Henry Kloss sells his new speakers direct to the public, capitalizing on his legendary reputation among audiophiles.
Henry Kloss is about as near to a legend as you'll find in any industry. It was Kloss who brought Dolby sound into living rooms; Kloss who commercialized chromium dioxide audiocassette tape; Kloss who pioneered large-screen projection television. And it was Kloss who made the dominant speaker systems of three decades -- Acoustic Research in the 1950s, KLH in the '60s, and Advent in the '70s.
Now, he's at it again. As cofounder and CEO of Cambridge SoundWorks Inc., in Newton, Mass., Kloss has designed a new high-end speaker system called Ensemble, consisting of four sleek black boxes that can be dispersed around a room. But more striking than the speakers themselves is the way the company has chosen to market them -- selling direct to the public through advertising that makes the most of Kloss's legendary reputation among audiophiles.
It's a daring strategy. After all, the company is asking consumers to shell out $500 for speakers sight unseen and sound unheard. "People thought we were crazy," says company president Tom DeVesto. "They said, 'Why would anybody buy speakers they can't hear?' " Indeed, few people would but for the involvement of Kloss, a figure as warm and fuzzy to stereo buffs as Santa Claus is to children. Then too, it doesn't hurt that selling direct allows Cambridge SoundWorks to price the speakers hundreds of dollars below the competition. The combination of Kloss and price is enough to get many audiophiles to dial the 800 number and talk to a salesperson. UPS takes care of the rest. Customers have 30 days to try the speakers and return them. DeVesto puts the return rate at "well under 10%."
The strategy is very efficient. Because customers pay the company directly, it gets its money at once. It needs no receivables financing, no credit department, no field sales force, and it doesn't have to woo dealers at trade shows. "We can spend that money on advertising, paying our office salespeople well, and putting more into the product," says DeVesto. The company, he adds, would have needed three times as much start-up capital had it gone through dealers. As it is, Cambridge SoundWorks broke even on a monthly operating basis after just four months of delivering speakers. DeVesto anticipates sales of about $4 million for the first 12 months. That's not bad, even for a legend. Indeed, he notes, it's better than KLH and Advent combined.