Unknowns get foot in electronics space

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Apex, Benq, Roku and Tatung may not be household names yet, but they want to be.

These consumer-electronics newcomers are employing specific strategies of pushing innovative products and offering low prices to get onto retailers' shelves and into consumers' homes. Their hope is that while Sony, Samsung and Panasonic rest on their name-brand laurels, consumers will come to prefer the new guys.

Sound impossible? Consider this: In just five years, Apex has become the No. 1 seller of DVD players in the U.S.; Roku, in less than a year, has garnered significant buzz and media coverage for its new high-definition DVD recorder. And most have aspirations beyond one or two product lines. These brands plan to become full-fledged, U.S. consumer-electronics players in the $100 billion-plus industry.

window of opportunity

"We're still dealing with a dearth of marketing competence in this space. There is definitely a window to come in, execute sharply and gain significant market share," said Rob Enderle of the Enderle Group consultancy.

And with each success, another potential ad agency client is born. While they may not spend much on paid advertising now, as these companies become more successful and make higher profit margin, they plan to spend more. That means they'll be looking to hire ad agencies to help them continue to brand and grow.

Sound unlikely again? Think about this: Samsung is reviewing its global advertising account worth an estimated $700 million. Just 10 years ago, Samsung spent only $7.5 million on media in the U.S.

Also adding to agency coffers may be established players who feel the need to spend more to fend off new rivals. Total paid media spending for audio and visual equipment was $1.7 billion in 2003, according to TNS Media Intelligence/CMR; up more than 30% from $1.3 billion in 2002. Meanwhile, the Consumer Electronics Association estimates an increase of about 5%in total sales for 2004.

The new competitors come in a variety of forms. Some are established brands elsewhere in the world, but new to the U.S., like BenQ, which is actually the renamed Acer's communications and multimedia division. Others are small startups such as Roku and Prismiq.

"They may be new players in an already-crowded market, but it's a really big, fat expanding market," said Joe Calloway, branding consultant and author of "Becoming a Category of One."

shelf space

For the new players, the main strategy for now seems to be just getting onto shelves. To do that, the companies offer either an innovative product such as Roku's high-definition digital recorder, or low pricing such as with Apex Digital's entry-level DVD player.

"It's amazing how important it is just to be in the stores," said Anthony Wood, founder and CEO, Roku. "If you can manage to be one of the two in a product category that sit on the shelf, people will look at you and read the box and buy." Roku, a private company, has a total marketing budget of $1.5 million.

Apex Digital's strategy is purposefully low cost with razor-thin margins. "Every retailer has an opening price point. ... It's not necessarily profitable, but it gets you on the shelf," said Steve Brothers, Apex senior VP-new products and business development. The payoff for Apex is as the $49 DVD players fly off the Wal-Mart shelves, buyers who didn't expect much for the price, discover it's a good product for the money, he said. Buyers, he added, spread the word and are also willing to buy other, maybe even higher-priced, Apex products.

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