The aim of this report is to critically assess the marketing strategies of “Bang & Olufsen” considering their business in United Kingdom. It comments on the B2B and B2C products in brief. The report comments on the following:
The macro business environment
Organisation’s Marketing Mix
Organisation’s segmentation, targeting and positioning strategies.
Based on the findings and observations, some recommendations are put forth at the end of the report.
Company Background
Bang & Olufsen manufactures a highly distinctive and exclusive range of televisions, music systems, loudspeakers, telephones, and multimedia products that combine technological excellence with emotional appeal.
Founded in 1925, by “Peter Bang” and “Svend Olufsen” in Struer, Denmark, Bang & Olufsen a/s is world renowned for its distinctive range of quality audio, video and multimedia products that represent their vision: “Courage to constantly question the ordinary in search of surprising, long-lasting experiences”.
Bang & Olufsen employs over 2,550 staff members and had a turnover of DKK 4,092 million (EUR 5486 million) in the 2007/2008 financial year. (Bang & Olufsen)
The Macro Business Environment
Most of the B&O products are manufactured in Denmark. Considering the business in UK, it has to understand the political, economic, socio-cultural and technological environment in UK. Since Denmark and UK are the members of European Union (EU), there are some advantages for the organisation.
Political
The European Union (EU) allows the free movement of goods and services between almost 500 million consumers in 27 EU member states. Due to this, import duty is not payable on goods sourced from Denmark, being one of the EU member states. (Business Link UK)
There could be changes in the VAT and service taxation policies with the formation of new government.
Economic
The economic crisis and recession had affected the business of B&O as people and businesses are more likely to hold on to their cash and not to spend it on high priced consumer goods.
Due to the fall in share prices and real estate markets, the consumers of the high end products, like B&O, will be less likely to spend as earlier.
Another economic factor faced by the B&O is currency exchange rates. As large part of the products produced in Denmark and with the Danish Krone (DKK) pegged to Euro, devaluation of GBP to the Euro has affected sales in UK which is one of the largest markets of the company.
Socio-cultural
B&O has adopted the philosophy of Danish Design, which is renowned for its high class design and quality. The products of this class are considered as status symbols and products of pride.
Technological
Competitors like Bose, Loewe who are also known for their design, quality with the high prices are coming up with new products with the same functionalities as B&O with equal or slightly lower prices.
Due to the advancements in the technology, components are getting cheaper which may help companies like Sony, Samsung etc. with range of products in various qualities, targeting customers spanning across price conscious segments to quality focused segments.
Legal
The company has to ensure the protection of the trademarks of the brand. The logos and other trademarks should be registered in UK.
The company should ensure that there are no patent infringements.
Environmental
Develop and produce products under circumstances that comply with the demands of the standards ISO 14001 and OHSAS 18001.  Â
Bang & Olufsen as an environmentally responsible company desires to create sustainable products. The considerations involved in the operation, design, and longevity of the products must be in mutual balance with the environmental impact of production. (Environment, Bang & Olufsen)
The Marketing Mix
The marketing mix is a combination of the Four P’s – Product, Price, Place and Promotion all used to together to meet the customer needs. To create the right marketing mix, businesses have to meet the following conditions:
The product has to have the right features – for example, it must look good and work well.
The price must be right. Consumer will need to buy in large numbers to produce a healthy profit.
The goods must be in the right place at the right time. Making sure that the goods arrive when and where they are wanted is an important operation.
The target group needs to be made aware of the existence and availability of the product through promotion. Successful promotion helps a firm to spread costs over a larger output (The Times 100).
Product
Bang & Olufsen manufactures a highly distinctive and exclusive range of televisions, music systems, loudspeakers, telephones, and multimedia products that combine technological excellence with emotional appeal.
Classification of Product
Speciality products have unique characteristics that are important to buyers at any price.
B&O products are classified speciality product. B&O products are made to fit in at a place where people feel at home.
B&O products are designed with the philosophy that they should provide:
Unique experiences
Relaxation
Comfort and stability
Uncomplicated solutions ‘make life easy’
Tranquillity and longevity
Consumers are ready to pay premium prices for all the above characteristics.
Product Mixes, Lines and Items
B&O product mix comprises of several product lines such as audio, video etc. The company has a diverse product portfolio. The product range today consists of acoustic, audio, video, plasma, telecom, gift items/accessories, as well as the business areas Automotive and Enterprise. The portfolio has more than 50 individual products, many of which are designed and manufactured as per the customer desires. (The Beoworld)
Product Line
B&O has various products in each line, e.g. their audio product line has offerings as BeoSound 8, BeoSound 5, BeoSound 9000, BeoSound 3200 etc. They all belong to the same product class – high-end audio systems. (Audio, Bang & Olufsen)
Four Dimensions of Product Mix:
The four dimensions of B&O’s product mix are as follows:
Width: various product lines such as acoustic, audio, video, plasma, telecom etc.
Depth: on an average, in each product line 6-8 items are offered
Length: video line of the B&O offers various dimensions of TV (e.g. BeoVision 7 comes in 3 different dimension viz., 50″, 40″ and 32″)
Consistency: all the products lines closely related in end use as all the products fall under similar set of products (i.e. high-end consumer appliances)
(Adopted from Bang & Olufsen)
New Product Development
The four product-mix dimensions permit the company to expand its business in four ways. It can add new product lines, thus widening its product mix. It can lengthen each product line. It can add more product variants to each product and deepen its product mix. Finally, a company can pursue more product-line consistency. (Kotler, 381)
Line Stretching and Filling
The company usually adds the items in the current product lines stretching it both-ways to some extent by adding lower as well as higher price products. It also fills the lines by releasing the products in same line with different versions e.g. a new 50″ TV was launched in the video line.
B&O markets its products in a manner that opens up more than one product from the product portfolio. E.g. the home integration line which consists of remote controls designed to control all of the other lines in just one remote control. In addition all products carry the same type of design and thus fit together aesthetically.
Product management
Great design, mixed with robust technology, allows it to charge obscene sums to well-heeled consumers who want to buy originality and quality from an exclusive brand.
Competing on price and product variety would be a dangerous game. The company is a pipsqueak in a consumer-electronics world dominated by giants such as Sony, Samsung, and Royal Philips Electronics.
Like Apple, it brings out very few products a year. In fiscal 2007 it released just 10 new models. But unlike Apple, B&O keeps its handful of products on the market for up to a decade or longer without abandoning them for new models or cutting their prices. (Jay Greene, 2007)
Product Features/benefits
B&O products are made to fit in at a place where people feel at home.
Products are also designed to be serviced and are expected to have a long life span. B&O will actively support products for 10 years following its discontinuation and often longer.
The design itself carries a price tag as does the exclusive image.
Branding
“B&O regards itself as the only company currently bridging the gap between design and consumer electronics.” (Hansen and Nielsen, 2008)
“The philosophy is: creating audio concepts that combine brilliantly authentic sound quality, simple yet surprising design and a touch of magic. So that living with it becomes a special pleasure.” (Bang & Olufsen Design Philosophy, Beoworld, 2010)
“The gear should look smart, but technical performance should be outstanding. Designers and technicians work together in close collaboration from the very start of a new product.” (Bang & Olufsen Design Philosophy, Beoworld, 2010)
After sales service
Every Bang & Olufsen customer is offered customised installation of products and link systems on delivery. Bang & Olufsen provides the guidance and advice needed to ensure that the customer gets the full benefit of the new products from day one. (Installation, Bang & Olufsen, 2010)
The B&O products offer performance and pleasure beyond expectations, so does the B&O’s International Guarantee. The Bang & Olufsen product is guaranteed against all defects in workmanship and materials for three years. (International Guarantee, Bang & Olufsen, 2010)
Price
“Bang & Olufsen: for those who discuss design and quality before price”. (Who are Bang & Olufsen customers?, Beoworld, 2010).
B&O follows the Image Enhancement Pricing objective because B&O products are seen as lifestyle products. B&O products are always highly priced as the company delivers the quality, elegance, design, status quo equivalent of the price.
(Solomon et. al., 2009)
(Hansen and Nielsen, 2008)
Quality
Bang & Olufsen products are designed to be not only aesthetically pleasing but also essentially functional and easy to use. The expectations raised by a strikingly individual appearance must be completely fulfilled in terms of high quality performance in all areas when the system is switched on. Therefore, excellence in providing the consumer with the highest pleasure in both ownership and use rests on “high quality” as the common denominator of all activities and competence areas. (Competences, Bang & Olufsen, 2010)
Place
Bang & Olufsen products are sold by over 1.200 dealers in more than 100 countries in an extensive network of retail stores. Approximately 65% of these stores are B1-stores, which exclusively sell Bang & Olufsen products. The B1 stores account for 81% of the total turnover. (About us, Bang & Olufsen, 2010)
(Bang & Olufsen (2010) Annual Report 2009-10, p24)
Bang & Olufsen products sold with the premium and luxury cars such as Aston Martin, Mercedes AMG and Audi A8 to name a few.
“Considering the huge costs involved in the luxury yacht market, it is amazing how little customers spend on their on-board entertainment systems, and how little consideration they give to the total entertainment experience, often buying a pre-defined package;” says Torben Ballegaard Sørensen, CEO, Bang & Olufsen. (Ecoustics, 2005)
Along with premium cars, B&O also offers entertainment systems in the luxury yacht market.
Promotion
Pull Promotion
In order to promote their products and utilize their existing distribution channels (exclusive B&O stores), B&O needs to address their product turnover life cycles and provide newer and improved products to their stores.
In attempt to meet the customers demand for high quality, unusual design and up-to-date technology, B&O needs to approach innovation and creation uniquely. This is where Idealab enters into the picture. It is B&O’s hope that this new, innovative approach to product design, development, production and sales will be their keys to answer this dilemma.
Marketing Strategy: Segmentation, Targeting and Positioning
Segmentation
Demographic
This segmentation categorises market based on age, gender, family structure, income and social class, race and ethnicity and geography.
B&O customers can be divided into four categories.
First category is of people who are young and well qualified, who have very few commitments, have large disposable income and are eager to fulfil their dreams.
The next category is of younger people who have just started a family, money is tighter and hence purchases are made only after careful consideration.
The third category is of the ones who have it all, children are grown-up, despite of some possible financial obligations, the family still has surplus income and are looking for luxuries as second homes, exotic holidays or may be B&O equipment.
As per Jan Dalskov from Market Intelligence, most B&O customers fall into this category.
The last category, “Grey gold”, whose children have left home, have money to burn and can think of buying B&O products for the sake of change or due to the external influences. (Who are Bang & Olufsen customers?, Beoworld, 2007)
Psychographic
Unlike other mass producers of electronics, B&O makes a few select products for the clearly defined few. It’s therefore: ‘broad appeal’ versus ‘individual needs’! (Who are Bang & Olufsen customers?, Beoworld, 2007).
Behavioural
This segmentation slices consumers on the basis of how they act towards, feel about or use a product (Solomon, Marshall, Stuart, Barnes, Mitchell, 220-21). B&O products are often seen as “Life-Style” products. As the slogan says, “B&O products are for those who discuss design and quality before price.” (The history, Bang & Olufsen, 2010)
Targeting
Differentiated Targeting
B&O uses a differentiated targeting strategy. It focuses on design and quality over price. As a result of this they charge premium prices to customers to recover the higher designing and production costs. Differentiation is about justifying premium prices to prefer the product over other, less differentiated products. Due to this B&O products are positioned as “High Price = High Quality”.
Positioning
B&O products are very elegant in design to justify the higher price.
Price
Design
B&O
Sony
Samsung
B&O products deliver best quality as compared other mass production electronics giants. As they describe – “It will never skip a beat”. (BeoSound 2, Bang & Olufsen, 2010)
Price
Quality
B&O
Sony
Samsung
B&O products are available in many of the luxurious 5-star hotels, high-end cars such as Aston Martin, Mercedes SLS AMG & S-Class. As Carsten Sander (Senior Director Scandinavia and Baltic) says that “people normally have to decide between taking a vacation to some exotic place abroad, renovating their homes, upgrading their car etc. or buying one or more B&O products”. (Hansen and Nielsen, 2008)
Price
Status Symbol
B&O
Sony
Samsung
Discussion and Conclusion
The company, B&O, looks very strong at their brand position and recognition. Higher prices, elegant designs, supreme quality and collaborations with the luxury brands have placed company products in a niche market. Consumers are buying experience when buying B&O products. Ownership of B&O products creates a feeling of belonging to certain social class.
Company is successful in keeping their brand image intact by delivering cutting-edge technology, high performing products. The company has strong and wide product mix, good length and depth of the product lines.
Currently company has a generally tendency to launch 2-3 products in a year. The company can work on stretching the product line in both ways by keeping the brand image intact. Stretching the product line downwards i.e. offering the products of lower costs may affect consumer’s perception of “High price = High quality”. Entering into the lower price market will result in increase in competition from electronic giants such as Sony, Samsung etc.
If company can concentrate on filling the product line i.e. more variations in existing product lines then it will give the consumer to choose the best suitable and feasible product to their needs.
While working on the product designing and manufacturing, company can also invest in promotions.
Focussing on top executives of the corporate firms may help the company to approach the potential customers. They can promote some free demonstrations, introductory offers to these executives who are willing to burn out some cash in order to maintain their social status. Exploring and expanding in this new segment of the market will give company the chance to reach to the potential customers.
While exploring new B2C segments, company can also enter into B2B solutions by providing Audio & Video solutions for the renowned conferences like Apple’s WWDC, Microsoft’s PDC etc. Similar to luxury yachts and cars, they can also reach Charter Jet manufacturers for collaboration, widening the product mix.
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