A small Scottish company shows how being famous for something works

A small Scottish company shows how being famous for something works

I recently discussed how you must be famous for something. If you’re famous for something it is easier to:

  • focus on what you can be the best at, 
  • find your “tribe,” 
  • tell people what you do, 
  • get referred, and 
  • define your core customer 

While we all know of companies like Apple and Tesla, not only can large companies achieve this, but small companies have achieved the same thing by carefully defining their niche and what they want to be famous for. An example is Linn Products Limited, a Scottish engineering company that manufactures hi-fi and audio equipment and is renowned for reproducing music neutrally as possible. In 2020, Linn’s revenue was about £20MM, so it is not an Apple or Tesla. For clarity, I am an owner of some Linn products, and the picture above is my LP12 with a Naim power supply.

What Linn Was Originally Famous For

Linn became famous with its initial product, the Linn Sondek LP12 turntable, introduced in 1973. The company’s logo is the simple geometric representation of the ‘single point’ bearing, which was the unique selling point of the LP12. 

What did Linn achieve with the LP12? Hi-Fi Choice reviewers voted the LP12 “the most important hi-fi component ever sold in the UK,” and The Absolute Sound ranked it the second most significant turntable of all time in 2011. Hi-fi reviewers sometimes use it as a reference turntable, and Robert Harley said, “It’s impossible to imagine the high-end industry without the LP12”.

The company’s controversial founder, Ivor Tiefenbrun, has defined its philosophy – there are only two ways of doing things – the “Linn way” and the wrong way. The Linn way believes in the primacy of “the front end” (that the quality of the source was crucial for hi-fi music reproduction). Once the information was lost, distorted, or corrupted, it was gone forever and could never be retrieved. Basically, “garbage in garbage out.”

Whether you accept the Linn way determines whether or not you are part of the Linn tribe – “Linnies.” Linnies are committed to the Linn way and are true believers. Whether or not it is true is irrelevant; Linnies are the tribe that is the focus of the company’s marketing and products. To have such a dedicated tribe of customers and followers is indeed the ambition of many B2C companies. Now many others believe that Linn’s doctrine is prone to “propaganda, brainwashing, historical revisionism and other ways of interpreting reality.” 

Technological Excellence

While a hi-fi company, Linn has relied on technological excellence to maintain its reputation. All its equipment is impressive, with the fit and finishes reflecting the product’s price point. The products are built to minimize unwanted electrical and mechanical interactions that could degrade the performance. Casework is damped to reduce the impact of external vibrations. When products are sent to Linn for repairs, they are returned with:

  • a copy of the diagnostic analysis of the problem:
  • photos of the problem areas;
  • how it was fixed;
  • pictures of the replaced components; and 
  • all signed by a specific engineer. 

This service further creates the image of technical excellence. The company invests between 10% and 20% of its revenue in R&D to maintain its technological leadership.

Today’s Strategy – Digital

Over the years, the company has introduced new products, speakers, amplifiers, CD players (no longer), and digital streamers while still sticking to its philosophy. In 2007 the company’s strategy switched to supporting digital music playback of 24bit/192 kHz studio master quality recordings using a digital stream over a home network with digital technology. 

The company launched its first digital streamer in 2007, and since then, it has launched several others. Linn’s commitment to digital music has continued. In October 2010, Linn Records was awarded Label of the Year by Gramophone magazine because of the company’s commitment to improving the quality of the recording process and distributing music online at studio master quality. Since then, Linn provided its digital music players with internet access to lossless music streaming services (TIDAL & Qobuz) which provide access to a CD-quality library of over 60 and 50 million audio tracks, respectively.

Exact Technology

In 2013 it launched its Exakt technology, which in line with the company’s philosophy, was designed to eliminate many of the sources of music loss inherent in analog hi-fi chains. The company sought to prevent the signal loss by keeping the 24-bit lossless signal in the digital domain to the loudspeaker and converting it to analog at the latest possible stage. In 2014, the company launched speakers with the Exakt technology, which effectively turns the speaker into an intelligent, network-connected, software upgradeable product. According to the company, inside each Exakt loudspeaker is a proprietary digital platform that eliminates phase and magnitude distortion and offers room optimization. These speakers have the amplifier inside, shortening the distance from the amplifier to the speaker to prevent signal loss, and they received high critical acclaim

The LP12 Is Still Going Strong

The Sondek is still in production today and is benefiting from vinyl’s resurgence. There have not been any radical changes to the turntable’s design since its introduction. However, Linn has not sat still; the LP12’s sound quality has been improved through retrofittable upgrade kits, which consist primarily of refinements in materials used and improved manufacturing tolerances.

Initially, Linn manufactured the LP12 itself but relied on other manufacturers to provide components such as tonearms and cartridges. Supex cartridges, Grace and Sumiko tonearms, and Naim Audio amplification were the ones that filled that gap. Today, Linn produces its cartridges, tonearms, and amplification. However, one of the attractions of the LP12 is that owners can still use other components with it.

Linn currently offers four versions of the LP12 – Majik, Akurate, Klimax, and “build it yourself.” The differences between the versions are improved components to improve sound quality. Linn now offers a system that takes a feed straight from the tonearm base and digitizes the music in line with its strategy. The LP12 signal is converted to the 24bit/192 kHz stream and kept there until it gets to the amplifier.

How Linn Feeds Its Tribe and Creates Stickiness

While the Linn range of products has changed over the years, I believe that one of the ways it has kept its followers is by:

  • Staying constant in its philosophy;
  • Providing a range of its products so that it is easy for owners to understand the improvement paths;
  • Providing upgrades for many of its products; and
  • Moving with the times.

An excellent example of this is the discussions I see online, where someone who has always wanted an LP12 will find an old one that they can upgrade for less than the purchase of a new one. Thus, the company gets new acolytes who will buy products from them over time but are not driven away by the high cost of entry.

With its latest technology, the company is increasing the stickiness of its products. Those with Exact speaker technology, as mentioned before, have upgradable software systems, which provides more ways to offer upgrades to uses, as Tesla does. In addition, those with Exact speaker technology are tied to the company because if they want to change systems, they need to buy new amplifiers as the amplifiers are built into the speakers.

So How Does this Help Linn

As I mentioned in my previous piece, being famous for something is crucial. How has it worked with Linn?

  • Linn is famous for producing excellent HiFi equipment through engineering excellence.
  • Linn’s job is to capture music at the source as accurately as possible and reproduce it with minimal loss and as neutrally as possible.
  • Why does it exist? To providing musical reproduction excellence through engineering, attracting both customers and employees who believe in its vision.
  • People know what you do. Anyone who is an audiophile knows about Linn. Either they believe in it or not, but it is easy to find those that do or could and then refer them to the company. Those who don’t believe in the “Linn way” or want value amplifiers are not interested.
  • The tribe. The famous Linnies are in multiple Facebook groups and other online forums. At my reconning, there are over six thousand members, which, while not a lot, is ideal for a company whose strategy is low volume high margin. You will not find Linn’s products on Amazon or any discount sites. The company emphasizes using its dealer for all installations and equipment.
  • Selling value. Linn focuses on selling the “value” it provides. Its ranges – Majik, Akurate, and Klimax – have different price points, but its latest product, the Linn Klimax DSM (Digital Music Streamer Preamplifier), retails at nearly $40k.

For what are you famous?

If Linn, a small Scottish company, can achieve this, what stops you from being famous for something? 

Start with your Why? and At what can you be the best in the world? Jim Collin’s Hedgehog concept asks you to consider what would happen if you focused your energy and effort on one main thing. What could you become the best in the world at? Not that you are setting a goal to become the best at something; you understand with certainty what you can become best at. Most importantly, you also understand what you cannot become the best at.

From there, it becomes easier. If you would like help, contact me.

Copyright (c) 2021, Marc A. Borrelli

 

 

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I think the key is to start from two points:

  • What is the value that you are providing: and
  • What is the customers’ BATNA (Best Alternative To a Negotiated Agreement)

The first is to identify the value you provide, and the second is the customers’ next alternative to you. Your pricing needs to fall between these, but even within this space, there are many options.

Here are a few examples.

Selling products on the web.

If you are selling products on the web, what is the value you provide your customer? If there is no value other than a low price, then your customer’s BATNA is whomever else is selling the same products. Now you are competing on price, availability, and shipping costs. If their BATNA is Amazon, how much margin do you have if you match Amazon’s prices? Probably not much. Therefore you need to find a way to distinguish yourself so that you are not competing on price. 

Some companies provide lots of information on the products they offer so customers can make more informed decisions. We have all seen Amazon’s reviews being increasingly filled with fake reviews. The company provides more value by providing this information; however, how does it ensure customers purchase through it versus using it for information and then buying from Amazon.

Stopping customers’ switching is especially hard if they are Prime customers or this is not an impulse buy. In many cases, having got the information, whether on the website or through a phone line, the time to switch to Amazon and find the same product may not be worth it, and so they will purchase from such a company’s site. However, I am sure many sales are lost because the customer reverts to the company they know or look at the price and, having obtained the information, no longer value it to justify the price difference.

If the information is on the company’s website, that may be a cost of doing business. However, if there is an option to phone a support line and get advice on determining the appropriate product, maybe this service can be sold on a subscription basis. If customers pay for the advice line, they may become more “sticky,” preferring to buy from a company that provides excellent advice rather than purely on price. Also, since they are tied into the advice line, they may go there more often, increasing the volume of repeat business for the company.

Selling Knowledge

Recently talking with a company, “Z,” with a great deal of expertise in the manufacturing sector, Z is often retained by customers to solve their problems. However, once provided with a solution, the customers use other lower-priced manufacturers to produce the product. The company was struggling to price this service because using an hourly metric, the rate seemed excessive to get the return on their expertise. 

Returning to the two points I mentioned above, the value this company provides is enormous. Their customers’ BATNA may be six months of delay and thousands in costs to correct the production process. In such a case, it is hard to justify an hour rate, but in such cases, I am constantly reminded of the story of Neils Bohrs.

“A company’s machine breaks down. The company’s owner, an old school friend of Niels Bohr, calls in the physicist to help fix it. Bohr examines the machine. He draws an X on the side and says, “Hit it right here with a hammer.”

The company’s mechanic hits the machine with a hammer. It springs into action. The company’s owner thanks Niels Bohr profusely and sends him on his way.

A few days later, the owner receives an invoice from Bohr for $10,000 and gets on the phone with him immediately: “Niels! What’s this $10,000 invoice? You were only here for 10 minutes! Send me a detailed invoice.”

A few days later, the company’s owner receives this from Bohr:

INVOICE  
Drawing X on the side of your machine $1
Knowing where to put the X $9,999
Total $10,000

So do you price your services because you know where to put the “X.” In discussion with a company on this point, they were concerned that charging the value of their knowledge on where to place “X” would put off the customer. However, it is critical in such moments to realize the customers’ BATNA. If a six-month production delay would cost them $100,000 on top of $150,000 of costs in getting the production process right, then the customer profits from any option less than $250,000.

Realizing that in such a case, even a price of $225,000 might cause the customer to walk, price it differently. If the cost to produce the product is $20, then charge 25c per product made. The cost would increase production costs by 1.25%, which barely moves the needle. However, provided the customer is expected to produce more than a million of them, it is better for the expert and maybe more palatable for the client.

Selling Vistage

As a Vistage Chair, I am often asked by possible members how to justify the membership price. What they are looking at is a monthly fee that equates to about $20,000 per annum. However, what we are providing is value, and the BATNA is very large.

Members are CEOs of companies with revenues of $5 million and up, so my response is, “What is the value of your average decision?” If, as CEO, you decide on new ERP systems, hiring key executives, determining strategy, then I would argue that those decisions have a value of at least $200,000 or more. 

So to make a better decision, the CEO would either have to hire a consultant or go with what they know. Assuming they hire a consultant, the cost comprises:

  • time required to find the consultant who doesn’t gain from the decision (i.e., the consultant is not selling you the system or getting the recruitment fee);
  • time required to brief the consultant on the issue; and 
  • the consultant’s fee.

I estimate that this cost would be $40k to $50k. Therefore, your Vistage group provides you with an answer for 50% or less of the consultant’s price. Not only that, but you can have the group help you with many such decisions during a year. So your ROI on your Vistage membership is probably 200% or more. Where else can you get such a return on investment?

So what are you going to do?

For all CEOs and salespeople, the answer is to slow down and look at what you provide to the customer. What is the value of that product or service, and what is their BATNA. Determining this may take time, but it is well worth it. Because once you have completed this exercise, you can price your products and services in such a way that maximizes your margins while providing profit improvements for your customer.

So, sit down with your product team and salespeople and start brainstorming on the value and BATNA. You may find opportunities to increase your pricing or realize that a particular product or service is not worth offering as it is a commodity.

If you want help with pricing better and increase your margins, contact me, and I can help you.

 

(c) Copyright 2021, Marc Borrelli

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