has introduced exciting new products such as the Senseo coffee concept.

    c) Technology

    Philips’ semiconductor and lighting products are embedded in the cars we drive, in the offices where people work and in sports stadiums. Philips illuminates monuments such as the Pyramids, the Eiffel Tower and events like the 2004 Olympics in Athens.

    REJUVENATING THE BRAND

    As years passed by, Philips kept on increasing its portfolio into technology products which made it more confusing for consumers. So, Philips decided to overcome this weakness and made it simple for its customer base with the ‘Sense and Simplicity’ campaign. Positioning basically means where exactly your products are placed in the market. Whether it is a market leader or at any other position but the most important thing is, where does the brand stand in the consumers list? It depends whether the product provides them value for money or not. Rejuvenating the brand refers to a strategy applied in order to place the product in the market at a higher level. Through research the best campaign adopted by Philips is the ‘Sense and Simplicity’. Two major elements were to focus on simplicity and provide value for money high-technology products. Since the launch of this campaign Philips has made great progress. Philips created a Simplicity Advisory Board (SAB) which helped in making great progress. Also, products Senseo, a coffee machine that was stylish and very simple to use. In order to move a product the strategy to be adopted has three stages:- Research to discover the weakness

    A right direction to be looked out for
    Planning and Organizing
    The major problem faced by Philips in 2003 was that there were too many different target audiences for a single product. The media investment was also unfocused and was spread thinly between too many different product segments. Such an ambiguous range of different advertising approaches created great confusion in the customers’ minds. Therefore, Philips wanted to create a clear vision that would help the company reposition itself. Thus, creating a brand promise ‘Sense and Simplicity’. Customers have a wide range of products and thus Philips had to be the best among the all in terms of technology. Products offered by Philips were generally purchased by customers only when they needed it and so it to focus on clear communications about the benefits of its products. Three main elements of this strategy were Philips image, Communications and Product & Services. In order to improve Philips image, advertisements were made so that customers can recognise which a Philips product and which is not. Through ‘Sense and Simplicity’ it succeeded in doing so as from the customers to the other stakeholders it was clear about the brand promise. ‘Sense and Simplicity’ is seen in mostly every product of Philips and also in the existing ones. When it designs any new product, its major concern is to provide an easy to use high tech product.

    All these are based on advanced, based on findings of careful customer research and easy to use. Lastly, the message communicated to the audience is simple to follow and is also directed without any efforts. With the launch of the Simplicity Advisory Board (SAB) which includes experts from the fields of IT, healthcare, fashion, design and architecture gives and outside view of what simplicity means and how can it be valid across the organisation. These members were chosen for their expertise services. The best example which can show the new re-positioning is the Senseo Coffee System which had been developed through a partnership between Philips and Sara Lee (A FMCG supplier). Key aspects of Senseo are that it has a cool design; it is user friendly and produces amazing coffee. 10 million of these coffee systems were sold in 4 years from 2001-05.

    This product clearly proved the strategy of simplicity implemented by Philips. Other such products are:- Chameleon – a lamp shade which changes to any colour you show it In Touch – a mirror that changes into a touch screen message centre on which messages can be left on answer phones or stuck on the fridge Momento – a glass ball to share video memories.

    ‘Sense and Simplicity’ is not only applied by Philips in its products but also in its workplace. In the medical products, Philips had created the AmbientExperience which made medical scans less frightening for patients. Philips wants its consumer to have a lifetime experience so that they are loyal to the brand. Communicating the message at the target audience in a right manner using the right media is necessary. ‘Sense and Simplicity’ communication of this message would not make it complex for the customers and easily be comprehended. The best way for mass communication is a television advertisement or also magazines. LET’S MAKE THINGS BETTER (1995)

    This campaign was launched by Philips in September 1995 as a new global communications strategy with a main aim to improve people’s lives. It maintained an image as a provider of technically advanced and quality products. The company strongly believed that this campaign would certainly strengthen its brand image in front of the consumers. This strategy is basically about thinking and acting differently as a company as well as an individual. The name of the campaign suggests that Philips would produce innovative products which would force the consumers to purchase and also offer them a lifetime experience. This strategy of advertisement is not just a mere campaign for Philips because the way in which it operated in 1990 was quite different than today.

    Today, Philips focuses more on consumer satisfaction and hence providing them quality products. People today look at Philips as an organisation made up of people with a mission who makes a positive difference in their everyday lives and not as just another manufacturer.

    PRODUCTS:-
    DVD Recorder
    Electric Brush
    Medical Might
    SENSE AND SIMPLICITY

    The ‘Sense and Simplicity’ campaign was based on Philips major strengths of design and technology. According to this new brand promise, the company decided to provide high-tech products that met customers’ needs and also which are easy to use with a simple design. Simplicity was not only was to be found in its products but also was used to make Philips a nimbler and a more effective company. Philips was still behind in numbers then but still was a market leader in lighting and medical equipment products in several markets. This campaign brought Philips in the right direction. According to authors Schiffman and Kanuk, “marketers should position their brands so that they were perceived by the customer as occupying a distinctive niche – a niche not occupied by any other brand”. With this campaign Philips focussed mainly on associating the brand with simplicity.

    PRODUCTS:-
    Senseo – a coffee maker that was a huge hit with coffee lovers, (had only one button) which was user friendly. HeartStart – a defibrillator that could be used by patients at home Philishave Cool Skin – an electric razor

    The Perfective – an electric iron
    The Perfectdraft – a beer pump
    The Intelliclean – a tooth brush system

    WILL THESE STRATEGIES REJUVENATE THE FADED GLORY OF PHILIPS?

    NO, re-positioning its products works would not rejuvenate the faded glory of Philips. It started with bulbs and today it’s re-positioning itself with health care products to offer a well-being. Till quite an extent it has succeeded also as the campaign of ‘Sense and Simplicity’ has made it very clear in the customers mind. Also, targeting the youth by offering various MP3 players and such devices has not been successful for Philips. The push given by the ‘Sense and Simplicity’ campaign would not take Philips a long way as its profits today are declining. In the lighting industry, Philips is one of the leaders in India providing quality products with a warranty of at least one year. Philips is a pioneer in providing lighting solutions to India. The lighting business of Philips in India has also seen plenty of ups
    and downs. The company had to shut down two factories respectively in Kolkata and Mumbai in the late 1990s. The entry of Chinese products affected its market share too. Such products were used and dumped while the government’s intervention for anti-dumping laws helped CFL manufacturers including Philips. The lighting segment is doing extremely well in India and is driving its entire penetration with LED solutions. It had supplied 15 million lamps for the Kerala State Electricity Board and 2.6 million for the Indian Railways. It has also received a lot of street lighting and heritage property projects. India did not look for cheap fittings and also is conscious on energy saving. In the 90s, Philips was a dominant player with a market share of about 15% in the television segment but later in 2010, it outsourced its television segment to Videocon. This was an expected decision as it was facing heavy competition from Korean companies (Samsung and LG) and was not performing well in terms of production of Televisions in India. Also, these companies were providing televisions at a very lower price which wasn’t a efficient decision to be taken at Philips. The strategy to outsource failed for Philips and its share reduced to 3.5%. But later Philips’ sustained its TV market share at 6% in the following year. Philips, to revive its past glory, started focussing on a varied product change. It started producing products such as DVD players, MP3 players and headphones targeting the youth. Repositioning its products works, the consumer electronics and appliances market exploded. The Rs.20,000 crores in 2005 increased to Rs.33,000 crores in 2010 while Philips’ revenue from the consumer business declined from Rs. 1091 crores in 2005 to Rs. 659 crores in 2010. The consumer business fell drastically from 42% of turnover in 2005 to 28% in 2010. Philips is though doing a lot in order to revive its past glory. A big chunk of its revenues are coming from AVM (Audio Video Multimedia) such as DVD and Home theatre systems. It has a market share of 24% in India but experts say that it could be short-lived as Philips is changing its products work. Philips planned to target at an audience between the age of 15-30 years and also provided products at lower price of Rs.150. The strategy was youngsters don’t hold onto a product for more than 2-3 years. Philips had changed its personal care portfolio and introduced shavers, body groomers and epilators. It signed John Abraham and Kareena Kapoor as its brand ambassadors. This was the first time when Philips had
    signed any celebrity to promote products. Philips has about 75 ‘light lounges’ in 40 cities in India. It sells lighting products between Rs.575-Rs.45,000. Philips is constantly trying to redefine the market but lacks a clear cut strategy for India.

    COMMENTS/SUGGESTIONS

    Philips should stop its production in the television segment or not even outsource it to companies like Videocon. Philips should concentrate more on consumer lifestyle products. It should try and provide customised products to the consumers. For example, A customised electric trimmer for different types of skins etc. Targeting the audience with this approach could increase its sales in terms of trimmers sold. Philips, in the lighting industry is doing well and should keep it going. It shouldn’t focus more on any other segment and also if it does then that segment should be preferred after the lighting and health care segments. Philips should invest more into marketing as it did by signing John Abraham and Kareena Kapoor. Celebrity marketing in India is a minor key to success.

    Philips can also change its logo as it has been the same since quite a few years now. Philips can also launch its website for online shopping of electrical in this tech savvy world.

    CONCLUSION

    Philips being a company existent since 1891 has not succeeded as much as it actually expected. The lighting industry is one in which Philips is comfortably leading and also the health care. After the ‘Sense and Simplicity’ campaign, Philips saw a different phase. Providing energy saving products and different innovative ones is an USP of the company. Today, Philips is not performing the way it planned even after changing its products work.

    BIBLIOGRAPHY

    Brand positioning – Brand repositioning and communications – Philips | Philips case studies and information | The Times 100. 2013. Brand positioning – Brand repositioning and communications – Philips | Philips case studies and information | The Times 100. [ONLINE] Available at:http://businesscasestudies.co.uk/philips/brand-repositioning-and-communications/brand-positioning.html#axzz2PbyRDHWE. [Accessed 08 April 2013]. Three Brand Innovation Success Stories | CloverView Blog. 2013. Three Brand Innovation Success Stories | CloverView Blog. [ONLINE] Available at:http://www.cloverleafinnovation.com/blog/brand-repositioning-success-stories/. [Accessed 08 April 2013]. Marketing. 2013. Marketing. [ONLINE] Available at:http://anastasiadm.blogspot.in/2012/11/brand-repositioning.html. [Accessed 08 April 2013].

    Philips embarks on a broad repositioning, expansion :: DNA. 2013. Philips embarks on a broad repositioning, expansion :: DNA. [ONLINE] Available at:http://www.dnaindia.com/money/1383825/interview-philips-embarks-on-a-broad-repositioning-expansion. [Accessed 08 April 2013]. Conclusion – How a brand promise drives change in a multinational organisation – Philips | Philips case studies and information | The Times 100. 2013. Conclusion – How a brand promise drives change in a multinational organisation – Philips | Philips case studies and information | The Times 100. [ONLINE] Available at: http://businesscasestudies.co.uk/philips/how-a-brand-promise-drives-change-in-a-multinational-organisation/conclusion.html#axzz2PmgYyna0. [Accessed 08 April 2013]. Research – Brand repositioning and communications – Philips | Philips case studies and information | The Times 100. 2013. Research – Brand repositioning and communications – Philips | Philips case studies and information | The Times 100. [ONLINE] Available at:http://businesscasestudies.co.uk/philips/brand-repositioning-and-communications/research.html#axzz2PmgYyna0. [Accessed 08 April 2013]. Business Today. [ONLINE] Available at: http://businesstoday.intoday.in/story/philips-case-study/1/187786.html. [Accessed 08 April 2013].

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