Who are Bang & Olufsen customers?

Bang & Olufsen: for those who discuss design and quality before price" Bang & Olufsen is a remarkable company, unique among loudspeaker manufacturers. Located in Struer, an isolated rural town in north western Denmark, B&O has forged a unique corporate style and identity over the past century. Beginning in the 1920s by making power supplies for radios, they have grown into a multifaceted company grossing approximately $700 million annually (2002). In addition to audio, they have both medical products (Medicom) and telephone divisions. B&O's success is based on an unlikely combination of factors: an extraordinarily creative, high-risk industrial design process (only two people can kill a project: the president and/or the designer!), meticulous basic and applied research and highly automated just-in-time manufacturing processes that yield gorgeous high-performance products. A very creative approach to advertising and marketing that has led to an extremely powerful brand identity. Three of their products have been selected for the permanent collection at the Museum of Modern Art in New York City and they enjoy extraordinarily strong customer acceptance and loyalty to products that have very long production runs (15-20 years is typical). A carefully managed, nurtured and controlled distribution system around the world, including both single-brand "boutique" stores in choice locations in major cities worldwide as well as more general and broad distribution and sales via more conventional retail stores and chains. Bang & Olufsen products are marketed as "lifestyle" products, and are carefully targeted at middle and upper class customers who are educated, well-to-do, cultivated in their interests and highly individualistic and self-motivated. B&O often refers to Mercedes Benz as their primary competitor, and perceive that they are competing for upper middle-class discretionary dollars. Their designs attract both men and women with a combination of high technology, spectacular and often audacious Danish modern styling, excellent performance and extremely functional integration into the typical upper middle class home. B&O manufactures playback systems as well as loudspeakers, including tape decks, CD players, turntables and televisions. A significant portion of their business is installed systems, and the entire product line is integrated so that household-wide systems may be easily installed and used. Needless to say, home theatre is a central interest and concern, and B&O is hard at work on developing the next generation of home theatre systems. So what makes a Bang & Olufsen collector? Is it the style of Bang & Olufsen products... the modern design? Or just someone who wants to allow themselves an air of individuality? In 1968, Danish consumer electronics manufacturer Bang & Olufsen bore the slogan: "Bang & Olufsen, for those who discuss design and quality before price." This has not changed much

since. The company, which in 2001 had an annual turnover of DKK 3.7 bn (455 million euros) and a profit ratio of 9 % is still attracting mainly European consumers who identify with its highprofile, high-tech and unique-looking products. Bang & Olufsen has been present in the US market since the early 1960's but only with limited visibility. Total sales in 1999 were about DKK 200 (25 million euros); very little in relation to the total US consumer electronics market. While other brands focus on exotic techniques and components in their products, thereby limiting themselves to customers who want to understand technology such as frequency range and the finer art of speaker cables, Bang & Olufsen always had a more 'high-brow' approach. The company seeks customers with money and good taste, who own a nice home and car and are willing to spend money to achieve the same quality for their audio and video equipment, long before design-widescreen TVs became fashionable. So while Bang & Olufsen's competitors make one product for the many; Bang & Olufsen makes a few select products for the clearly defined few. It's therefore: 'broad appeal' versus 'individual needs'! Design alone, of course, did not create B&Os international reputation. Design in itself was never a goal, only a means. "Design is a language," so it was said. It was in the first half of the 1970s that B&O developed a deep understanding of the concept of design. It was clear to the company's management team that design without a basic idea - a concept - would become both superficial and transient. In parallel with the design, B&O, therefore, developed a new marketing and communication strategy - a "lifestyle" oriented strategy aimed at a smaller, but more international target group. Perhaps this strategy was best encapsulated in the advertising slogan of the period: "B&O is for those who consider taste and quality before price." Press Release August 2002 " Bang & Olufsen is voted the coolest technological and mechanical brand in the UK Bang and Olufsen is delighted to hear that it has been voted as the coolest technological and mechanical brand in the UK . It has also been voted the third coolest brand overall in the UK the only technological brand in the top five. A spokesperson from Bang and Olufsen commented: "We believe it is due to the sustained high level of technological performance and build craftsmanship that people recognise Bang and Olufsen as the coolest technological brand in the UK." The research which made Bang & Olufsen the top technological and mechanical brand in the UK was conducted by NFO WorldGroup on behalf of the Superbrands organisation. Using a sample of 18 - 30 year olds, it found that 72% of respondents believe the personality of the brand is the most vital factor when determining if the brand is cool with only 24% thinking it is due to celebrity endorsement.

The nation's coolest brands overall have been revealed by the 'Superbrands Cool Council ', made up of eminent figures from the world of celebrity and branding, including Dermot O'Leary, DJ Carl Cox, photographer and Dazed and Confused publisher, Rankin and top marketeers from agencies such as Mother, Cake, Farm and Imagination." 1 NFO WorldGroup on behalf of the Superbrands organisation, August 2002 2 NFO WorldGroup on behalf of the Superbrands organisation, August 2002 3 Superbrands Council, 2002 4 Superbrands Council, 2002 Individual products for individual people Bang & Olufsen does not want to make mass-market products with a broad appeal like its competitors - products without any regard for the preferences and needs of the individual enduser. This kind of product strategy is what you could call 'One Product for the Many' - with mass production and thereby price as a marketing tool. In such products one feature appeals to one type of person, other features to another, the price, but no features, to a third, etc... But on the whole, the consumer will pay for a number of features that he or she never really wanted - and perhaps never will use. By employing competences selectively and by making selective and intelligent choices on behalf of the end-consumer, Bang & Olufsen today makes individual products for individual people. Each of its products has its own specific profile with each its own specific job to do in the market - but they all share the same basic Bang & Olufsen qualities. The selling points of its products are their own individual qualities. No two Bang & Olufsen customers are alike General lifestyle analyses don't hold true when it comes to Bang & Olufsen's prospective customers. Theoretical and general customer segmentation just doesn't go far enough. Instead it's vital for dealers to understand that the people who enter their stores do so for very different reasons. And the dealers who best identify these reasons and tailor their advice accordingly will create the best stores. Jan Dalskov from Market Intelligence describes how in recent years the department has intensified its focus on Bang & Olufsen's customer database to identify patterns specific to Bang & Olufsen customers. A variety of analyses have been carried out using questionnaires and group interviews. The good news is that there are a number of opportunities which dealers could be exploiting better. We could place greater emphasis on targeting our customers - in other words, finding a framework through which we can tailor our activities to customers and ensure that individual customers get individual treatment.

According to Dalskov, at every step of this process it's crucial to understand that Bang & Olufsen isn't looking at the mass market. We are addressing consumers who have opinions and who have unique wishes and needs. Just like coffee To illustrate his theory Dalskov uses coffee as an example. "To most people coffee is a hot, black drink to which you can add sugar or milk according to taste" We drink it to wake us up in the morning, to revitalise us during the day and to round off the evening after a good meal. This is what you'd call the general concept of coffee. But do we ever ask how the beans are ground or roasted? Do we ever question the size or type of cup it's served in? "Three out of four coffee drinkers won't give such things a second thought, but one in four is far more selective. At a good restaurant the choice might be between cappuccino, espresso, mocha, Colombian, Arabian or liqueur. The factors to take into account also include the way the beans are processed and the size of the cup. But ask too many specific questions and there's a risk that the poor diner will decide to forget it and settle for tea instead!" Identifying and interpreting So what's all this got to do with Bang & Olufsen? Well there's a parallel between the range of coffee on offer at a good restaurant and the range offered by Bang & Olufsen. Just like a good restaurant, Bang & Olufsen creates different products for different customers. This means that sales staff in the stores have to be able to identify individual customers. But that's not enough. Staff also have to interpret the needs of the customer, resulting in definitive, tailored advice. "We've got nothing to do with mass production," says Dalskov. "We're a meaningful alternative for those who have made a conscious decision as to what they want in their lives or who are interested in being inspired. We can't label them based on their age, their clothes or their job. On the other hand, we can build up a picture of the different reasons consumers have for buying Bang & Olufsen. Jan Dalskov divides these reasons into four categories. Firstly there's a younger group developing. They have no commitments so far and are keen to realize their dreams fired by the philosophy that the world is their oyster. One example is the 23-year old architecture student who Dalskov happened to meet in Copenhagen when he and his son went to the young man's basement flat to buy a second-hand fridge. The furniture consisted of a top-quality bed, an old wardrobe full of woodworm with nails in the sides for coats, a desk made out of a door on two trestles, and an Ouverture with two BeoLab 4000s ... "He explained to me that his first aim was a good bed so that he'd get a good night's sleep and be able to study," says Dalskov. "Next on the list was realizing his dream of owning a Bang & Olufsen product. Chairs and other furniture would just have to wait. "We have to be aware that there's an ever increasing number of young, highly educated people who live alone and have few commitments and a large disposable income," says Dalskov. "But it might not be the Avant and the MasterLink System that set their pulses racing. Around half of

them are women. How many dealers still believe that women don't buy audio equipment or televisions? That's such an out-of-date view." Nest builders The next category is younger people who have started nest building. Individuals have now become couples and are starting a family. Money is tighter and there are lots of calls on their cash. Purchases are made only after careful consideration and with an awareness that they have to set priorities. Many in this group are reluctant to enter a Bang & Olufsen store as they've got the impression that they won't get away without spending a small fortune. Initially all they might want to buy is a phone. High priority luxuries All dealers recognize the third category. These are the ones who have it all. Their children are older. There are still many financial obligations but the family has surplus income and sets great store by luxuries such as second homes, exotic holidays - or maybe Bang & Olufsen equipment. "Most Bang & Olufsen customers fall into this category" says Dalskov, "and sooner or later they usually go for the standard solution with an Avant and/or an Ouverture plus a Link system. Again here we see the traditional pattern where the customer is a man. But that's no reason for us to forget everyone else." The fourth and final category on this grand tour is what Dalskov calls "Grey gold". The children have left home. They've got more time on their hands. There's more money available and the dream they have never been able to afford is at last within their grasp. This category also includes many Bang & Olufsen customers. Often they are buying new products for the sake of a change - or have been inspired by new opportunities. It's not necessarily because their existing products have worn out. Again here women play a key role. They may not always appear as often as customers but they are often the driving force behind a new look or changes in the home. Dalskov has a good example in this category too in the form of a childhood friend who years ago couldn't be convinced of Bang & Olufsen's values. They cut no ice with him. But that was in the days when he was starting a family. Now his children have left home and he's got more cash in his pocket. "He's just bought a complete Bang & Olufsen system," Dalskov grins. Different products for different people The four categories don't mean that dealers have to label their customers. But dealers have to understand that people are looking for products for different reasons. That said, there are still common features which we see again and again in the vast majority of our customers. Music and/or television play an important role in their lives. Most are also broadly interested in culture. Owners of Bang & Olufsen televisions often have more television channels available than average but watch fewer programmes. They choose to have access to a wide range so that they can select the few programmes worth seeing.

Naturally they also emphasize quality, and that's borne out by the interior of their homes. "We're not trying to categorize our customers," says Dalskov. "Contact must be forged on the basis of what people want and what we have to offer - concepts. If we do this well, we'll be able to create a database which dealers can use to target customers, coming up with the right arguments for the right people. We can tailor activities, find prospective customers and treat them individually. At the moment we're considering how we are going to structure the information to provide us with a tool which will precisely target the 500,000 customers we already know about. At the same time we're also encouraging dealers to enter customers' purchases in the database wherever possible. Once we've got that far we'll have a very strong tool which will benefit every one of our dealers." "