Figure out what you do
Klipsch defines vision as a narrative statement about why you’re in business. Figuring out the answer to this question is a key component to success for any business.
“We’re in the loud speaker business,” Klipsch says. “Then the next cut would be, ‘OK, are you mainly commercial loud speakers or residential loud speakers?’ In our case, we’re residential loud speakers.
“Then you’d say, ‘Are you trying to sell standard products at commodity price points where you’re looking for high volume in dollar sales but lower margin in the per unit sales? Or are you prepared to take lower sales volumes by maintaining a higher quality product at a higher gross margin? We’re the latter. We call that premium loud speakers, best of class.”
The point of this exercise is to be clear about what your vision is supposed to be. If you don’t know that, how can you expect to be attractive to a market with many, many options for just about anything you can think of?
“That vision statement has to nail down all those variables,” Klipsch says. “You are this, but you are not that.”
It’s not as if Klipsch hadn’t had to modify its vision before the recession. The home entertainment industry has been in a state of tremendous flux for more than a decade.
“It’s more matching up to the ever-changing dynamics of the retailer, and then, in our case, understanding new product categories that the consumers have bought in to like earphones and ear buds and docking stations for their telephones and other devices,” Klipsch says.
You need to be in touch with the people who buy and sell your products to get a read on what they are looking for you to do.
“You do that by having interaction with your consumers so you know what’s happening at the ultimate consumer level,” Klipsch says. “There is no reason to wait until the end of the month to know what’s going on during the month, and how we know is by interacting with our customers on a daily and weekly basis all the time. I was with one of our largest retailers all day yesterday and for dinner last night. In those meetings, we get a feel for where they are. If they are starting to see more traffic and are starting to see a recovery and are increasing their orders for October and November, that’s an indicator.”
When two or three other indicators tell you the same thing, that could be perceived as a trend.
“If only one retailer is doing it, maybe he has some unique capability, but it doesn’t represent the market,” Klipsch says. “That’s the judgment call we have to make every day.”
When you’re talking to your buyers and sellers, don’t just ask questions. It doesn’t hurt to talk shop once in a while and get into the details of your strategy.
“We develop strategies so that we provide a product to Best Buy that’s not like the product we provide to hhgregg. The strategies we come up with are meant to give the major retailers some unique product lines and somewhat separate from what some of the other major retailers are selling. So the merchandisers at those different retail stores are participating in how they would like to see that strategy evolve and how they would use their part of the strategy to their advantage. There is a coordination that is occurring.”
As Klipsch has expanded around the globe, the company has also focused on developing strong relationships with distributors so it has a contact point from which to gather feedback about consumer habits.
“They become the primary interface for language issues, credit issues and inventory issues,” Klipsch says.
The goal is to be in touch with your customer and the market and be able to tweak your vision to meet the changes as they occur.
“It’s an ever-changing set of priorities that you tend to have to constantly evaluate,” Klipsch says. “You’re looking at your key profit centers. You’re deciding whether one has growth opportunity or the other one. You just want to protect and stabilize and you reallocate resources, therefore accountability, to evolving new responsibilities as the business has evolved. Let’s face it, your two resources are people and money, and you’ve got a limited amount of both.”
