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Record Label Marketing offers a comprehensive look at the inner workings of record labels, showing how the record labels connect commercial music with consumers. In the current climate of selling music through both traditional channels and new media, authors Tom Hutchison, Paul Allen and Amy Macy carefully explain the components of the contemporary record label's marketing plan and how it is executed. This new edition is clearly illustrated throughout with figures, tables, graphs, and glossaries, and includes a ...
Record Label Marketing offers a comprehensive look at the inner workings of record labels, showing how the record labels connect commercial music with consumers. In the current climate of selling music through both traditional channels and new media, authors Tom Hutchison, Paul Allen and Amy Macy carefully explain the components of the contemporary record label's marketing plan and how it is executed. This new edition is clearly illustrated throughout with figures, tables, graphs, and glossaries, and includes a valuable overview of the music industry.
Record Label Marketing has become essential reading for current and aspiring professionals, and for music business students everywhere. The book also has a companion website located at recordlabelmarketing.com.
Record Label Marketing.
* Gives you an exclusive and complete look at SoundScan and how it is used as a marketing tool
* Presents essential information on uses of new media, label publicity, advertising, retail distribution, and marketing research by record labels
* Offers insight into how successful labels use videos, promotional touring, and special products to build revenue
* Includes important specialized marketing strategies using the tools of grassroots promotion and international opportunities
* Reveals how labels are managing within their transitional digital industry
* Looks to the future of the music business - how online developments, technological diffusion, and convergence and new markets continue to reshape the industry
Selling recorded music
The concept of selling recorded music has been around for more than a century. While the actual storage medium for music has evolved, from cylinders to vinyl discs, to magnetic tape, digital discs and now downloads, the basic notion has remained the same: a musical performance is captured to be played back at a later time, at the convenience of the consumer.
In today's marketplace, the consumer is showered with an array of products from which to choose, making the process of marketing more important than ever. Before explaining how records (recorded music) are marketed to consumers, it is first necessary to gain a basic understanding of marketing.
What is marketing?
Marketing is simply defined as the performance of business activities that direct the flow of goods and services from the producer to the consumer (Committee on Definitions, 1960). Marketing involves satisfying customer needs or desires. To study marketing, one must first understand the notions of product and consumer (or market). The first questions a marketer should answer are, "What markets are we trying to serve?" and, "What are their needs?" Marketers must understand these consumer needs and develop products to satisfy those needs. Then, they must price the products effectively, make the products available in the marketplace, and inform, motivate and remind the customer. In the music business, this involves supplying consumers with the recorded music they desire.
The market is defined as consumers who want or need your product and who have the willingness and ability to buy. This definition emphasizes that the consumer wants or needs something. A product is defined as something that will satisfy the customer's want or need. You may want a candy bar, but not necessarily need one. You may need surgery, but not necessarily want it.
The marketing mix
The marketing mix refers to a blend of product, distribution, promotion and pricing strategies designed to produce mutually satisfying exchanges with the target market. This is often referred to by the four P's, which are:
1. Product – goods or services designed to satisfy a customer's need
2. Price – what customers will exchange for the product
3. Promotion – informing and motivating the customer
4. Place – how to deliver and distribute the product
The marketing mix begins with the product. It would be difficult to create a strategy for the other components without a clear understanding of the product to be marketed. New products are developed by identifying a market that is underserved, meaning there is a demand for products that is not being adequately met.
The product aspect of marketing refers to all activities relating to the product development, ensuring that:
There is a market for the product
It has appeal
It sufficiently differs from other products already in the marketplace
It can be produced at an affordable and competitive price
An array of products may be considered to supply a particular market. Then the field of potential products is narrowed to those most likely to perform well in the marketplace. In the music business, the Artist and Repertoire (A&R) department performs this task by searching for new talent and helping decide which songs will have the most consumer appeal. In other industries, this function is performed by the Research and Development (R&D) arm of the company.
New products introduced into the marketplace must somehow identify themselves as different from those that currently exist. Marketers go to great lengths to position their products to ensure that their customers understand why their product is more suitable for them than the competitor's product. Product positioning is defined as the customer's perception of a product in comparison with the competition.
Consumer tastes change over time. As a result, new products must constantly be introduced into the marketplace. New technologies render products obsolete and encourage growth in the marketplace. For example, the introduction of the compact disc (CD) in 1983 created opportunities for the record industry to sell older catalog product to customers who were converting their music collections from the LP (long playing record) to CD. Similarly, when a recording artist releases a new recording, marketing efforts are geared toward selling the new release, rather than older recordings (although the new release may create some consumer interest in earlier works and they may be featured alongside the newer release at retail).
The product life cycle
The product life cycle (PLC) is a concept used to describe the course that a product's sales and profits take over what is referred to as the lifetime of the product—the sales window and market for a particular product, from its inception to its demise.
It is characterized by four distinct stages: introduction, growth, maturity and decline. Preceding this is the product development stage, before the product is introduced into the marketplace. The introduction stage is a period of slow growth as the product is introduced into the marketplace. Profits are nonexistent because of heavy marketing expenses. The growth stage is a period of rapid acceptance into the marketplace and profits increase. Maturity is a period of leveling in sales mainly because the market is saturated—most consumers have already purchased the product. Marketing is more expensive (to the point of diminishing returns) as efforts are made to reach resistant customers and to stave off competition. Decline is the period when sales fall off and profits are reduced. At this point, prices are cut to maintain market share (Kotler, P. and Armstrong, G., 1996).
The PLC can apply to products (a particular album), product forms (artists and music genres), and even product classes (cassettes, CDs and vinyl). Product classes have the longest life cycle—the compact disc has been around since the early 1980s. However, the life cycle of an average album release is 12–18 months.
Diffusion of innovations
When a product is introduced into the marketplace, its consumption is expected to follow a pattern of diffusion. Diffusion of innovations is defined as the process by which the use of an innovation is spread within a market group, over time and over various categories of adopters (Dictionary of Marketing Terms, American Marketing Association, 2004). The concept of diffusion of innovations describes how a product typically is adopted by the marketplace and what factors can influence the rate (how fast) or level (how widespread) of adoption. The rate of adoption is dependent on consumer traits, the product, and the company's marketing efforts.
Consumers are considered adopters if they have purchased and used the product. Potential adopters go through distinct stages when deciding whether to adopt (purchase) or reject a new product. These stages are referred to as AIDA, which under one model is represented as attention, interest, desire and action. Another model uses awareness, information, decision and action. These stages describe the psychological progress a buyer must go through in order to get to the actual purchase. First, a consumer becomes aware that they need to make a purchase in this product category. Perhaps the music consumer has grown tired of his or her collection and directs his/her attention toward buying more music. The consumer then seeks out information on new releases and begins to gain an interest in something in particular, perhaps after hearing a song on the radio or attending a concert. The consumer then makes the decision (and desires) to purchase a particular recording. The call to action is the actual purchase.
This process may take only a few minutes or may take several weeks, depending on the importance of the decision and the risk involved in making the wrong decision. Involvement refers to the amount of time and effort a buyer invests in the search, evaluation and decision processes of consumer behavior. If the consumer is not discriminating and dissatisfaction with the decision is not a setback, then the process may take only moments and is thus a low-involvement situation. On the other hand, if the item is expensive, such as a new car, and if consequences of a wrong decision are severe, then the process may take much longer. Several factors influence the consumers' level of involvement in the purchase process, including previous experience, ease of purchase, interest, and perceived risk of negative consequences. As price increases, so does the level of involvement.
Consumers who adopt a new product are divided into five categories:
2. Early adopters
3. Early majority
4. Late majority
Innovators are the first 2.5% of the market (Rodgers, 1995) and are eager to try new products. Innovators are above average in income and thus the cost of the product is not of much concern. Early adopters are the next 13.5% of the market and adopt once the innovators have demonstrated that the new product is viable. Early adopters are more socially involved and are considered opinion leaders. Their enthusiasm for the new product will do much to assist its diffusion to the majority. The early majority is the next 34% and will weigh the merits before deciding to adopt. They rely on the opinions of the early adopters. The late majority represents the next 34%, and these consumers adopt when most of their friends have. The laggards are the last 16% of the market and generally adopt only when they feel they have no choice. Laggards adopt a product when it has reached the maturity stage and is being "deep discounted" or is widely available at discount stores. When introducing a new product, marketers target the innovators and early adopters. They will help promote the product through word of mouth.
Products (or innovations) also possess characteristics that influence the rate and level of adoption. Those include:
"Relative Advantage: the degree to which an innovation is perceived as better than what it supersedes. Compatibility: the degree to which an innovation is perceived as consistent with existing values, past experiences, and needs. Complexity: the degree to which an innovation is perceived as difficult to understand and use. Trialability: the degree to which an innovation may be experimented with on a limited basis. Observability: the degree to which the results of an innovation are visible to the receiver and others." (Rogers, E. M., 1995).
One way marketers can increase the potential for success is by allowing customers to "try before they buy." Listening stations in retail stores and online music samples have increased the level of trialability of new music. Marketers can improve sales numbers by ensuring the product has a relative advantage, that it is compatible, that it is not complex, and that consumers can observe and try it before they purchase.
The Boston Consulting Group growth-share matrix
Most companies produce a glut of products, some of which perform better than others. The Boston Consulting Group has come up with a method of classifying a company's products based on market growth and market share. The resulting growth-share matrix can quickly indicate the potential for future sales of each product. Market growth is indicated by the vertical axis, with high growth at the top. Relative market share (relative to the competition) is indicated by the horizontal axis, with high market share located on the left side. Then products are placed in quadrants based on their relative market share and growth potential in that market.
Stars: Stars are high-growth, high-share entities or products. Since the market for such products is still growing, they consume heavy investment to finance their rapid growth. In the recording industry, a genre of music showing growth (such as rap/hip-hop in the past decade) would be considered in the high market-growth category. An artist with a high relative market share (such as OutKast) would be considered a star.
Cash Cow: These business entities generate a high rate of return for little ongoing investment, and therefore, are very profitable for the company. These are established products with brand recognition and require less marketing dollars per unit sold. In the recording industry, established artists such as Elton John fall in to this category.
Problem Child: The problem child or question mark is a business unit that requires lots of cash and generates little return. They are low-share products in a high-growth market. The goal is to build these into stars by increasing market share while the market is still growing.
Excerpted from Record Label Marketing by Thomas W. Hutchison Amy Macy Paul Allen Copyright © 2006 by Elsevier Inc.. Excerpted by permission of Focal Press. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Market, concepts and Definition; Markets, Market Segmentation and Consumer Behavior; The US Industry Numbers; Record Label Operations; The Profit and Loss Statement; SoundScan and the Music Business; How Radio Works; Charts, Airplay and Promotion; Publicity of Recorded Music; Advertising in the recorded Industry; Distribution; The Music Retail Environment; Grassroots Marketing; Internet Marketing; Music Videos; The International Recording Industry; Tour Support and Promotional Touring; Special Products and Special Markets; Marketing Research; The Recording Industry of the Future; The Market Plan; Example Marketing Plan