Sound Strategy

In an industry that reaches customers through dealers, lone operator Dave Fokos thinks he can sell his high-end Icon stereo speakers direct to the people who'll use them

The building, low and modern, sits back in the woods off a road that winds through an industrial park. The parking lot is empty save for a car or two under a dank winter sky and the looming skeletal shapes of trees. Inside, the feeling is one of equal desolation. A room bathed in shadows gives way to a nearly silent manufacturing area and warehouse. As a young man of medium height, dressed in jeans and a hooded sweatshirt, assembles a cardboard shipping carton, the sound of a ringing phone drifts from the front of the building. He drops what he is doing and sprints for the phone. "Hello, Icon Acoustics. . ."

Four years ago, when Dave Fokos was dreaming about starting a company that would make loudspeakers for the high end of the stereo market, he would run the numbers -- in longhand -- through various iterations to reveal the cash flowing fast and steady, the phone ringing off the hook with customers eager for his product. Fokos even drafted a statement that read like a manifesto proclaiming the rise of a postmodern workers' paradise under Icon's roof. He planned to have a company that afforded a quality work environment and subsidized education for its employees; a company that opened its books to all workers. He figured that by 1991 he'd have a staff of three or four people happily assembling speakers under the gentle glow of halogen lights, pausing during their herbal-tea breaks for a leisurely perusal of Icon's books, and after work, heading out to a company-subsidized concert.

But it hasn't quite worked out that way. Icon Acoustics Inc., based in Billerica, Mass., is for now one guy alone in a building out in the woods.

The Idea Dave Fokos is just 30 years old. He exudes the certainty of a craftsman who long ago found his calling. He has been fooling with audio equipment since his high school days. At Cornell he majored in electrical engineering, taking whatever electives and independent-study courses he could to further his skills as an audio engineer. (One of his former professors is an Icon investor.) By graduation, Fokos had designed and built a commercially viable pair of loudspeakers.

In June 1984 Fokos, fresh out of college, landed a job as a loudspeaker designer for Conrad-Johnson, a high-end audio-equipment maker in Fairfax, Va. In the next four years Fokos would be the principal designer of 13 speaker models for C-J, an experience he calls "an invaluable apprenticeship" for running his own show. Fokos founded Icon Acoustics in April 1989, believing the niche he sought had scarcely been explored.

Most stereo equipment is sold through dealers. But to small and craftsmanlike speaker builders like Dave Fokos, many audio dealers are a retrograde lot, grinding manufacturers' margins down to the nub and selling not what they believe in but whatever happens to be piling up in the back room this month. They sell a relative handful of popular, mass-produced models, effectively denying more customized offerings access to the mainstream market. What Fokos wanted to do with Icon was to bypass what he saw as a dealer cartel.

Icon seeks to sell direct from the factory. Customers can call Icon on an 800 number and order speakers. Icon pays for shipping and any return freight via Federal Express, and customers can try out the speakers at home without obligation for 30 days. If questions or problems arise, Fokos is available, via his 800 number, to give advice.

Fokos sees several advantages for his customers. Not only is the dealer markup -- 100% or so -- avoided, but with the home trial, buyers can listen to the product in their actual environment before making a decision. Most important, direct selling makes available to the listener a niche product that would not be profitable for most dealers.

Icon's product line consists of two models. Its Lumen speaker stands 18 inches high and weighs 26 pounds. A pair currently sells for $795. The Parsec, 47 inches high and 86 pounds, sells for $1,795 a pair.

Both models have components of very high quality that in many cases cost 10 times what the equivalent part in a mass-produced speaker does. In that way, they embody the Icon ethos: cram the speakers with quality components and craftsmanship -- and then sell them for half the price a dealer would charge.

The Market Fokos defines his target market as people who love to listen to music, equipment junkies, the audio-addicted. They tend to be educated, affluent, and obsessed. As Fokos puts it, "These people would rather buy a new set of speakers than eat."

But reaching enough of those people is Icon's challenge. Consider this: There are about 335 stereo-speaker makers in the United States selling to a $3-billion-a-year market (for all audio components). About 100 of them sell to the low end and midrange of the market -- say up to $500 per pair of speakers -- which accounts for about 90% of that $3 billion. That leaves roughly 235 specialty companies fighting over a market that amounts to no more than $300 million.

"It's a tough go for many of these companies," says John Atkinson, editor of Stereophile, a monthly consumer magazine. "They are forced into an area where they are trying to compete with the Japanese," he says. "Japanese products sold in the United States are of relatively poor quality but are sold at an affordable price." The U.S. products are often expensive, but they are often very good.

Most of those 250 companies are undercapitalized and therefore unknown. Plowing most of their resources into building speakers, they have little left over to market them with. That, too, was Icon's problem. How would Fokos get the word out?

The Marketing Strategy The first thing Fokos wanted to do was to create an identity for his product. He strove for a look, an attitude. "At this end of the market people buy speakers for a lot of irrational reasons," he says. Buyers may want good sound, but at these prices they are also in search of an aesthetic. Icon's speakers have a sleek, potent look. On the back, a laminated label, carefully hand-lettered just above the gold-plated input jacks, reads: "This loudspeaker was handcrafted by Dave Fokos. Made in the United States of America by Icon Acoustics, Inc., Billerica, Mass."