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Recently IHS shared some of the finding of the latest IHS Auto Tech Consumer Survey - Premium Car Audio - US, UK, Germany & China – 2015. The quintessence of the study: Consumers have a strong desire in premium/branded car audio systems. In related news, Harman made a big splash in the world of branded and premium acoustics and announced that it has signed an agreement to acquire Bang & Olufsen Automotive car audio business.
"Rented" Audio Brands
There are three strategies when it comes to audio systems for automotive OEMs.
The first strategy (Branded Audio) is what the consumer is expecting when they buy a branded audio solution. The system is engineered by the company on the branding label and the components are from that same company too, so they can come to expect the same audio quality that they have come to know in other sectors, like headphones or home surround.
The second strategy (Non-branded Audio) is becoming ever more important as automotive OEMs upgrade their audio systems available to consumers. If the non-branded audio solution is top of the line, then a branded solution becomes less necessary and less likely to be chosen.
The third solution (Rented Brands) is the solution most attractive to the automotive OEMs. They receive a solution in their vehicle with a top of the line branded name attached to it, but at a lower cost, since they are likely paying for a solution with cheaper components and engineered either by the OEM itself or by the company supplying the components. This does not mean it is not a good audio solution, just probably not what the consumer is expecting if they buy a certain brand.
Harman acquires Bang & Olufsen, adds another brand
Harman made the recent announcement that it acquired the automotive audio business unit of Bang & Olufsen. Bang & Olufsen is a Danish company that is known for high quality audio. It has been involved in automotive in recent years with companies like Audi, Aston Martin, BMW, and Daimler’s AMG performance brand for Mercedes-Benz. Bang & Olufsen though has employed the rented brand solution mentioned above.
Harman, essentially paid €145M to use the Bang & Olufsen name in vehicles for components they and other component suppliers had already supplied. This is a steep price to pay, but what it does is solidify Harman’s presence in the luxury brand segment.
Questions remain though about how far Harman can diversify its branding before it ultimately hurts the overall Harman brand. Brands like JBL and Harman Kardon and even Mark Levinson and Revel are associated with the Harman brand. However, Bowers & Wilkins and the recent acquisition for the automotive business of Bang & Olufsen are not brands traditionally associated with Harman. Furthermore with eight total brands in the automotive market now it dilutes the overall Harman name. Consumers associate more with JBL, Bang & Olufsen, Bowers & Wilkins than they do with the Harman name.
Bose Introduces Advanced Technology Series
With the recent introduction of the new Cadillac’s CT6 sedan, Bose is trying to emphasize that its systems aren’t created equal. Its Panaray system marks the global debut offering of Bose Automotive’s new line of “Advanced Technology Series” sound systems. The CT6 includes three levels of Bose sound, with the Panaray system available in higher-tier packages. Will the consumer understand the differences and will they be willing to pay for the differences, even if all systems bring the Bose branding into the car? Singling out the “Advanced Technology Series” and "Panaray" is at least a good start.
Product differentiation is very important in the onslaught of audio brands that are currently available. Audio suppliers are caught in the middle. OEMs are trying to focus on a target market in which competitors offer very similar products already. An OEM that uses product differentiation by offering low, mid, high and ultra-luxury audio brands, tries to create the perception among buyers that the audio brand’s version of a given acoustics systems is somehow different, adds value and most importantly is worth the higher price ticket.
"Renting" audio brands is common practice in the automotive industry, just like OEMs share other components within a given brand or even outside of the parent company, but when it comes to audio branding, OEMs need to also be mindful of the consumer. As mentioned earlier, it does not mean it is not a good audio solution, just probably not what the consumer is expecting when they purchase a certain brand.
By Kevin Hamlin, Senior Analyst, Automotive Technology, IHS Automotive
Posted April 9, 2015

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