The existential brand crisis that saw Sonos go into co-opetition with Amazon and Google

Wireless speaker company's VP of marketing reveals the existential crisis that saw the business overhaul its go-to-market strategy and seek out partnerships with the digital tech behemoths that could crush it
Pete Pederson

Pete Pederson

Wireless speaker producer, Sonos, doesn’t have a chief marketing officer. Nor has it had one for nearly two years.

Instead, the company has a triumvirate of experienced leaders overseeing its brand and marketing needs. One of these is VP marketing and communications, Pete Pederson, who caught up with CMO during a recent visit to Sydney to discuss the brand’s existential crisis and evolving go-to-market strategy in the face of voice-activated devices and the digital behemoths behind them.

As Pederson explains, Sonos has three people occupying the CMO office: A VP of brand, with a strong creative bent; himself, the VP of marketing; and a VP of product marketing, who by account, “is more internal-facing than anything else”.

“The role of the CMO almost a misnomer in most companies; these individuals tend to skew in one of those three ways. They inherit the title even though they need lots of people around them to do different things,” Pederson claims.

“Given our size, we skipped that step and agreed the three of us can work together on those responsibilities. If you were advising Sonos from the outside, you’d look at this three-in-a-box approach and think it was weird.

“I’ll be honest – it took us a while to work out swim lanes, make sure we knew which direction the other guy was going to go. But as we sit here today it’s working fabulously well.”

Pederson agrees it’s all too easy for marketers to get caught up in the tactical realities of business and forget to care for the brand. Sonos’ marketing trio are constantly in conversations about balancing short and long term.

“Our brand team has quite intentionally separated so they can focus on the brand, build it in a highly premium, curated way. Then it’s my job to figure out how it translates to retail execution in Australia, working with leading teams,” he says.  

“It does create tension sometimes, but it’s good, healthy tension. What it means is these guys can really focus on building and maintaining the brand. It’s the jet fuel the rest of us need to perpetuate in local markets.”

As you might expect, these debates extend to the challenge of demonstrating impact. “Like every company, we have endless debates about measurement,” Pederson admits.

“We finally got to a place where we’re very clear on what we’re trying to do as a brand and marketing team. The c-suite is all signed up to that. And we don’t measure a lot of things.

“We’re focused on building brand awareness long term. It’s the one big KPI. Short-term stuff is still important, on a ROAS goal and we hold everyone accountable to that. That’s kind of it.”

Go-to-market crisis

Gaining clarity has taken time, and was arguably born out of what Pederson describes as an “existential moment” for Sonos in terms of market positioning and ambitions.

The catalyst? The arrival of voice-activated speakers from digital giants, Amazon, Google and Apple.

“For 15 years, we innovated the wireless home speaker system space. We didn’t have a lot of competition and enjoyed almost unprecedented latitude,” Pederson explains. “When Amazon, Apple and Google crashed into this space, it was a big wake-up call. We hadn’t invested in voice technology or really had to deal with competitors.

“We had to take a deep breath and figure out how we use our relatively modest size as an advantage to compete with much larger tech behemoths that can outspend and outmanoeuvre us. They can flood the market with cheaper goods, they own the ad platforms, and the commerce engines. These are heady challenges.”  

The solution was to join forces with both Google and Amazon. “Not only do we have their services on our platform, including voice, we collaborate closely in building market share for their services and our products,” Pederson says.  

“You have to be careful – they are competitors and collaborators, so we’re playing a constantly careful dance with players 150 times our size.”

What Pederson says distinguishes Sonos, and what he and the rest of the marketing and brand function is working diligently on, is building premium product quality credentials and premium audience.

“That crisis moment galvanised our positioning as a premium brand. We knew we couldn’t compete at the low end of the market. Nor do we want to. We went the other way,” Pederson says. “As a premium brand, design then became very important, as did the aesthetic, ease of use – these things weren’t just ideas, we worked hard as a brand team to drive them into the product.”  

Credit: Sonos

To date, Sonos speakers are in about 10 million households globally, and continues to grow.

“Amazon and Google in particular wanted Alexa and Google Assistant in those households. So it’s a symbiotic relationship in many ways,” Pederson says. “These guys have grown the pie for everyone and introduced consumers to the idea of asking for music with their voice. Once consumers get a taste of that experience, they see it is fantastic yet recognise the sound quality is so poor. That’s an upgrade opportunity for Sonos.”

According to Pederson, Sonos’ commitment to be an “awesome sound experience company” helps the business stay grounded in what it’s really trying to achieve.

“With Cambridge Analytica and all the privacy concerns today, we don’t have a dog in that fight. We’re not interested in monetising the user, we’re interested in one thing only: Presenting people with an awesome listening experience,” he says. “And we’re very much an experience company. Every conversation is around what is the right consumer experience and how do we make it better.”

Sonos of course continues to perch on a precarious ledge between Amazon and Google, who compete against each other. “It’s a big one – not irritating Google by doing a co-branded initiative with Amazon and vice versa,” Pederson says.

“But again, since our starting point is so different, we can play a neutral, almost Swiss role in the industry. We’re not a threat.”

Ikea partnership

Sonos’ partnership plans continue. Six months ago, the company struck a collaboration deal with Ikea, producing the Ikea Symfonisk table lamp and bookshelf Wi-Fi speakers. Pederson says this has given Sonos access to the 1 billion people passing through Ikea stores annually.

“It has also expanded our geographic footprint into places like India, for example, and consumers there are having their first experience with our platform via Ikea,” he says. “A trend that’s been true almost since we started as a business is when you buy a Sonos, you tend to buy more Sonos. These things are incredibly sticky. It’s a great experience when you have multiple devices in your house.

“When a consumer buys at Ikea, they become our customer. We have a magic window where we’re communicating directly via our app. It’s a huge CRM and upselling opportunity. We’re seeing that happen.”

The next horizon for Sonos is finding regional partnerships, particularly across markets such as China, India and Japan. “We’ve had to let go of some control, but that’s OK. As we scale, partnerships will be key,” Pederson says.  

Today, 100 music services exist on the platform, and Pederson says it would love to see all voice assistants on its devices.

“You can see a path to one day having a Chinese voice, or one of these smaller voice services that’s more privacy focused, on the platform. There are a lot of ways we can go since our approach, by design, is open and welcoming,” he says.

Up next: Customer data and insight, marketing authenticity and subscription trials

Page Break

Listening to customers

Even as its harnessing data on its customers, Sonos has to be mindful of how it uses these insights in product innovation, marketing and design. Pederson stresses the company’s commitment to not monetising customer data.

“We have loads of data because it’s a system that reports back to the mothership, but we use it to improve the experience,” he says, noting key data sets include listening hours, engagement rates, and which rooms speakers are situated in, as well as how consumer name their speakers.

In one instance, a rise in speakers being registered as ‘bathroom’ led Sonos to create a humidity resistant product better fit for purpose. More recently, the company changed the user experience interface in its customer app because it found users were not getting to music fast enough.

“One of our key KPIs is speed to music. We just want you to listen to great sounding music and try to eliminate any friction slowing down someone’s ability to get music in their house,” Pederson says. “That’s why voice is so important – if you utter it and you’re listening to the music right away, that’s ideal. So we made changes to the UX in order to speed up access to music.

“From a CRM point of view, our customers are incredibly loyal and vocal… We consistently see word-of-mouth from a Sonos owner as the number one purchase driver. We listen to feedback quickly, obsess over it and make changes to product, services and app based on it.  

“When we get the best of the best stories back from customers, we’ll hold them high internally. They become inspirational for the team and a validation that the strange choices we make as a business at times are the right ones.”

Read more: Sonos' approach to customer experience

Marketing mix

Complementing this is what Pederson describes as the brand’s commitment to authenticity in marketing. By way of example, he highlights a recent collaboration with the Beastie Boys on a limited edition speaker design.

“This little energy marketing moment was great. But it’s not like we knocked on the Beastie’s door and asked them to do it. We have had a relationship with their management almost since founding our company,” he says. 

Nevertheless, the marketing mix has had to change, and Pederson admits Sonos was “very traditional for a very long time”.

“Then everyone was striving to invest in digital marketing and we probably over-rotated,” he says. “We’re now we’re pulling back to a more balanced marketing offence, whereby with the long-term efforts, we’ll absolutely use traditional media such as outdoor and print. It’s what premium brands do. Then we’ll balance with short term.

“But digital is also changing rapidly. It was once viewed as this highly measurably, fairly effective thing from a cost perspective. Yet there is a reason these tech companies are making so much money – they’re slowly but surely ratcheting up the cost of advertising on their platforms. So it’s still part of the mix, we see just as much value in things like outdoor and online video.”

Given its consumers tend to be “connoisseurs of culture”, Sonos also has an emphasis on streaming TV offerings such as Netflix and Hulu, along with podcasts. “All of this comes back to that authenticity effort,” Pederson says.  

“Our ultimate priority is maintaining our premium-ness. The more partners we work with, the more risk for the brand to turn up in unanticipated ways. We work really hard to maintain that premium position, from how we go to market, to media selection. We’re vocal internally about that.”

Subscription-based offering

Meanwhile, innovation remains the game of the game. Just last month, Sonos announced a trial of a ‘Flex subscription-based speaker services in the Netherlands, a three-tier program allowing consumers to rent select products on a monthly basis.

“We launched with the objective to just see what would happen and what we could learn,” Pederson says. Sonos was inspired by Netherlands bike company, Swapfiets, that’s taken the market by storm.

“We also knew that with a younger demographic, this phenomenon was taking hold very fast. We saw it as an opportunity to test and learn,” Pederson says.  “Like everything we do, we’ll do this very pragmatically, testing different models, and we’ll learn as we go.”  

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, follow our regular updates via CMO Australia's Linkedin company page, or join us on Facebook: