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Wed 9 Aug 2006 04:00 AM

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Creativity key to success

Best known for its popular range of MP3 players and IT peripherals, Creative Labs is carving a successful niche in the Middle East consumer electronics sector. Creative Labs Middle East senior marketing specialist Gibson Varghees speaks to ECN.

|~|GibsonCREATIV200.gif|~|Creative Labs Middle East senior marketing specialist Gibson Varghees|~| Electronic Channel NewsPlease provide an overview of Creative’s operations?

Gibson VargheesThe company’s corporate headquarters is located in Singapore, but we have regional offices in Europe, the United States and a separate base in Singapore catering to markets in the Asia Pacific.

ECNWhat are the company’s core products?

GBMP3 players and sound cards presently account for the bulk of our business. Creative introduced the sound card in 1982, which revolutionised the PC market. We recently developed a new sound card called Xtreme Fidelity that works to significantly enhance MP3 sound quality, which is fairly low-fi compared to CDs.

In fact, tests have proven that the sound card can boost sound quality to 24-bit stereo. The sound card can also provide simulated surround sound in conjunction with a standard set of stereo headphones. It is the only sound card available on the market that provides this capability.

ECNWhat are Creative’s key markets in the Middle East?

GBDubai is widely recognised as a showcase for the Middle East consumer markets in general and a lot of companies look to the Emirate to identify consumer trends that impact the entire region.

As a result, we maintain our core presence in the UAE, but we also have a presence in other key markets including Saudi Arabia, Iran, Kuwait and Bahrain.

Iran offers huge commercial potential for our business, which we plan to tap with our MP3 player range.

Saudi Arabia is another market where we expect to increase our business in the coming months, thanks largely to an increasingly affluent consumer demographic. Saudi’s sheer size makes it arguably the most important market in the GCC. The Middle East is a very important region for Creative from a global perspective and one we believe will provide key opportunities for growth in the future.

ECNWhat type of distributor model do you employ in the UAE, for example?

GBWe have traditionally adopted a multi-distributor set-up in the UAE. However, in recent years we’ve scaled this back to two distributors. We may look to expand this base again in the future depending on how the market develops. We largely adopt a similar strategy for other markets in the region.

ECNHow do you implement your product and branding strategy when dealing with a new distributor?

GBWe concentrate on core products. Creative has 400-plus products, but if I’m looking to appoint a new distributor, I look at the company’s core competencies, its history in the market and what other products and brands it already represents. I also look for assurances from that distributor in regards to what retail presence they can guarantee for the Creative brand.

ECNWhat would be your key message to a potential distributor in the Middle East?

GBWe are here to create a brand and we are serious about doing business in the Middle East, so we will provide you with all the marketing and associated support required to ensure our relationship will be successful. There is a commitment there. In return, we expect you to promote our brand and build a rapport with the retailer to ensure our products receive the greatest exposure possible in their stores.

Power retailers, particularly in the UAE, follow a very structured approach when dealing with vendors. We look to see what sort of relationship a distributor has with these key players in a particular market.

We do not place great emphasis on doing business with ‘box movers’. We are more interested in working with distributors and retailers that are committed to building a brand presence for our company in the region.||**||Channel Focus|~|Gibson200.gif|~|"We do not place great emphasis on doing business with ‘box movers’. We are more interested in working with distributors and retailers that are committed to building a brand presence for our company in the Middle East."|~| ECNWhat characteristics distinguish the UAE from other consumer markets in the region?

GBThe actual structure of the Dubai consumer electronics market is not very sophisticated. The reputation for sophistication comes from the consumer market in general.

Consumers in Dubai have very sophisticated tastes and demands and as a result, marketing strategies must be tailored specifically to attend to these demands.

ECNWhere is the Creative product range positioned in the market?

GBOur strategy is to target a specific sector of the market and offer a Creative product at every price point in that category. In terms of MP3 players, we have entry level products that sell for as little as US$35, while our premium models are priced up to US$700. Our competitive advantage lies in the features we offer at every price point, with products that are generally more highly specified than those offered by our competitors.

ECNHow did the company’s experience developing IT peripherals foster the development of its range of MP3 players?

GBGiven our experience developing PC multimedia products, the next logical step was to develop a ‘lifestyle’ consumer electronics portfolio leveraging our existing technology, which included MP3 players. In the Middle East, our core product range consists of these digital lifestyle products.

According to the latest research from GfK Marketing, Creative is currently the number one brand for MP3 players in the UAE in terms of units shipped. Recently, we have been looking at ways of incorporating Xtreme Fidelity-style sound enhancing technology in our range of premium MP3 players. This will provide us with a key point of difference in this highly competitive market.

ECNWho are Creative’s competitors in the MP3 market?

GBApple and Sony. Certainly, Apple has had major success with its iPod, and Sony has also done well with its MP3 Walkman. You have to respect their achievements given their success globally.

We are also facing increased competition from Chinese vendors targeting the entry level sector. They do not pose a major threat yet, but the potential is there. We maintain a number of advantages over these vendors however, particularly in terms of after-sales service and customer support. We have managed to achieve considerable success in the entry level market by offering value-for-money MP3 players with impressive features.

ECNWhat sort of threat do Chinese vendors pose long-term?

GBThere is a large number of low-cost Chinese goods entering the Middle East market, particularly through Dubai. Many of these products have little in the way of brand equity and are manufactured by vendors basically looking for short-term gains.

The best way to confront this challenge is to provide consumers with a well-known branded product that boasts a high feature set for around the same price as a Chinese product.

ECNWhat sector of the consumer market do you see Creative’s immediate growth coming from?

GBThe boom in demand for notebook PCs has been a boon for our business. We have been working to expand our range of consumer IT peripheral products including web cams and portable speakers to cater to this demand.

We believe in the next quarter, much of our sales growth will come from this sector, and we are implementing a marketing strategy to support our distributors in this market. This will involve in-store promotions in conjunction with key retailers and roadshows – key channel activities designed to enhance our brand image.

ECNWhat marketing support do you offer your distributors and retail partners?

GBWe are very aggressive in terms of our marketing strategy. We are working with retailers to position our product bundle as a single solution, and one that complements notebooks from other manufacturers. It is important to get the message across to consumers that Creative has a great many more products than just MP3 players.

We have laid the groundwork with our distributors and we have received positive feedback from the power retailers, who have expressed a willingness to work with us on this strategy.

We recently ran a dealer display competition that attracted around 45 entries from retailers across Dubai. Jumbo won the Power Retailer category, while CompuME took out the dealer segment. In the UAE market, which has such a large ex-pat population, you need these major retailers to be responsive and support your vision.

ECNWhat incentives can you offer distributors in terms of product bundling?

GBWe have worked to develop a full product bundle for consumers looking to enhance the multimedia capabilities of their notebook PCs. This package includes an assortment of webcams, including our latest model with Live Motion technology, which tracks the physical movements of a user, and high-end portable speaker systems. We also offer internal and external sound cards, mice and keyboards. It is a complete solution.

The cutting edge technology is the unique aspect of our products, which is aided greatly by a competitive price point. We are trying to focus on the core demands of consumers in this sector, by offering them highly specified solutions at affordable prices.

ECNDoes Creative have plans to customise its product range for the Middle East?

GBOne of our key priorities is the customisation of certain products for specific markets in the Middle East. With 400-plus products, there is plenty of potential for us to experiment.

Certainly, consumer demands in Iran for example are different to those of countries with large ex-pat populations, such as the UAE and to a lesser extent, Saudi Arabia.

ECNA major issue confronting the consumer electronics channel at the moment is grey market distribution of unauthorised products. What measures has Creative put in place to safeguard its channel partners?

GBThe grey market does present a challenge, although it is fairly limited in terms of our business. There is a certain amount of Creative product that does flow into markets such as Dubai from unauthorised channels. But that doesn’t actually impact the power retailers because they have such strong relationships with our official distributors, who also guarantee them sales and service support.

Our strategy is designed to ensure standard pricing structures for all of our distributors irrespective of their country of origin. In this way, we remove any chance of a price war occurring if grey market products infiltrate a particular market sector.

It also makes it fairly pointless for a particular company to try and sell our products through unauthorised channels, given the added cost burden associated with shipping and distribution. These costs generally nullify any slight price advantage they believe they could gain by selling product into countries they are not officially authorised to deal with.

Another factor is the localised warranty we offer, which discounts any products sourced from unauthorised international channels.||**||

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