1 PAN­EUROPEAN CONSUMER GROUPS

EXHIBIT 6.1 PAN­EUROPEAN CONSUMER GROUPS

Bang & Olufsen has selected the northern groups A, Bl and B2 as its primary target groups. They were selected because:

Their attitudes and interests are in harmony with Bang & Olufsen's philosophy. They influence public opinion compared to other groups, they are more frequent buyers of and more likely to pay high prices for audio and video products.

Characteristically the groups are curious, open­minded and have a strong desire to learn new things. They are always changing.

888 • Owrcieie Case Six: Bang & Olufsen

The targeted groups A, Bl and B2 account for 30 per cent of Europe's total population, but only some 17 per cent in West Germany (as it then was). In contrast A, Bl and R2s make up 35 per cent of France's population and 37 per cent in Italy. This suggests that German consumers, on average, are more conser­

vative than the French and Italians. For Germans, adjustment to change is the

responsibility of institutions rather than individuals. .A New Promotions Strategy

The limitations of the push strategy used by Bang & Olui'sen Germany showed in the low consumer awareness (10 per eent) and preference (2 per cent) for Bang & Olui'sen products by Germans in 1984. Comparable figures in Denmark were 98 per cent awareness and 48 per cent preference. The situation had to improve and could only improve. A switch from a push to a pull strategy was needed to redress the balance between consumer demand and the availability of the products. The advertising strategy was built upon four ideas:

1. Quality of advertising medium has great influence on the attention and the

effect of the advertising message.

2. Activation of the main targetgroup by the careful choice of media (exclusive special magazines concerning living, design, lifestyle and so on) creates multiple purchase incentives without cannibalizing the Bang & Olufsen main target group.

3. Target group analysis and purchase motives. Main income and education levels decide the interest in the product and bear on the purchase decision.

4. Increase in awareness of Bang & Olufsen. Through advertising in higb­ profile generat­intsrest magcustnes, the company would achieve a clear

increase in the Bang & Olufsen awareness to an above­average level. Marketing expenses increased from 3 to 10 per eent to support the new pro­

motional effort ­ a change partly funded by cutting dealer margin from 38 to 33 per cent. 'We approach our main target group directly,' said Bernd D. Ehrengart, President of Bang & Olufsen Germany.

A New Dealer Base In 1984 the dealer base was 450 individual dealers, each with a different agree­ ment with Bang & Olufsen. Their rewards were based on their historical relation­

ship with Bang & Olufsen's sales subsidiary rather than on the turnover and profits they generated. Their individuality was also expressed in the marketing

strategy, the service performance and the price policy they offered. The sales strategy focused on transactions rather than on customer relations, a difference then unrecognized by Bang & Olufsen and the dealers.

A new strategy came under the banner: 'Mit dem Partner im Handel' (relation­ ship marketing). The aim was to have a dealer network whose sales processes matched the quality of Bang & Olufsen's products. Dealers should project a 'perception of high quality" and 'heighten loyalty towards Bang & Ohifsen'. Each geographical sales area would have a 'long­term potential coverage plan', and each area's plan would be tracked by the national sales office, which aimed to increase quality and loyalty within the distribution network. Dedicated Bang & Olufsen displays would increase the average turnover per dealer and the share of Bang & Olufsen turnover per dealer. Each dealer would have a partnership agreement with Bang & Olufsen covering: presentation, minimum range of products, exterior identification, service/installation provision, promotional activity policies, training and minimum turnover.

Overview Case Six.­ Bang & Ohifsen • 889

Bang & Olufsen's message to its chosen dealers was: • Bang & Olufsen makes you an up­market store.

• Bang & Olufsen offers unique high technology on a full range of exclusive products.

• Bang & Olufeen caters for customers who want qualified guidance. • Bang & Olufsen conducts its marketing in co­operation with its specialized

dealers.

A New Organization In 1984 Bang & Olufsen Germany had 25 staff. Those worked mainly on the internal administration of stock keeping, servicing", book keeping and recording orders. The average sales per employee were Dkr452,000. The new marketing strategy required the staff to he more externally oriented, with a focus on com­ munication, technical and sales training, distribution development, service and working" in the field implementing the new marketing strategy. More staff were needed, but increased sales per employee would more than cover their cost.