Vizio Marketing Strategy
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VIZIO, Inc. is a company that specializes in flat panel televisions. The company, initially known as V. Inc., was founded in 2002 and it has its headquarters in Irvine, California. The company produces a wide variety of products that includes LCD and plasma Televisions, LED and LCD high definition (HD) TVs. When VIZIO first entered the highly competitive LCD TV market in 2003 the price point for 40 inch plasma TVs averaged around $2000 – $2500, while the average price for a CRT TV was only $500. The price difference limited the consumers to the ones that had a college education, were prosperous, and obviously had a significant disposable income. As such, the products only targeted the market segment that included customers that were 35+ years, which was not VIZIO’s intended target customer base. Given the fact that the electronic market segment for televisions had been mainly dominated by monster brand names such as Panasonic, Sony, Samsung and many others, and also taking in consideration the fact that VIZIO was a relatively new brand , the Company had to use a good marketing plan to gain entry on the already crowded market.
To get an advantage in the market, VIZIO decided that an approach based on price would be the best approach. Based on this marketing strategy, they knew that in order to have access to a wider range of customers, they needed first to established partnerships with well-known retailer channels that offered products at lower prices, such as warehouses, retail clubs, or Big-Box Retailers. They also needed to target a self-informed segment, with knowledge about the technology, because this segment will not require the costs of promoting the products as it would,if introduced to the unknowledgeable segment. North American retail channels are dominated by four major categories of retailers with great economic influence: * Big-Box Retailers: K Mart, Sears, Wal-Mart, etc
* Specialty Electronics Retailer: RadioShack, Best Buy, Circuit-City
* Warehouse Club Retailers: Sam’c Club, Costco, BJ’s
* E-Retailers: eBay, Amazon, etc.
Since all of the channels present diverse challenges, VIZIO had to choose the one that would offer them the possibility to reach its financial goals and future end customer. Below is a table presenting the main challenges for the main retail channels and the reasons that prompted VIZIO to choose a certain channel:
Channel Characteristics| Warehouse Club Retailers| Traditional Retailers| Specialty Electronic Retailers| Marketing & Promotion Costs for Manufacturer| Lowest| High| Highest| Sales Commission| None| Low – Medium| Medium – High|
Revenue / Profits Streams| Mark Ups| Markups, Volume Discount, Double Marginalization, Sales Promotions| Markups, Volume Discount, Double Marginalization, Sales Promotions| Influencing Buyer Purchase Decision| Neutral| Manufacturer Incentives and Commissions| Manufacturer Incentives and Commissions| Profit Margins| 10 – 15%| 20 – 30%| 25 – 40%|
Distribution & Logistics| Managed by Retailer or 3rd Party Distributor| 3rd Party Distributor| 3rd Party Distribution| Table 1: USA Retail Channel Characteristics and Costs Based on the characteristics of the USA Retail Channels and their initial marketing strategy, to keep their price low, VIZIO decided to exclude online retailers as the average consumer was not willing to spend more than $300 on an electronic purchase, and high-end retailers because they would influence their products prices because of the additional marginal costs. However, they chose Warehouse Club Retailers such as Costco, Sam’s Club and BJ’s as the channel for their products because of their low margin cost model, and more importantly because of the number of stores spread nationwide, which would generate brand awareness for the product. More importantly these types of retailers require minimal advertisement costs, which perfectly suited VIZIO’s low cost approach, and their budget as a new competitor against monster such as Samsung, Sony , etc. Moreover the partnerships would be mutually beneficial for both the producers and the retailer.
For VIZIO was an advantage because many of the warehouse retail channels did not have sales personnel which could influence the customers during the shopping process because of the sales quotas. For the retailer was advantageous because of lower price driven by the lack of brand name, and the fact that they require all manufacturers to sell directly to them, which subsequently eliminated costs and markups associated with middle distributing channels, which was also a plus for VIZIO. Based on the geographical coverage, and the numbers of sales, VIZIO decide to partner with COSTCO, as this particular retailer suited their needs the most in attaining their financial and marketing goals.
At Costco, VIZIO relied extensively on consumers to purchase their product without any assistance from salesman whom would either influence or steer the consumer during the sales. Because of their low brand awareness, they strategically placed their products on conspicuous display, right at the entrance at the stores, to catch the customers’ attention, but more importantly because their shoppers fell into the market segment target by VIZIO, 35+ years, wealthy, and with disposable income. By their 5th year mark, and driven by new distribution channels, the company broke the 3,000,000 set mark. As a result of this success, and increased profitability, VIZIO started applying the undifferentiated marketing strategy by ignoring the market segment differences by mass advertising and distribution to other markets. Using unique technologies to ensure that their products are of the highest quality available has helped the company prosper and grow. Nevertheless, VIZIO’s success can be attributed to the following marketing strategies:
1. They eliminated the costs associated with major advertising campaigns, because the retail channel chosen offered advertised promotions only to its members. 2. By eliminating the 3rd party distributor they also eliminated channel conflicts associated with double marginalization. 3. And last but not least, by partnering with retail channels as Costco, which have very low price markups on products, they were able to sell their products at a significantly lower Their marketing strategy worked very well, and in a couple of years, the company went form the “No-Name” brand to market leader. At the end of year 2011, VIZIO was the leader of liquid-crystal-display (LCD) television in the U.S. market, accounting for more than 27% of the country’s sale, according to a report provided by iSupply.com. Their major competitor, Samsung and Sony, among others, made up only 20%, respectively 10.1%. Since the company first opened its doors for business, by offering only flat panel televisions, VIZIO has broaden its range of products which now includes home theaters, Internet applications, and an extremely wide variety of accessories.
They also partnered with Technicolor SA, which is the technological leader of digital innovation in media and entertainment markets. VIZIO is expanding its distribution in Canada, with the goal of making product available through a wider range of Canadian retailers. VIZIO products are now available in Canada at Costco, Costco.ca, Walmart, and Dell with future plans that include further distribution on the international, extra continental market. VIZIO is a living proof that in order for a company to be successful it requires a team of employees that have the same values, believes, and structure to make any business strive. This is what helped VIZIO reach their goals and continued to find new ways of maintaining their competitive edge.