How to Take Share with Technical Support
By Rob DeRobertis
Because of The Company’s growing audio software capabilities, PC makers came to rely on The Company’s expertise and support, sending new PC designs to it for audio function debugging and Microsoft operating system testing. This whole product offering enabled the audio business to position itself as the premiere industry expert on audio subsystems. As the Intel motherboard was generally regarded as the de-facto industry reference design for premium systems, adoption of the Company’s solution by the leading Asian board manufacturer quickly followed. These economics enabled The Company to lock into its position with increasing tenacity.
Results
The Company’s audio semiconductor components became one of its more successful operations, selling more than 80 million chips annually to PC companies by the end of 2003 and generating a 15% operating profit on $80 million in revenues. The audio chip group was the recognized leader of the PC audio segment where its systems expertise, coupled with leading service and support, gave the business a 50% market share and iron-clad relationships with the PC industry’s top players.
Lessons Learned
The recipe for success was different than a conventional chip business strategy. Rather than introducing new products with better specs and higher performance -- always thinking that the customer will pay for it -- the recipe here was one of opinion leader partnership and service investment. This strategy required selling at the systems level where software and integration services had value. The Company did give up per chip margin at the hardware level, but by establishing audio subsystem leadership, it ultimately gained dominant market share in a rapidly growing market, ultimately optimizing earnings.
