Selling Sound: Bose Knows

Partly thanks to an alliance with Apple, it's already one of the most trusted brands in the U.S. Where does it go from here?

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In the late 1980s, Bose salespeople went door to door to demonstrate the company's speakers, promoting what the company promised was rich sound without the bulkiness of other systems. "You had to hear it to believe it," says Bose President Bob Maresca. A lot of people heard -- and believed.

Many still do. Bose ranked as the most trusted consumer brand by far among 22 well-known tech companies, ahead of heavyweights like Apple (AAPL), Microsoft (MSFT), Dell (DELL), Intel (INTC), and Sony (SNE), according to a recent survey of 4,732 U.S. households by Forrester Research.

What's more, many people are likely to keep on believing in Bose, according to extrapolations made by Forrester. An estimated 17.5 million households plan to buy Bose products, compared with 7 million expecting to buy from Apple, Forrester says. This was the first time Bose was included in Forrester's trust survey, but the findings don't appear to be a fluke.

Market researcher NPD Group, in a survey of more than 600,000 people between April, 2005, and March, 2006, found that in home audio, Bose was less than a percentage point away from No. 1 Sony in terms of customers' repurchase intent. A bigger proportion of people who bought Bose gear said they were likely to purchase it again than did buyers of nearly every other brand.


  What's bolstering Bose's marque? In recent years, it has been an association with Apple. The companies collaborated on a set of speakers for Apple's digital music player, the iPod, and in 2004, Bose released the $299 SoundDock Digital Music System. "They pioneered the all-in-one premium iPod speaker system," says Ross Rubin, an NPD Group analyst. Speakers turned out to be the best-selling category among iPod accessories, a fast-growing $5 billion market, according to Envisioneering Group.

The fact that Apple admitted licensing its iPod connector technology to Bose and, at first, offered the speakers exclusively in its own stores was a big vote of confidence from a company not known for forging alliances. "It was the first time [Apple CEO Steve] Jobs acknowledged an outside collaboration," says Richard Doherty, director of Envisioneering Group.

For Bose, that made a huge difference. "There's been an uptick in their image since the iPod has been connected to it," says Nick Shore, founder of branding consultancy Way Group in New York. "They feel almost like the Mercedes Benz of sound systems" (see BW Online, 2/15/06, "Delivering Two Kinds of Quality").

What Steve Jobs giveth, he can also take away. In February, Apple released its own brand of iPod speakers, generating concern Bose sales would suffer (see BW Online, 3/01/06, "Apple's Latest Audio Offensive"). But Apple's speakers are bigger, more expensive, and appeal to a different customer, says Rubin. The SoundDock is still featured prominently at Apple's stores and in Apple ads. "Our relationship with Apple has been good," says Maresca.


  In fact, some analysts expect Bose will introduce more iPod-related gear in the next several months. "Bose is [in iPod accessories] for the long run," says Phil Hess, director of Bose's home entertainment division. "It's a segment we are going to focus on."

Another focus for Bose is marketing. The closely held company doesn't disclose spending figures. But detractors say a lavish ad and marketing budget keeps prices and visibility for Bose products higher than is warranted by their sound quality. Others say the company overemphasizes design to the detriment of audio.

Bose is unfazed by the brickbats. "Unless we believe we offer significantly better performance, we won't [make a product]," Maresca says. "We are careful to never over-promise." The company, like many rivals, offers a 30-day money-back guarantee on its products.


  Besides, there's a lot to be said for Bose's sleek design, say several analysts. Bose's Wave music system's plastic cover has no molding marks -- no mean manufacturing feat. The company's Lifestyle home theater in a box has only two speakers, instead of the industry-standard four, making it easier to set up, explains Rubin. "They have components that look good, don't take up a lot of space, don't have controls all over the place," he says.

Then there are the stand-out features, such as automation. Bose uses research into how a human ear responds to sound to build automated tone control into products. Many other audio makers' gadgets require the user to use knobs and dials to adjust volume. With Bose, sound levels are adjusted by Bose's ADAPTiQ technology, which analyzes a room's acoustics and makes automatic adjustments aimed at improving sound performance of speakers.

Industry insiders believe Bose could leverage its growing branding power to expand into new product categories and markets. Today, Bose sells everything from the SoundDock on the low end to the $3,999 Lifestyle home entertainment system. The company has a decision to make: "Do [they] want to expand the market and compete more aggressively on price, or just sell to the existing, [high-end] customer base?" says Ted Schadler, a Forrester analyst. Bose potentially could move beyond sound systems into consumer electronics more broadly, he says.


  Many analysts expect the company to introduce a competitor to the Sonos Digital Music System that allows users to beam music wirelessly from the PC to a stereo, speakers, or home theater system (see BW Online, 5/8/06, "Sweeter Music From Sonos"). Given that Bose has already introduced the AL8 wireless link, allowing users to listen to their Lifestyle system remotely, a Sonos-like device would be a logical extension.

But the company's product strategy is set by its founder, Amar Bose, whose eccentricity is legendary. Still the CEO after more than 40 years, Bose, 76, invests all of the privately held outfit's profits back into research. "We are not in it strictly to make money," says Maresca. "Dr. Bose is extremely eclectic in his research interests. The business is almost a secondary consideration." That said, since 2004, when the company reported $1.3 billion in revenues, Bose's sales have risen 38.4%.

An electrical engineering professor at the Massachusetts Institute of Technology, Bose founded the company in 1964 out of frustration with the quality of speakers on the market. He is fond of saying, "if I worked for another company, I would have been fired a long time ago," according to published articles. Indeed, Maresca recalls how Bose invested tens of million of dollars over 19 years developing headset technology before making a profit. Now, headsets are a major part of the business.


  Similarly, Bose's love of sports cars led to 20 years of research into suspension systems. The company is in talks with auto makers to have its product, unveiled in 2004, installed into high-end cars that might hit the road in five to seven years. "We are far more patient than most companies," says Hess.

But sound systems remain the brand's sweet spot. The company, which released several home listening systems last year, gained nine points of market share, to a total of more than 20%, and is now second in market share in home audio to heavyweight Sony.

The company has come a long way since it had to sell its systems door to door. Where Bose goes from here is an open question, but one thing's for sure: When it comes to the brand, consumers like what they hear.

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