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15 Minutes With…Jim Minarik, Chairman & CEO, DEI Holdings : Synergistically Separate

How DEI keeps the Polk Audio and Definitive Technology brands mutually supportive but distinct

January 2012 By Nanck Klosek

CustomRetailer: The Polk Audio and Definitive Technology brands have co-existed for several years within the DEI brand family, and have been successful at maintaining their legacy identities. Can you talk a little about their distinct identities?

Jim Minarik: We continue to be very committed to keeping the brands separate with everything that faces the customer. All of the product ideation and the customer-facing sales and marketing activities, whether consumer or trade, are all really separate. Both have their own product styling and signature technologies. And while both brands are focused on specialist distribution, including custom, Definitive is even more limited in distribution. In that regard, they are kept quite separate.

On the back end, we've certainly taken advantage of a number of synergies, including regarding distribution. There used to be separate distribution warehouses for all, and now we have two, one in Vista, Calif., and another one in Memphis, Tenn.; all our brands are in those centers and we can service both coasts in a very efficient manner. Certainly, the general overall financial side is consolidated—that's a big part of what DEI Holdings does, as the financial superstructure to all the companies under the umbrella.

In things like corporate governance, I'm the CEO of DEI Holdings, and I'm always looking at ways we can add other synergies. For any new key technology—such as very thin speaker design, both for Polk and Definitive for retail and custom applications, I've definitely had both engineering teams cooperate so that we're getting the best thinking and the largest group of minds focused on it. We share technologies across platforms where it's appropriate.

CR: What are the specific market targets for each brand, and talk about where the differentiations and synergies occur, in product design, engineering and channel distribution. How do they co-exist under the DEI umbrella in ways that don't interfere with their maintaining separate marketplace footprints?

Minarik: In general, Polk overall has a broader line covering a wider array of price-points. We go quite high with the line but also get into categories such as, for example, powered surround bars. For a lot of custom retailers doing second and third installations in a home, bedroom or den, powered surround bars are a popular solution. From the consumer's perspective, it's not expensive, it's easy to understand, and easy to add onto the equipment in their homes to augment their systems where they might live just with a flat screen if they didn't exist. Polk moved very aggressively in that area, starting at $1,200 retail, but now they range down to $299 retail for a powered surround bar with a wireless sub. Definitive makes soundbars today, but all are passive solutions requiring components to drive them.

Both companies have extensive lines of custom-installed in-ceiling and in-wall speakers. Definitive came out two years ago with the Disappearing in-wall series that is very slimline with magnetically attached grilles and more recently, this past year, Polk also added another line of custom products to their assortment.

Both companies are focused on custom. Polk overlaps quite a bit at the mid and higher end with Definitive, but Definitive tends to go somewhat higher in price-points, depending on category.

CR: Polk has recently entered the headphone arena. Talk about the strategy behind that move, and how it was decided to select the fitness niche in which to debut the product category.

Minarik: We started studying that market nearly two years ago, with a fairly large amount of research, and looked at who was where with solutions and branding messages. Focusing on performance and/or lifestyle, we constructed a grid, looked at it, and envisioned an area within the grid—high performance and active lifestyle—where there were some solutions but really nothing in the sports-performance area.

Since all the other areas were pretty heavily covered with multiple brands, we focused there, and our product development began. We looked at ways to keep the headphones attached to the ear during all sorts of athletic activity but also at how to get high performance and maintain durability—for example, we have a Kevlar-reinforced cord in every cable so they don't break, and we have moisture resistance built in. There was nobody in that quadrant then. [Eventually] there were others who launched in that quadrant, but as a result of our research, our UltraFit line is out now, and we're also, in the early part of 2012, adding models.

CR: Do you foresee Definitive entering the headphone category? If so, what niches are being considered, if any, for an appropriate entry venue?

Minarik: Without going into a great deal of detail, Definitive is definitely looking at headphones for 2012.

CR: For both brands, what product areas are being developed most intensively, and how does what is being worked on make sense in terms of what the 2012 audio consumer wants and needs?

Minarik: We've just made some organizational changes. At the holding company level, Kevin Duffy has been promoted to president of DEI Holdings, I also just became chairman while remaining CEO. The main reason is that we recently went through a transaction to go private. After having been public for the past six years, we went through the same challenges everyone who's been going through the recession did. We recovered nicely in 2010 and had good growth in 2011 in all the business units and we have new financial partners—Charlesbank Capital Partners.

Lots of what we have done we will continue to do, because it's working well, and on the audio side, we are intently focused on speeding up and improving our product development and our market capabilities in three areas: headphones, soundbars and personal audio product solutions covering an array of things like AirPlay and small Bluetooth personal-use solutions. We made the organizational changes so we could focus much more energy on those areas. Kevin is working with our existing Polk and Definitive teams on that.

CR: What potential do wireless and IP-based technologies hold for the Polk and Definitive brands, and what product offerings from them are the next logical steps for the marketplace in those arenas?

Minarik: Both Polk and Definitive already have wireless-ready subs and will be adding and continuing to invest heavily in wireless solutions. We also are really aggressively adding products in the Bluetooth and AirPlay arenas, as mentioned; those are going to be very important areas. CR



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