New luxury-style opportunity in the US$ 15-20 Billion global Audio hi-fi equipment market; up to 18000 times more consumer interest in product attribute
Bottom of page: Video introduction.
Main idea: Revealing a very promising potential opportunity in the global US$ 15-20 Billion market for audio hi-fi equipment, especially loudspeakers but perhaps also hi-fi components, based on research and strategy development, and also based on recent changes in a certain production technology. The opportunity is not based on a technological innovation basically, but on a psychological innovation or realization, so to speak, (there are no patents or trade secrets discussed here).
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Potential for a “new” luxury segment: „a new/additional definition of style focused, decoration-friendlier luxury and high-end hi-fi.“ Audio hi-fi is probably outside the sectors where a luxury holding company is normally searching for new opportunities. Making and selling high-tech audio electronics is not what luxury companies usually see it as their business to have anything to do with. But the new opportunities, and strategies for market penetration, that I have already formed, do not mean that the design and marketing operations have to have any expertise to talk of in the field of high-tech electronics and audio software coding. Those working in that part of the formula, the design and marketing, could very well benefit from the insights, expertise and resources that the luxury sector possesses. For that reason, I am attempting to raise interest among your company in this.
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The problem: I believe that for decades, the main companies in this part of the international audio/video consumer electronics markets never had a correct understanding of the market they were operating in. They had a good understanding of the technology, and believed they were selling a technological solution. They did not have the best possible approach to all the potential consumer groups in their potential market, or what the fullest range of customer satisfaction could be about. This could mean that these equipment are serving the needs well among some groups, but could be doing it much better among groups that could be deeply interested in enjoying music, but are less interested in acquiring current types of offerings to do so. This may mean, in short, a very large lost market potential, perhaps without the companies fully realizing it. This difference may be huge. The key question is: What are people seeking through using these equipment? Why would people want to buy them, both people who buy and more importantly, who consider it but don‘t buy? The right answer is the key to unlocking new potential, a set of needs that were there all the time, but relatively new innovations may open new possibilities.
My recent investigation into market data has shown me, that there is a huge gap between how the equipment have been, and what important consumer groups may be more interested in. For instance, in the data I gathered, there were more than 5,000 (five-thousand) times more individuals interested in a certain field of experience, rather than how these equipment are often portrayed. That was more specifically 92 million individuals against of around 17,000 individuals.
Further steps: I would like to offer my time and work in defining, researching and unleashing these opportunities, as a consultant, project leader or staff member of a company that has the willingness and ability to go after this opportunity. Let‘s look at this a bit further.
This opportunity is possibly, or probably, outside the areas where you have been most actively looking for new opportunities. It may even be that you have concluded that this is not an area of potentially strong growth. If you decide to go ahead and participate with me further, be prepared to get a completely new insight from a new viewpoint into consumer values and preferences, consumer pain points, and new solutions using a flexible production technology and the internet, where the value chain is re-organized in a new and flexible, cost effective way, with the goal of opening new opportunities for market penetration, fantastically successful promotional initiative, sales growth, revenue growth and improved profit margins.
The three steps to find the right path:
- A theory on what the situation really is, or how well current product offerings are answering the full spectrum of needs and preferences of different potential buyer groups, including groups that might have potential to become customers, but have been less interested. This means creating the theoretical framework to understand the forces in human psychology that may be active here. A theory on how it may be possible to increase price premium, and especially to increase interest among possible buyers in the more expensive, higher-end equipment, or more specifically, make certain affluent groups interested who were less interested before.
- Research that can be conducted to find out about how interested different consumer groups are in the product features in question. In short what may entice them to buy and use. A key area to investigate is: How have consumers been probed until now, what questions have been asked, what is the angle, and how could consumer opinions data be gathered to reveal a new angle, a more accurate picture, that may open up a vista of new opportunity? There is, for instance, a rather simple and not costly way available to gather key data.
- Given that the outcome of the research conducted to test the theory is as I believe it will be, then I can present recommendations on how the product offerings can be altered. It is rather straight forward, using flexible production technologies that have become more widely used recently, and would also call for a new emphasis in design, promotion and sales.
The Solution: The main function of audio hi-fi equipment is understandably to deliver sound in the most satisfactory way possible, within all limits set. However, even if the makers of these equipment don‘t like it, then it is a fact that these equipment have two basic functions. The main function (delivering audio), and the „second function“. So what is the „second function“, and how can it be better served? Here are clues.
Audio hi-fi equipment are often quite big and well visible, especially big, higher-end loudspeakers. It came to my attention long ago that not everyone is interested in the visual effect that these objects have on the place they are in. I saw very clearly what the problem was. They buy these equipment to listen, but they will also have these objects in their homes, before their eyes. So how they perceive and judge these objects, emotionally speaking whether they realize it or not, is done in the same way as they perceive and judge all other large and visible things that are going to be visible in the living room. They judge them based on the basic function (here, to create sound), but also on the second function, how they look. Together, these two factors create the overall „rating“ and influences how these things rank against all other things they might be interested in spending their limited, hard-earned money on. This might mean that people interested in enjoying music at home are less interested in investing in these equipment, and to set them up in their own homes. People‘s purchase decisions, according to my theory, are not fixed, they are extremely changeable. In a split-second, the possible buyer can make a decision of what to buy, not just choosing between two different audio offers, but between such equipment or something totally different, another product or service category entirely, and that is based on the total emotional reaction. To win the sale, you must offer something where the two functions both serve in a superior way. Audiophile „equipment nerds“ often seem to be very important target markets for these companies, but I believe that interest in these products could be increased considerably among other groups, simply because they are interested in high-quality enjoyment of music, and especially other finer things in life, even if they are not interested in the technology as such, (see the numbers here after).
I often see remarks, in editorial content of audiophile magazines, in advertising, and on the websites of equipment makers, that they strive to create equipment that do the only thing they say that matters: To deliver the best sound. Many offer hi-fi equipment that are very „hard core“ technological electronics equipment, and they look as such. It is true, that for some consumer groups, this is all that matters. They don‘t care about the second function, all they want is the best new tech and the best sound. But there are other groups that care very much about both functions. In fact, the number of those who are especially interested in equipment and technology that deliver sound, are dwarfed by those who are more interested in what the second function is active in. Of these, women are quite important, but men are as well. The fact is that women influence 80-90% of household expenditures, and make decisions on 57% of all consumer electronics purchases, and much more can be said (Barletta, Marketing to Women). How can you win the hearts and checkbooks of women? Here are some numbers:
According to easily accessible market data, I found the following: There are more women interested in music than are men, 195 million women versus 168 million men.* Audio hi-fi equipment allow you to play music. Among men and women, ages 20-65+, in the Western World (minus Japan), let us take a look who are interested in music and high-end audio equipment, but not interested in the „second function“ I spoke about (here, „interior design“ but other similar interests give similar results). Let‘s call that interest 1. Then how many are interested in music and the second function, but not interested in high-end audio devices as such, and we call that interest 2. Among women, there were only 16,700 women with interest 1, while there were 92 million women with interest 2. This is a 5,500 fold difference. Among women in the USA and Canada only, the difference was more than 18,000 times. That is 1,800,000 % (one point eight million %) more interest! If you look at interest in general home audio, rather than high-end audio, then there is somewhat more interested in that, so there the difference is „only“ 2,400 fold.
Surprisingly, since men are often seen as being more technologically thinking and interested in equipment of all sorts, the same difference is also very large. There were 260,000 men who had interest 1, while there were 36 million men with interest 2. The difference is 138 times. If you look at interest in Home Audio instead of interest in high-end audio, the difference is 100 fold. If you present and portray hi-fi audio most strongly from the viewpoint of being technologically advanced, home audio equipment, then you are obviously not hitting the home run with everybody.
So how good are the equipment makers in serving the second function? Makers of audio hi-fi equipment have always had trouble with the second function. It is understandable, because serving the second function, with extremely varied and personal preferences, and making and offering equipment that serve those, is both costly and has extreme business risk. There is a great risk of manufacturing, and stocking too much of one thing, offering it and hoping to sell, but not being able to sell it, and having too little of something else. Therefore, a great number of equipment makers have almost completely refrained from serving these different needs. They even boast that the second function isn‘t important at all, and they completely shun it. But it is important nevertheless, among many. Whether that is based on conscious thought, or an unconscious feeling, then I believe it can often be the key to the final decision. The numbers above indicate that very clearly.
Recent changes increase potential: This opportunity has been known to me for long, it‘s one of my oldest ideas. I always found this opportunity most interesting, but the manufacturing solutions were complex and potentially expensive. This meant that responding to these unfulfilled needs in the market seemed to make sense mainly in the most premium luxury segments of the market. Partners that would have made sense were companies like LVMH, Groupe Richemont, and Pinault-Printemps-Redoute (now Kering). Those companies were not very accessible for me at the time.
However, there have been recent changes in production processes which change this situation, and make it very exciting. It would now be possible to offer solutions to less premium segments of the market, or from medium priced I think, and then up towards premium luxury high-end. I can now point out a more flexible, cost effective way of serving this secondary function. It would be the goal of a project undertaken by me to present the research and argument for how that could be done.
The solution when it comes to both loudspeakers and components could use a relatively simple technological solution, which has recently become quite widely used, and to use the internet and information technology solutions for sales. It would be rather simple for loudspeakers, and slightly more complicated for components, but both could be very attractive business wise, as it seems to me that serving better the second function could open vast possibilities. Instead of being bland, boring, unsatisfying, the possibility would now be to being able to offer absolutely drop dead gorgeous equipment, which will possibly set a new standard in how the „second function“ is served. The idea would be to go after a larger market, with higher margins and increased profitability. It could allow to increase the diversity of product offerings, without driving cost and risk through the roof. The innovation may allow a loudspeaker company to use less expensive raw materials in the build of the loudspeaker, allowing for cost reduction.
Possible market size: The opportunity is in the market for audio hi-fi, which will be roughly worth around US$ 15-20 Billion around 2018-2022, according to various forecasts. The solution has the goal of building mid-range to premium offerings in the market (which however was difficult with the previous manufacturing technologies), with the ability to charge higher price premiums, and increase profitability. The solution did include innovations or new approach in market research, design, manufacture and assembly, promotion, sales and delivery of these equipment. A key concept here could be „a new/additional definition of style focused and high-end hi-fi.“
I believe, that how the market is divided between different levels of price premium is a reflection of two things: The level of affluence of different groups among the public, and how accurately the offerings on the market reflect the full spectrum of needs and desires of those markets. I believe that this match has not been accurate in the home audio equipment markets. This means that the industry has not been fully offering the types of products that all groups would be most delighted to acquire, use, and talk about. It might be possible to change the mix of offerings, and move the market towards the „natural“ proportions in terms of the premium price levels.
The evaluation was based on a certain distribution of price premiums, based on known numbers about the distribution of people into groups of affluence. These groups were: Conventional offerings, (around 88% of total number of customers), Style offerings (10%), Stylish premium luxury offerings (1.8%) and Top tier prestige luxury offerings (0.2% of total number of customers). The results gave me the preliminary, theoretical conclusion, that the possibilities of improved sales numbers, margins, profitability, and stock market prices of companies that would implement this successfully, could be „very considerable“ and perfectly in scale with the basic size of the market.
Recent changes in how people enjoy music, with emphasis on mobile devices, wireless tech, earbuds and headphones, has changed the scope of the general opportunity. For that reason, I am not saying what the preliminary conclusion was, regarding possible changes on market value. The market size is difficult to predict, before the research and analysis has taken place mentioned before.
Let us put it this way: If you evolve the focus in how the product is conceived, designed, presented and positioned, emotionally speaking, from being very technology audio equipment device focused (which around 398,000 men and women show special interest in, in the Western countries*), and you move the balance towards incorporating better, and responding better to, a focus on the „second function“, (which around 128 million men and women show special interest in), then what may the effect be? The answer is: I cannot predict accurately at this moment, but it could be significant. The future market size is only predictable when the basic focus of products offered are predictable. A change in this focus could unleash forces with surprising results.
How will this be best implemented? In this audio hi-fi opportunity, as well as regarding the opportunity described in Chapter 2 (de-alcoholized wine), I am in a similar situation as I was when I was introducing my ideas regarding the Vatnajokull glacier: I had a bold, strategic vision, facts to point out, good arguments, and a blueprint for a solution that might be economically very valuable. What happened then was so spectacular that something similar was seldom seen in the world history of the 20th century, but for myself the consequences were far from positive. Now I have to ask what are the best steps to take? I am not interested in repeating the severe challenges that I seem to have encountered as results of the Vatnajokull case (see Part Two in this book). What is the best way of creating a vehicle that can successfully exploit these opportunities in the audio hi-fi sector, according to my discoveries, in a way that is healthy, just and fair, and offers opportunities for growth and value creation for those who are involved?
This text here is openly available, but obviously doesn‘t say much about the actual consumer preferences or the solutions on how to take advantage of the opportunities in this US$ 15-20 Billion market globally. I do have almost full ideas about that already. My logical next step would be to work on the research, interpreting the results, strategy formation and forming of a marketing and execution plan, with collaborators or for the company I am working for. The further results would of course only be available for those I have reached an agreement with. Now is the time to secure that.
I am interested in working for or with in some way a company that is already well-established in the audio hi-fi consumer electronics. A strong contender in luxury markets could be very much interested also. Both have their pool of knowledge and resources, and I have my vision and strategy. I offer you to enter discussion on how this can be done in the best way for all parties involved.
If your interest is awakened, I suggest that you or someone also reads the other parts of the e-book „Overview of Opportunities“ to better understand the author of this is, his background, history, past accomplishments, and potential.
(* Based on easily attainable market data from a social website).
Progression of home audio-video technology from 1920 till today (chart by me).
Overview of Opportunities, view the entire book
If you are curious, read about other opportunities that Sverrir is possibly interested in working on later, read about his previous accomplishments that is the Vatnajokull National Park in Iceland, which is Western-Europe’s largest national park, and see letters from a minister, ministry people and others regarding these. See here.
My personal art and design gallery, with my own works.
Contact: Sverrir Sv. Sigurdarson. Email: sverrir@sverrir.info. Phone: +354 8640023 Skype: sverrirsveinn