Sound ideas
By focusing on top-quality products, Klipsch has established his brand as the one to go to for excellent sound, but he has also had to make sure the company is in the right distribution channels to utilize its quality advantage.
The distribution channels for high-end speakers have grown from the single audio specialty store 10 years ago to include regional specialty stores that focus on custom installations and big box retailers such as Best Buy.
“Ten years ago, Circuit City, Best Buy and stores like that were looked upon as mass merchants, but they have evolved the product they carry to the next level,” Klipsch says.
There are now hundreds of uses for speakers, ranging from home theater systems to docking stations for iPod digital music players. The company looks to provide a solution for customers in each of those categories, regardless of whether they get a product from Best Buy or a custom installer.
A consistent quality product across all these uses is key to maintaining the brand image.
“In all cases, what we’re driving is a single brand image, Klipsch, so that whenever a consumer or retailer gets involved with a Klipsch product, regardless of what category it is in, they have high expectations on the performance side,” Klipsch says.
High performance also equals a higher price tag, with better margins for resellers.
“We redefined the multi-media loudspeaker space for computers five or six years ago,” says Klipsch. “When all the loudspeakers for computers were selling for $69 and $79 a pair, we came out with loudspeakers at $299 and $399, added a powered subwoofer and literally, in our retailers’ space, doubled, tripled and quadrupled their average selling price for the product.
“The reason we did that is instead of being a commodity product, we developed a best-in-class, high-performance product that cost more, and the market said, ‘I really like good sound, and this sounds good.’”
Staying on top of the quality heap comes at a price. Klipsch spends about 4 percent of his annual budget on research and development that is a combination of science and art.
“The science of it is something that we have a lot of engineers that work on it … but I want to tell you, there is an art to it,” Klipsch says. “At the end of the design cycle, we actually voice these loudspeakers, and there are some people that have just great ears — they can hear things that I can’t and maybe you can’t, but they just have great ears. There are several people in our company that are jokingly called ‘the guys with the golden ears.’ That phase makes a difference to us.
“The final human reaction to the sound coming out of that specific loudspeaker, and in both cases, whether it is the science or the art of it, there are absolute standards below which we are not going to drop.”
As Klipsch continues to roll out more products to match up with new technologies such as iPods and flat panel televisions, the pressure to shorten the Klipsch product cycles increases as the devices they connect to shorten their own development cycles. Despite the pressure, to stay on top, quality must always win out over speed.
“Our product cycle has shortened to a degree,” says Klipsch. “We introduced 11 new speakers in six months last year. At the same time, we have a high-dollar product series coming out in 2006 that has been under development for more than three years. We have the infrastructure to move quickly when the marketplace demands it or when we see an opportunity for advantage, but we also have basic quality and performance standards that we will not ignore, regardless of the pressures.
“The negative impact of a compromised product far outweighs any benefit we might derive from being fast.”