The $40 million-plus campaign for the Dutch electronics giant, by Euro RSCG, London, is the company's first global image advertising. The campaign is a key step in overcoming Philips' reputation for being great at inventing products but terrible at marketing them. The new theme eventually will be used in product advertising.
Philips desperately needed to "make things better." It marked its centennial in 1991 by announcing a $2 billion loss for the previous year. Under a painful restructuring program, Philips slashed 60,000 jobs, closed plants and assembled a new multinational team of aggressive, marketing-oriented managers.
This year, Philips is expected to make a net profit of almost $2 billion, following record profits last year of $1.3 billion on sales of more than $30 billion.
Philips spends about $500 million a year to advertise everything from light bulbs and razors to compact discs and semiconductors. The goal ultimately is to cut its roster of about nine agencies to two, said Roger Woods, director of corporate relations.
Euro RSCG and D'Arcy Masius Benton & Bowles already handle most of the company's consumer products.
"They are moving more and more toward being a marketing-oriented company rather than just inventing things in a lab," said Philip Van Den Berg, an electronics analyst at Goldman Sachs in London.
Philips is also reinventing itself as a multimedia company. Philips Media is developing software, equipment and distribution channels. Philips is also investing in content-its 75%-owned PolyGram music and film company made the hit movie "Four Weddings & a Funeral"-and is pushing compact disc-interactive. But while its CD-i video system took off slowly, Philips hopes it will become the standard audiovisual format.
And in a series of joint ventures in the last year, Philips has become one of the largest cable and pay TV operators in Europe. Separately, Philips has joined with two U.S. partners to develop technology for interactive TV services, including a set-top box that eventually will deliver services like home banking, teleshopping and video-on-demand.
"All these activities are linked in one way or another to interactive TV and the so-called superhighway," said Robert Hamersma, Philips Media's general manager. "We are preparing ourselves for the future."
"At the moment, Philips Media is still suffering startup losses," said Arjen Dibbert, an analyst at Mees Pierson bank in Amsterdam. "There is a gut feeling that there is money to be made, but it's difficult to predict exactly when and how much-possibly in five to 10 years."
Philips is rolling out CD-i this month in China, Thailand, Taiwan, the Philippines, Australia, New Zealand, Indonesia, Singapore and Hong Kong. It has sold about 1 million units in Europe since its 1991 launch there.
"The Far East is getting a very high priority with our company," said Mr. Hamersma. "In three years, 25% of our turnover as a group is expected to be from there."
Currently Asia accounts for only about 15% of sales, but it is Philips' fastest-growing region, and the company is making careful strategic moves there-from a joint venture to produce TV sets in China to using Singapore as the worldwide headquarters of Sound & Vision, Philips' TV, video and audio product division set up last year.
The driving force behind Philips' marketing changes is the high-powered Corporate Image Board set up two years ago to research Philips' core brand positioning.
"In late 1994 we started work on a corporate and positioning statement that would fit the whole company," said Mr. Woods, a board member involved in the pitch for the subsequent campaign among Euro RSCG, DMB&B and Young & Rubicam.
Philips has also recruited top executives who are getting more involved in marketing. One example is Cornelis Boonstra, who joined the company a year ago as exec VP after being president of Sara Lee Corp.
The new "Let's make things better" campaign is designed to motivate staff and emphasize the quality of Philips' products to consumers. (Philips found the public had an "unfocused familiarity" with the Philips brand name.) One ad features Susan Teo, a Philips TV engineer in Singapore, talking about how to stretch a TV picture without distorting it.
"It's more difficult for Philips to advertise one brand with one voice than [it is for] Nike or IBM," Mr. Woods said. "Philips sells everything from medical scanners for $1 million each to light bulbs."
One of Philips' challenges is to stay on top of the CD technology it invented. Philips has had one recent flop-its digital compact cassette machine, which suffered from high prices, too little software and head-to-head competition with Sony Corp.'s MiniDisc portable CD machine.
"In the end, nobody bought either product," Mr. Van Den Berg said; DCC and MiniDiscs "were both failures."
That didn't stop Philips from plunging into CD-i, which lets consumers use a TV to watch movies, listen to music and play videogames-all delivered by CD. This fall, Philips is introducing a plug-in board that will allow its CD-i machine to be connected to computers. Initially, the company isn't advertising its CD-i launch in Asia.
"When you are introducing a completely new [technology], you do it better by talking to the trade, training the dealers, participating in fairs and demonstrations than [with] a 30- or 60-second advertisement," said a Philips spokeswoman.
Philips' next marketing challenge will be the 1996 launch of high-density digital video discs that can store 135 minutes of video, storing entire films on one side of a disc. Philips' current CD-i holds up to 74 minutes of video.
Philips, now working with Sony, will be competing against a Time Warner-Toshiba alliance with a rival super-density disc. With CD-ROM makers backing the Philips/Sony standard and the movie industry supporting the Time Warner/Toshiba standard, a compromise format may emerge to avoid a costly marketing battle.
For Philips, which has been on the losing side of format wars too often, compatibility would be good news.
Headquarters: Eindhoven, the
Leadership: Jan D. Timmer, president
and chairman of the Board of Management
and the Group Management committee
Agencies: Main agencies are Euro RSCG
and D'Arcy Masius Benton & Bowles.
Worldwide ad spend: Estimated $500
Recent successes: Restructured management
is turning a profit. Philips brand
positioning has been redefined and
a worldwide image campaign launched.
Challenges: To become a leader in
multimedia worldwide and build Asian
This month Dutch electronics giant Philips breaks an international campaign themed, "Let's make things better."