Earlier today, we met with Sony Electronics America’s COO Michael Fasulo who outlined the division’s strategy going forward. As you may have seen, Sony Electronics America has recently gone through a restructuring in which more than 1000 jobs were cut.
He said that this was his “worst day”, but also that the cut was necessary and “done with dignity” in order to allow that business to grow. After looking at the situation, the Sony leadership decided that the cost of operations was simply too high. To be fair, it’s not surprising since the TV market is much more competitive than even the phone market.
Sony’s strategy going forward is to focus on high-end (and high-profits) leading-edge features like 4K and high-end camera sensors to “create the market”. Of course, the mid-range and entry-level markets (or “foundation” in Sony marketing/sales lingo) remains hugely important in terms of volume and revenues, but the idea is that human and engineering resources should be focused on Sony’s leading-edge product.
The challenge when you want to do this is that one needs to educate or demonstrate the new technology to consumers. This is particularly true in markets where people don’t always “buy on specs” and it’s fair to say that each of us would rather see the TVs what we buy, if that was convenient."SONY BETS THAT IF PEOPLE SEE IT, THEY WILL WANT IT"
Customers have a very hard time to effectively compare perceived “quality”, and anyone who as walked into a TV retail store has probably been faced with a wall of TVs playing over-saturated videos. Which is the visual equivalent of visual salt and sugar, making it impossible to see the finer differences. Sony bets that if people see it, they will believe it.
This is why you will see Sony –but also competitors- add in-store experiences so that end-users can get a feel for how different their products are. I tend to get a new TV every couple of years, and despite doing some homework, I can vouch for the fact that nothing can replace seeing things with your own eyes.
User interfaces can also make a big difference in the day to day use and they are often overlooked by reviews which focus mainly on image quality (or image data).
I would argue that within a given price range, the user interface is nearly as important as perceived image quality – especially if you use the Smart TV function that replaces a small box like an Apple TV or Amazon Fire TV. Sony has made some tremendous progress there, but it is certain that most consumers haven’t seen a demo yet.
To solve this, Sony has inked a deal with Best Buy, one of the few survivors of the great electronic retail extinction of the last decade, to have an in-store Sony Experience which will be carefully crafted to show Sony’s products under the best light, with “well-trained” Best Buy staff being in front of customers.
Sony knows that someone who buys a TV based on Price/Inch will be very difficult to sway anyway. However, the company is much more interested in buyers who would pay an extra if higher quality and value can be perceived. That is how companies make higher profits and Sony feels like this has to be done on the ground. Early internal studies suggest that the strategy will work.
Of course, no matter what course of action Sony takes, the TV business remains one of the most challenging sector – even for competitors like Samsung or LG. That’s why Sony is not going to fight for market share, but for a higher share of net profits instead.
With less TV models, a renewed focus on user experience and a lower cost of operation, Sony may just pull it off — time will tell. Interestingly, Sony said that women were the decision maker for up to 75% of TV purchases, so TV makers should take notice and adapt their male-oriented messaging.
On another topic, Micheal Fasulo talked about the Camera and imaging business, saying that “imaging” is a much broader business than just “cameras”. He was probably referring to the Sony Sensors business which has been booming in the past few years, thanks to the EXMOR series which is used in mobiles and camera systems."IMAGING IS MOVING TOWARDS FULL FRAME - MICHAEL FASULO"
With customers like Apple and other high-profile manufacturers, those sensors surely have a great track record. Mr. Fasulo hinted that “Full-Frame” was the future and this would indicate that Sony will continue to use the edge that it has in image sensor technologies to gather further market share and profits. So far, the Sony camera business has been one of the most successful for Sony and there is no sign of slowing-down.
Most observers would agree that with devices like the XPERIA Z2 and the PS4 (which is not part of Sony Electronics) are powerful demonstrations that Sony can play at the highest levels. Before the end of June, Sony will implement its in-store experience with Best Buy and I’m guessing that by year’s end, we should have a pretty good idea of whether or not things are going according to plan.
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