Archive for October, 2008

In a low-sales era, what’s a hit?  That’s the question posed by NY Daily News music writer Jim Farber.

Granted, the music industry has been suffering steep sales declines long before the current economic meltdown.  He points out that

there has been a steady downturn in total sales for the top five albums in each year of this decade, ranging from a high of 22.3 million in 2001 to an ’08 figure that will struggle to reach 10 million.

The rest of the article is his proposal for, as he says, "redefining success in our new age of austerity."  To do so, he suggests the following redefinitions:

• "Blockbuster": 2million units & up (equivalent of 5MM+ in 2000)
• "Smash": 1MM + (3MM in 2000)
• "Hit": 500K+ (1MM in 2000)

Jim’s question is specifically focused on the music industry, but I think there’s a worthwhile discussion for those of us in other industries and businesses, as well. 

What he’s really saying is that the music industry’s definition of success just got whacked by 50-60+%!  What if that were (is) your industry, i.e., packaged goods, consumer electronics, etc.?  Clearly, that has serious implications across the board, and numbers may well vary across industries and categories.  But if everyone takes this kind of hatchet to their assumptions and predictions, it’s easy to see the nasty (and chilling implications) this has for your business. It goes beyond one marketing campaign or even a set of campaigns. You and your C-suite executives must start (or have probably already started) asking questions like:

• What’s my revenue and profit forecast, and what does that mean for the long-term health and viability of my business?
• Do we have to revisit our assumptions about size of our market?  What were our assumptions about the existence of the market in the first place, i.e., is this particular product or service something that would only flourish in good or relatively stable times?
• Does the current economy favor our competition based on their price-to-value proposition?
• How do we continue delivering value?  What does "value" really mean for my customers and clients?

I could go on, but you get the idea.

But I’m not trying to be a doomsayer here.  The best way to deal with this downturn is to keep it real and honest.  So, if we haven’t already, we all need to be doing some serious scenario and contingency planning.  It also means that there needs to be some smart, new offerings in the pipeline that meet the direct needs of your customers.

So, marketers, what happens to your businesses when/if you assume your best case is 50-60% less that what you’re used to?

Additional link:

• Jim Farber’s original article

Harvard Business School professor John Quelch warns marketers to beware a new consumer in the final months of 2008: the middle-aged simplifier.  He says that this is a consumer who

finds herself surrounded by too much stuff acquired. She is increasingly skeptical in the face of a financial meltdown that it was all worth the effort. Out will go luxury purchases, conspicuous consumption, and a trophy culture. Tomorrow’s consumer will buy more ephemeral, less cluttering stuff: fleeting, but expensive, experiences, not heavy goods for the home.

The four(4) characteristics of simplifiers are:

• They feel that they have more stuff than they need.
• Second, their focus is on experiences, not possessions.
• Third, stuff that used to signify wealth (Range Rovers, for example) embarrasses them.
• Fourth, they have enough wealth that they no longer feel the need to be conspicuous about it.

Here’s what Quelch says that marketers need to understand:

These are well-off people who value quality over quantity and do not buy proportionately more goods as their net worth increases. Their increasing reluctance to consume will dampen expected demand growth in developed economies further and therefore slow economic recovery, requiring consumer-goods multinationals to further focus their efforts on emerging markets where stuff will still be king.

Which reminds me of Kim Rayburn’s suggestion last week that during this downturn, marketers need to not just look at loyal customers, but also figure out how to tap into non-customers.

Read John’s full post here.

Given the economy, it’s no secret that consumers are shopping based on price and/or value, and marketers are following their lead downstream.  However, to do so, marketers risk giving up margins, even as they move units.  So, what’s the best approach? 

Next week’s PMA Webinar tackles this subject, when BIGresearch’s Kim Rayburn (above) shares insights from the company’s ongoing work into consumer intentions and attitudes, as well as their current media usage to help marketers figure out ways to drive sales and provide promotional or product value for strapped consumers.

Join us and you’ll walk away with:

• A BIGresearch executive briefing
• 2-page recap of the Webinar + supplemental data
• Actionable takeaways that will help you understand new ways to decrease costs and grow revenue

DATE:   Wednesday, October 15
TIME:    2:00PM (EDT)/ 1PM (CDT)/ 12 noon (MDT)/ 11AM (PDT)

For more info and to register, click here.