The Sonos Strategy and Missteps: Lessons from a Strategy Gone Wrong

Good morning. Thanks for opening this email. I know Black Friday is coming up and you are itching to go back to finding the best deals. I appreciate you taking the time to check-in on this week’s five minutes for product strategy.

Talk about Black Friday. If you are searching for premium audio equipment, there is a story this year. One of the leaders, Sonos, is probably eagerly awaiting this disastrous year's for them to end. Earlier this year, a failed app update damaged its brand and products so hard that revenue dropped by 8% YoY based on its fiscal Q4 2024 earnings. Today, we’ll look at what happened, how it backfired, and what we can learn from Sonos’ mistakes.

A reader requested that I look closely at what happened to Sonos, and I love it. Thanks, Leo, for being a loyal and curious leader. I hope you like this one.

Please appreciate that I am now taking the toll of being bombarded with Black Friday Speaker Ads because I will do a lot of Sonos-related research. There is a high risk I will fall for one of the deals, but it’s all worth it for another in-depth analysis.

5-minute-read

The Rise Of Sonos

Sonos is known as a groundbreaking leader in smart speakers. Starting in 2002, when most people were wrestling with tangled cables across their houses just to support multi-room sound systems that surrounded them like never before, the Sonos founders became obsessed with a bold idea: how can we make great sound wireless, effortless to set up and have it everywhere in your home? The obsession turned into Sonos and redefined home audio forever.

The challenge—no technology that would support this existed. No drivers for audio, controller remote buttons, scroll wheels, or any of the planned networking existed. They had to build all of it from scratch.

By the summer of 2004, the small team of engineers in Santa Barbara, California, had working prototypes. A public demo at the All Things Digital conference put them on the map. At the same conference, Steve Jobs was presenting Apple’s Airport Express:

The launch in 2005 led to raving feedback from the public. This is ironic given the latest app update debacle; reviewers called out the ease of use and setup.

In an era when Bluetooth was clunky and hiding 100s of feet of speaker cables through our houses, Sonos rose to audio equipment stardom.

Sonos even outshone tech giants like Apple, Google, and Amazon. Case in point: Apple entered the segment with the HomePod as a direct competitor but discontinued the speaker in 2021 due to a lack of sales.

What Sonos Did — and Why It Backfired

In short - Sonos majorly pissed off their loyal, premium customers by treating them like alpha testers with no way out.

In more detail, they wanted the update to simplify the expansion of their speaker ecosystem. Sonos understood that launching more hardware more regularly would increase their customer lifetime value. (see chart below)

However, to launch updates, many different codebases supporting different systems needed to be updated. Every new product added required a tremendous software development effort to support. The goal was to consolidate these different systems into one and bring more functionality to the cloud.

So, strategically and financially, the decision to simplify the tech stack and architecture for faster hardware deployments makes total sense.

Now we come to the technical updates needed. I take this from third parties as I have no insights into Sonos, but others have done significant investigation that I’ll summarize below.

If you care for a detailed technical analysis of what they did, Andy Pennel wrote an excellent deep dive here.

In summary, Sonos decided to change three main things:

• Device discovery - Sonos decided to change the device discovery protocol, which led to many users not seeing their existing speakers anymore and having no way to find and connect to their existing speakers anymore.

• Development time—To support different platforms (iOS, Android, Web app, etc.), they had several independent codebases to update every time they launched new hardware products. This was probably one of the main drivers of long development times. The goal was to simplify the frontend tech stack to a single codebase. However, the app's overall performance took a massive hit. For example, turning the volume up and down on your app had a noticeable delay before the speaker would react.

• App user interface - The old Sonos app was never great. But users got used to it. By creating a new app, users would expect drastic improvements. But that didn’t happen. In fact, now they had to relearn another non-intuitive app to use.

The real issue is not that technical challenges arose and Sonos took the leap to address them at the risk of breaking things. The real problem is that the issues mentioned above were brought to market and destroyed the customer experience. It was not caught or addressed before.

And, of all things, this premium customer segment paid thousands of dollars for Sonos products.

Customers were forced into these updates and had no way to get out, and it took Sonos way too long to fix.

The all-breaking update launched in May, and the saga continued until August!!, when Sonos finally considered rolling the updates back (based on the Verge). However, a week later, in a Reddit AMA, Sonos confirmed that there is no way back. It seems like Sonos was very disconnected, even internally.

It seems that just like customers weren’t able to connect to their speakers, Sonos wasn't able to connect with its customers anymore…

How it Backfired

It seems that the feature set Sonos promoted as “worth the update” or the dominant use cases didn’t actually align with what users really wanted.

What didn’t make sense to users was the decision to move speaker controls to the cloud, especially with the explanation that users would be able to control their speakers even when they were not home. Users, rightfully so, saw security issues with that and questioned: “Why would I want to control my speaker when I am not at home?" It was almost comical, and it was hard not to agree.

Furthermore, customers who had invested thousands in equipment would now only be able to sell their non-connecting hardware with massive losses.

But even knowing all that, customers could not opt out of this update, and they felt forced into the updates they didn’t want.

Obviously, Sonos did not plan for a failed update as it happened.

Thus, their communications didn’t seem thought through either. For example, they told customers their old devices would now be “legacy” with a vague message: “Over time, access to services and overall functionality will be disrupted.”

This sounded like a penalty for their most loyal and long-supporting customers. It also sounded very vague, opening a lot of questions about what exactly that means.

Why it Failed

With its past achievements, Sonos seems to be a company of high engineering excellence. Its products stand out as high quality—not necessarily the app but the speakers and user experience around them.

The high-level issue here is that they completely mismanaged their customer trust. Sonos is not a scrappy startup that can afford to break things anymore.

Summarizing the key missteps:

1. Missed user research: Customer feedback showed a clear disconnect between the features the update brought and what users would have wanted.

2. Technical failure: There was no transition plan and certainly no fallback plan, and some customers could not use their products anymore.

3. Communication: Sonos tried to manage communications, but not understanding their users backfired, making them seem tone-deaf.

Our Key Takeaways and Lessons

1. Understand your customers: It seems all too obvious that companies need to understand their customers. But Sonos gave us valuable insight into what happens when that priority slips. Most companies don’t let it go that far, but this is a case study of how valuable user research is before making big decisions.

2. Plan for legacy support: Have a plan that clearly communicates what will happen to legacy customers. These are the most loyal, long-standing customers. Losing existing customers is 5-25 times more costly than winning new customers. Retention is cost-effective!

3. Communicate change: Customers were left in the dust, not knowing what to expect when the app failed them. Listen to customers' problems and frame the change as a positive that brings benefits, not as “sorry, your product might not work anymore”.

4. Brand equity has to be part of a business goal: Sonos’ strategic business goals with this update seem clear and executed. However, this goal did not include a bulletproof rollout considering customer trust. This hard-earned trust can get easily damaged when not treated with care. It’s hard to measure when everything works well, but it seems measurable when things fail.

It seems hard to estimate how impactful it is for a business to lose touch with its customers in the short term; often, this only surfaces in the long term.

Sonos told us a great tale about how even industry leaders can take the wrong turn when they lose sight of their customer priorities. Now, we can quantify what this means, looking at Sonos’ revenue drop in the aftermath—an 8 percent YoY revenue drop.

I am positive that Sonos will be able to recover from this. They are already well on track to repair the damage that was done, and I really want them to succeed because I love their speakers.

Would you still consider expanding or getting into the Sonos ecosystem? Think they learned their lesson?

Happy Thanksgiving and happy Black Friday! I hear there are some excellent deals on Sonos speakers out there. 🙂