Europe needed an updated version of our successful but aging Cube Clock Radio. This product did not work in America. America needed a product with a strong differentiated character to stand out in the mass market. We could only produce one product. How might we meet the needs of both regions in a single product?
Philips had made a cube shaped clock radio, the most basic of products for about 10 years. I had figured out how we would beat Sony, the number one in the Audio market, but it needed a pilot or probe project to show the design team what I had in mind for “global domination”. It seemed like this complex set of requirements might be just the opportunity I needed to demonstrate our new direction.
The present clock radio was made in a cheap way without paint finishing – glossy plastic in white or black. The design had a strong European feel i.e. conceptually it was meant to be a geometrically pure object made of high value materials. However, that had been the designer’s vision and it disregarded and probably blamed the cheap materials and finishes for the reality which was a budget constrained cheap looking product instead of designing an appropriate solution for the level of the product.
The concept for this product came from a conversation with one of the top retail buyers in the USA, where he suggested that they were looking for a soft friendly product that would be more suitable for a bedroom environment instead of the hard-edged cube we were offering. We all wake to an alarm clock and I imagined waking to a friendly smile as opposed to a hard edged technical box. Thus the direction to combine the cube form with a soft feel and human smile was born.
It became clear quickly that this product had high emotional appeal and I proposed that we add cost in the form of finishing (in the magnitude of cents only) and raise the price point to a premium 2-3 price points higher because the perceived value of the object with relatively expensive paint finishes lifted it to that perceived quality level.
What I had begun to understand was the notion of perceived value to tackle Sony! While Sony were investing millions in its halo products that were real value, in the mid end, where Philips mainly played, they had to produce at the same cost as us, relying on the halo effect “brand value” to sell the product. Clearly if we could add substantially more perceived value to our range in the mid end we would have a very competitive offer side by side on the shelf. That simple idea (and a lot of work) propelled us to number one in market share globally in 4 out of 7 audio categories.
This shift in design strategy completely changed the margins we could earn from some of the simplest and most basic products we made as we rolled that out through our audio range over the next two years. This change vastly improved margins allowing us to make profits that we had never made on clock radios or any other audio products before and strategically enabled the sales force to offer increased margins to key retailers to ensure that our distribution grew significantly. The addition of a range of colors cemented the success of this product that once again went on to be one of the longest running clock radio products for Philips. It is hard to stress just how effective longevity is to profitability. Pay of the development in the planned time and then suddenly your product is in high margin territory for the remaining years of its production run.
Most products development and tooling costs are calculated to be recovered in 2-3 years. When products then run an extra 5-8 years longer with none of the overhead and tooling costs allocated to them, they become extremely profitable. This is no mean feat in an environment where dealers are looking for new products every 1-2 years, but with a constant change in finishing and color, and a fundamental emotional appeal through the form we were able to achieve a 10 year run as well as creating range extensions around it which all placed in retail based on the success of this original soft cube.
A worthy replacement for a simple cube clock radio. Opportunity realized. Problem solved. New business value Created.