The Magnavox Secret

In the competitive scramble among TV-phonograph makers, any new sales idea is as good as gold. Last week Magnavox Co. announced one that it hopes will win nuggets of customer good will: a ten-year unconditional guarantee on its diamond stylus phonograph needles. The guarantee was possible because of the development of an automatic record changer with a tone arm that rests so lightly on records that the company says both needle and record will last longer.

Such developments have been a big factor in keeping once slow-moving Magnavox running with the leaders of the pack these days, particularly in the stereophonic phonograph field, where it makes 30% of all sales. Yet, unlike other companies with new products whose research and marketing costs eat up most of the gains from increased sales, Magnavox keeps its profits up too. This year Magnavox expects to increase its profits by 35% to $3.75 a share on a 20% increase in sales.

The secret, says Magnavox President Frank Freimann, is market selectivity. He limits his retail TV-phonograph dealers to the fewer than 2% in the U.S. that he thinks are best, deals directly with them to cut out middleman costs and prevent Magnavox products from winding up in discount houses at profit-breaking prices. As the company grew, he kept it from becoming top-heavy with bosses (a ten-year sales increase of 294% increased the number of top executives from only five to ten). In research, says Freimann, "the big thing is to avoid blind alleys."

By summer, Magnavox research will result in a large list of new products. Among them: a television set with an electronic eye to adjust the picture tube's brightness and contrast automatically to the light level in the room; low-priced ship-to-shore radios, direction finders and fathometers for small boats; citizen band radios at $99 a pair; transistorized electronic organs for the home, priced from $700 to $1.500; a miniature telemetering system between doctor and patient that will broadcast the patient's electrocardiograph, brain wave or other biological signals whenever the doctor tunes in at a few miles' range.

As for Government contracts, Freimann goes after jobs that will help the company develop techniques that will also apply to consumer products; e.g., an electronic photographic record storage system developed for the Pentagon led to a relatively low-priced system for business record storage that will be put on the market soon. In all, military orders bring in 40% of Magnavox's income. Present Government order backlog: $90 million, v. $67.6 million a year ago. This includes a communications system for the Advent satellite program, and new devices (started in Magnavox laboratories without Government subsidy) for detection of enemy submarines. Says Freimann: "We could be doing two or three times more than we are in these fields, but it wouldn't be profitable."

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