THOMSON NEEDS A HIT, AND IT'S UP TO NIPPER TO GO FETCH
Joseph Clayton knows how hot his seat is: "I've got 18 months," says Clayton, the new marketing chief of Thomson Consumer Electronics Inc.'s RCA and GE television businesses. He has to deliver the big gains that have eluded Thomson in the cutthroat $9 billion U.S. TV market, where GE's and RCA's position, still the largest, has eroded (chart). Otherwise, Clayton, who oversaw TV manufacturing until March, says he'll probably get the boot.
French parent Thomson badly needs a success. In 1988 the conglomerate gave $800 million and its medical-equipment division for General Electric Co.'s GE and RCA brands, then poured more than $300 million into its American plants.
Clayton, who is also the new head of Thomson's worldwide audio business, says the U.S. TV business eked out a tiny operating profit last year on about $1.5 billion in sales. But his French bosses want more. No wonder: In 1991, Thomson's worldwide consumer business lost $462 million on $5.8 billion in sales, including a $280 million write-off. So Clayton, 42, is applying what he calls "shock treatment"--pricing more aggressively, pumping out ads, and wooing retailers.
WIDE APPEAL. In contrast to last year, when RCA and GE stumbled badly over some attempted price hikes, Clayton is slicing prices on some models. He's also targeting the market for sets 30 inches and larger. Although big-screen TVs account for less than 5% of unit sales, with prices of $2,000 and more they make up 22% of retail sales, or almost $2 billion. Big-screen sales to dealers are 50% ahead of last year, compared with 3.7% for all TVs. And gross margins for big-screen TVs are about 35%, vs. 20% for a 20-inch set. As for smaller sets, Clayton is simply hunkering down for a struggle to retain or maybe boost share slightly.
To make big inroads in the high-margin end, Clayton is offering competitive prices and stressing the styling he ordered for RCA as director of manufacturing. In many sets, rounded edges have replaced sharp corners, and blacks and grays have banished the faux-wood look. RCA's smaller sets have updated styling, too, while GE gets a complete make-over next year.
The changes are having an impact. RCA and GE now account for almost 20% of sales of sets 30 inches and larger--behind Mitsubishi, Toshiba, and Sony but up from less than 5% two years ago, notes Stephen Nickerson, director of color-TV marketing for Toshiba America Consumer Products Inc. Says Nicker-son: "They are drastically improving."
Clayton will also funnel $30 million, double the 1991 budget, into ads emphasizing features and performance. To push RCA out from the "wall of eyes" that dominate stores' TV displays, Clayton has persuaded an Indiana Sears, Roebuck & Co. store to test a flashy Thomson-designed display of a "home theater," complete with RCA large-screen TVs, VCRs, and speakers.
Clayton's back-to-basics tactics set him off from his predecessor Martin Holleran, a GE man. Holleran got good marks for reintroducing RCA's canine mascot Nipper in ads. Yet Clayton and others took issue with his fondness for such ventures as sponsoring the America's Cup, which they saw as unproductive image-polishing. Says a Thomson executive in Paris: "People were taking sides. It was very unhealthy."
PUMPED UP. When French government official Alain Prestat took over Thomson's worldwide consumer business, he sided with Clayton, and Holleran left in March. Holleran calls the changes a case of "fine-tuning" his strategy. Yet the soft-spoken Clayton brings an assertive style: At a sales meeting he once hired a World War II-vintage tank to crush rivals' TV sets. Says Donald R. Andresen, president of Denver's 18-store Fred Schmid Appliance & TV Co.: "Joeis pumping up thevolume."
Some retailers, however, are leery of Clayton's plans to roll out the first wide-screen TV. A wide rectangular screen would make for more spectacular viewing than that offeredby standard square screens. Trouble is, no one is broadcasting for this format. The advent of high-definition TV may produce wide-screen transmissions, but until then RCA's wide-screen sets will show the movie of the week with black bands on the sides. A zoom feature can fill the screen, but it cuts off the program's top and bottom.
For Clayton, getting to market first with this wide-screen TV is a potent ad for RCA's technology leadership. Later on, he can turn his riskiest venture into a moneymaker. Besides, he has to get through 18 hairy months first.Lois Therrien in Indianapolis, with Jonathan B. Levine in Paris