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Alzheimers Society - Analysis

Figure 1 - Charities industry


Crowded marketplace 190,500 charities though lots are schools. Small number of established
strong key players.
Charities have adopted technology in support of fund raising facility to provide online donations
Donors tend to favour the big, high profile charities e.g cancer research
Medium sized charities such as ALZ tend to get squeezed out
Income is increasing, 2002 2007 increase of 51.18%
Hierarchy Cancer research donations represent 50%,Childrens charities represent 32%, Poppy
Day appeal 25%, Animal welfare 20% and Mental Health a mere 3.8% of charitable donations.
Charity Commission acts as watchdog
Figure 2. PESTLE Analysis
Political
Governments and regulatory bodies need to find a way to increase support for carers, and fund more
research to find a cure for Alzheimers. Doesnt seem to be high priority for government today (only
spend 13% of that on cancer research).
Time bomb waiting to happen as population is ageing especially 85*. 100,000 people develop dementia
annually and set to increase
Increasing strain on NHS where mental health is not as well understood
Economic
Global credit crunch has dampened consumer spending has hit all industries. What will be the impact
on donations? Likely to see people cutting back here as well though no evidence ye
Consumer confidence has hit rock bottom
Difficult times ahead as potential for unemployment to increase
Social
People understand the need to give increasing use of Comic Relief, personalities to raise profile
Cause related marketing increasingly popular
Ageing population; older people living longer, divorce rates high so more single households this will
result in less carers and puts more pressure on medical services
Greater interest in environmental issues, ethical trading, reputation of companies and organisations
Amounts bequeathed in wills to rise fourfold between 2010 2050 though may be used to fund
children/their own care
Social sigma associated with mental illness
Technological
Utilise to find a cure
Brain games e.g Nintendo DS a useful way to prevent Alzheimers
Opportunities are endless in terms of marketing
Sophisticated database marketing techniques now possible
More and more activity on internet and people willing to donate on line
Legal
Legal action can be taken against companies who are unethical, flaunt I.P, non compliance offences
Power of bodies like NICE can impact ALZ and use of drugs requires court action to fight
Environmental
C.S.R.- drug companies have to be more transparent, ethical sourcing and testing
Growing need for companies to target environmentally aware and cause related target segments

Figure3. Porter 5 forces

Supplier power- Low


Only 3.8% of
charitable donations
go to Mental Health
charities.

New entrants - High


Low barriers to entry
Crowded marketplace.

Industry rivalry - Intense


Competition in the UK is
increasing. Competitors use
sophisticated marketing. The
strongest have developed
their business by merging e.g
Cancer Research UK and
Imperial Cancer research.

Buyer power High


Consumers today have so much choice
in deciding whether to donate, and if so
which causes to donate to. They can
buy online, set up a DD, run a marathon
for a charity of their choice, and engage
in sponsorship events.
Using broadband they can surf 24/7 on
web sites to compare Charities and their
ethical trading stance. They can donate
to UNICEF whilst travelling on airlines
or send a donation whilst watching a
heart rending appeal on television.

Threat of substitutes Medium


The number of charities is increasing as is the amount of conflicting monetary pressures on the public
who are bombarded daily by sophisticated marketing techniques to tug at the heart (and purse) strings.
Figure 4 - Financial Review
Implications
Income

Increased by 4.2m 10%; 11% grants, 23% sales and fee income 19% legacies and
2% donations and subscriptions (120,000 people) though this plus grants makes up
68% income. Need to focus on increasing income from donations

Expenditure

Fairly consistent with care homes taking 78% and fundraising costs 13%. Spent
1.7m marketing activity - 4%

Reserves
ALZ has some reserves which I could use if needed
Figure 5 - Portfolio Analysis
Star

Question mark
6

Don
atio
ns
m

Cancer/
hearth

5
4
Dog

3
2
1

Heritag
e
-10%

Children
Animal

0%

Cash cow

More people are donating to charities;


with the top 5 charities taking 2/3rd of
market. Overall the voluntary income has
Internationa remained the same between 2004 2006
l aid
with international aid seeing a large
increase may have been a disaster that
rallied the nation but this has impacted on
the income of other charities.

25%

% change in voluntary income 2004/5 2005/6

ALZ held up well and saw a small


increase though overall receiving 1% of
voluntary income so very small

Figure 6. Branding
Personality improve quality of old age, find cure Big brands have greater fund raising power.
Awareness of brand is important so potential
Values
integrity, passion
donors know what ALZ stands for. Currently
ALZ brand awareness limited. Memorable
campaigns such as Cancer Research I
Emotional Reward feel doing something to help
shouldnt be here key to driving
Rational Benefits
small amount., won't miss support/donations.
Functional benefits

easy to donate

Figure 7. Value Chain


Firms Infrastructure - Use of strong management teams to maximise effectiveness , use of
strategic alliances/collaborations to strengthen buying power ,and maintain lean structure and
tight control of costs.

Support Activities

HR Management - Important to hire astute, adaptable people who share the companys core
values. Need to manage part time volunteers and have flexible HR policies
Manage relationships with suppliers, high net worth supporters and all other donors.
Technology Development - The Charity industry is highly competitive so ALZ need s to keep
abreast of developments and continually maintain their focus on new technology.
Maximise new technologies (mobile and internet), build database of high net worth individuals
/donors to target for marketing campaigns.
Procurement identify the right partners to work with, affinity partnerships, investigate possible
mergers and international acquisitions. Get best deals on purchases to minimise expenditure
and drive profit.
Inbound Logistics
Sufficient number
of distribution
points to
maximise income
potential.

Operations
Ensuring that
staff and
volunteers/
supporters are
proactive.

Outbound
Logistics
Centralising
donor
acquisition and
processing.

Marketing
& Sales
Brand positioning
Promote ethical
trading
Maj. of income is
spent on finding a
cure.

Service
Excellent customer
service at all times
in person/
Online/helpline.
Customer intimacy
B2B and B2C

Primary Activities
Figure 8. 7S framework
Strategy Growing pressure internationally
Grow value from new and existing donors
Increase awareness of Alzheimer's and mental illness generally; ideally identify ways of early
prevention. Lead research effort to find a cure Lobby government to put more resources into
research and care. National Dementia Strategy launched (opportunity?). Need to decide what
primary role is and what is core offering plus also measure the impact of services.
Structure Board of 12 trustees
230 branches 5000 volunteers
UK based but intl presence
25,000 members with voting rights and liable
Committees for remuneration, nominations, audit (risk) and investment - Is too bureaucratic?.
Systems Internet site
Phone helpline

Web forum with 130,000 posts


Usual HR, Finance systems.

DVD training

Shared
Values

Published values (Passion, Quality, Integrity, Inclusion, Mutual respect)

Skills

Improving skills/education of carers/donors. Strong in care and education. Innovation and


change will be important skills. Exam for carers and training programme tomorrow is another
day
Internal audit skills Small marketing team only 3 years old. Need to be innovative in
marketing/PR as competitive market. Do they have the skills to grow the business internally?

Staff

5000 volunteers great advocates for the charity. Have 25,000 members
Branch managers are salaried
Rely on volunteers is this enough? Do need to consider employed roles what is the ROI?

Style

Nothing specific in case study but assume local autonomy, open and collaborative , transparent
ethical and caring.

Figure 9 SWOT
Strengths
Income increasing year on year and sector
growing
Individuals will donate to causes they believe in
Strong in care and education
30 years old

Weaknesses
Fragmented market
Me too product
Charity is medium size so not receiving enough
share of donations
1700 services what is core competence?

Opportunities
International exposure especially in research
Could merge/form partnership with other charities
Licensing products
Raise awareness and get momentum like Cancer
Research did
Gift aid awareness if more donors claimed could
significantly increase charity income
Utilise National Dementia Strategy and align
Winning NICE appeal

Threats
Crowded marketplace very competitive
Barriers to switching charity is low
Recession impacting donations
Loyalty of donors is questionable
People will need to fund their own care/pensions
so may impact legacy income/large donations
Legacy income expected to fall (currently 38%)
Losing NICE appeal

Figure 10 Ansoff Matrix


Existing products

New products

Market penetration strategy

Product development strategy

Existing
markets

Need to drive increased revenue from existing


donors across all product categories high net
worth individuals, groups, companies and
organisations
Form partnerships with similar charities

Develop new products e.g internal audit


function for other charities, Franchising
branded products. Develop licensing and
patenting products e.g Brain games to
help prevent onset.

New
markets

Market development strategy

Diversification strategy

New distribution channels additional online


development blogs, social networking,
increase direct debits.
Develop compelling messages- shock tactics,
Use cinema, television, celebrity culture.

Consider different approach such as


providing consultancy services for new
charities

Figure 11. Business Portfolio Matrix (Harrell & Keifer (1993))

ALZ compatibility with each cou

High

Country attractiveness
High
Medium
Italy Germany USA
France
Sweden
Spain
Japan

Medium

Low
= Primary

= Secondary

= Tertiary

Low

Italy has largest oldest


population though pays the
least.
Sweden/Scandinavian
countries spends the most on
LTC. ADI has an annual
conference opportunity to
expand/grow presence.
Germany, France, USA spend
more on research than UK

= Very unattractive

Figure 12. Balanced Scorecard

Financial
Internal
Customer Learning & Innovation

Objectives
Donations in each country UK, ROI & overseas
Return on capital
Cash flow
Profitability
Donor lifetime value
Effectiveness of services offered

Measures
Sales vs targets in each sector
ROCE
Cash flow
Net margin
Donor LV calculation
Return/take up per service

CRM database
Penetrate new donors
Increase value from existing donors
Increase website traffic
Increase education
Control costs

No of donors on database and % change (new)


Value of donations from new donors
Increase in existing donations
Income per donor
Number of website hits/hits on knowledge centre
Frequency of donations
Donor acquisition /retention costs

Value for money & donor satisfaction


Donor loyalty
Donor endorsements
Brand awareness

Donor satisfaction and perception surveys


Donor retention levels
Web based
Level of brand recall
Market share

Innovate ways of targeting new donors


Empowered workforce

Return per campaign


No of new campaigns offered/ROI
Staff attitude surveys
Advertising as % donations
Marketing spend per donor

Figure 13 Loyalty Ladder


Price

Value Ladder

To create sustainable comp adv, and


Believe the
max. donations , long term
cause willing to
invest time/effort
relationships must be cultivated. By
moving donors up the value / loyalty
Start to want to
ladder, they become more loyal to
do more
this charity. This can be achieved Added
Value
through social marketing; message
driven, change behaviours.
Fund raising
Advocates will act as ambassadors
and help actively promote charity
recruiting new donors
Figure 15 ALZ Assets/Competencies
ALZ has a strong ethical trading
stance
Starting to gain brand recognition
ALZ supports the carers as well as the
sufferers of dementia
ALZ offers wide variety of ways to
donate
Socially responsible
Cares about the environment- recycles
clothing, Oxfam/M&S scheme

Loyalty Ladder
Partner/
champion
Advocate/
member
Supporter/
volunteer

Offering
Customise web page,
personal thank you
messages,
Offer more social,
personal (emails, news
updates,
Provide methods for donor feedback/give
time/increase donations
Perhaps paying by DD as more loyal customer

Buys the
message

First time
Donor maybe
one off

Knowledge of
charity

Awareness

Awareness of charity

Knowledge of ALZ
illness

Prospect

Awareness of illness

+Figure 14 Critical Success Factors

Easy to donate
different methods;
maybe cash. Newsletter

Maintaining a good reputation


Moving dementia up the government agenda and therefore
the public agenda
Making it easy to donate e.g text, red button,

Figure 16. Segmentation, Targeting and Positioning


B2B

B2C
Developed society/more affluent
ABC female age 65* Time rich community
minded, time to donate, no family
Men and women aged 30* ABC1 concerned
dependents
Couples aged 60* - potential carers
Existing sufferers and carers
Understand profile of lapsed donors and
current donors and target similar segments

Targeting

Work in partnership e.g Help the Aged use


shops to raise awareness/identify new donors
Consider campaign like Oxfam one with M&S
Awareness raising/donors with SAGA
Link with universities/research to drive thought
leadership/awareness

Target and penetrate existing and new


donors in the U.K. and also new markets
internationally
Buy database and use to target selected
Segments

Positioning

Socially responsible
Number 1 in the UK and internationally for
Proactively working to find a cure
research into and treatment of dementia
Leading the way in dementia research, prevention related illness
and cure

Segmentation

Similar companies /affinities where synergies e.g


financial service companies, SAGA, care homes,
retirement homes, garden centres, post office
Be aware of grants available and large fund
raising opportunities
Links to gyms for prevention healthy mind/body

Figure 17 7P Analysis
What is the product? Not clearly defined as offer 1700 services includes training and
development. Medical research. Information services Care support services
Product
Lobbying Thought leadership Training and education for GPs. Internal audit to other
charities
Price

Donation channels and actual donations from individuals and companies, fundraising
including initiatives such as Memory Walk. Time/resources of carers/donors, volunteers. 50%
people give up time. Could use gift aid more especially with higher rate tax payers. DD most
effective as locks donors in

Place

Offer all channels of donations increase in payments by cheque. UK and International


Opportunity to expand here. Care homes, GP surgeries, Hospitals/NHS. Website/online/chat
room (127,000 messages). Opportunity to affiliate other charity shops. ALZ Caf schemes

Use logo, brand and strap line in all advertising. Communications direct marketing most
popular (73%) (e.g forget me not campaign) but becoming less effective and 33.7% thrown
away..PR /Celebrity endorsement e.g Jim Broadbent. Could target superrich? Publications/on
Promotion line newsletter . More social marketing (message driven) Links to Twitter etc. Website
Opportunity to do mobile marketing No adverts on TV (though expensive). ALZ awareness
week, annual Memory walk, books Feelings Matter Most
People

Skilled staff Donors and volunteers,

Process

Staff training, customer service processes e.g staffing helpline, measuring satisfaction,
fundraising processes, marketing processes, knowledge of other charities

Physical
Evidence

Won awards (PR Week award Coronation Street story though 2 years ago), press coverage,
research papers, website, logo, merchandising, 1700 services offer

Figure 18 - Key stakeholders/partners


Other charities (Age Concern and Help the Aged), professional and public health bodies, pharmaceutical
companies, Government, supporters, Universities, academia, industry, international research

Vision
Recognised as the leading UK and international charity for Alzheimers/dementia with a significant
share/value of charitable donations whilst driving the international agenda in research, prevention,
cure and improving the quality of life for carers and sufferers profitably
Mission
Strengthening brand positioning as global leader in dementia whilst building partnerships
internationally to aid advancement and awareness allowing us to leverage existing and potential
new donors

Segmentation

Values
Passion
Quality
Integrity
Inclusion
Mutual respect plus
Transparency to key stakeholders
Ensuring donations are spent directly to benefit those who need it
Foster open and collaborative culture
Thought leadership
Dignity
Innovative in communications campaigns
Figure 16. Segmentation, Targeting and Positioning
B2B
B2C
Similar companies /affinities where synergies
Developed society
e.g financial service companies, SAGA, care
ABC female age 60-65 Time rich community
homes, retirement homes, garden centres, post minded, time to donate
office
Men and women aged 30* ABC1 concerned
Be aware of grants available and large fund
dependents
raising opportunities
Couples aged 60* - potential carers
Links to gyms for prevention healthy
Existing sufferers and carers
mind/body
Understand profile of lapsed donors and
current donors and target similar segments

Targeting
Positioning

Work in partnership e.g Help the Aged use


shops to raise awareness/identify new donors
Consider campaign like Oxfam one with M&S
Awareness raising/donors with SAGA
Link with universities/research to drive thought
leadership/awareness

Target and penetrate existing and new


donors in the U.K. and also new markets
internationally
Buy database and use to target selected
Segments

Socially responsible
Proactively working to find a cure
Leading the way in dementia research,
prevention and cure

Number 1 in the UK and internationally for


research into and treatment of dementia
related illness

Figure 4. SWOT

Strategic Fit
Weaknesses
Key Opportunities
Bureaucratic
Harness the size and flexibility of the label to adapt to
Radio monopolies
embrace the digital era in an ethical manner
Risk averse due to costs
Build upon the digital capability to increase customer
Inhibit creativity
loyalty and exploit new income stream
Reliance on CDs
Exploit current networks to contract an online plugger
Expensive / poor quality
Use existing commercial ability to develop new financial
Inertia towards technology
models to benefit artist and label
Financial constraints
Use existing infrastructure to develop strategic
Access to mass market
partnerships across the industry
Dependent on key people
Sustain multi platform / service offering to spread risk
Growth capacity
when considering global markets
Develop expertise to offer new services to the industry
Opportunities
Threats
Problem Zones
ICT explosion
Global reach of digital
Bureaucracy can delay decision-making and lose
CRM
Piracy
momentum in a fast paced industry
Online pluggers
Legalizing file-sharing
Inertia towards technology will inhibit reaching and
International markets Reaching audience
tapping into global audience
Strategic partnerships Receiving royalties
Artists are gaining more control and will not except
previous terms
New economic models New technology
New income streams More control to artists
Cost focus has stifled creativity by considering it as a risk
and market now demands creative approach
Diversify
Horiz/Vert integration
Reliance on CDs when digital is the preferred audience
CSR
Competition emerging from across the supply chain
Figure 5. Arthur D. Little Matrix
Stage of industry maturity
Embryonic
Growth
Mature
Ageing
Recommendations
Strengths
Access song codes
Finance
Access to pluggers
Expertise
Infrastructure
Commercial prowess
Control
Digital presence
Multi service
Adapting to market
Nimble

Divest in vinyl
Harvest CDs by
differentiating based on
ethical approach
Invest in Digital
technologies through
innovation and quality
(monitor SE Asian dev)
Figure 6. Ansoff Matrix
Short term

Dominant
Strong

Competitive position

Although well placed to


continue to serve all
platforms, market demand
indicates that label should:

Mobile phones - ?
Invest in new techno
Favorble
and improve sound
quality

CDs Cash cow


Differentiate
-recycled packaging,
new artwork and add
ons. Plan for exit.

Vinyl - Dog
Fulfil existing
order and
implement exit
plan

Tenable

Increase loyalty and value by


developing a CRM approach
Develop innovative new ways
to engage, reach and delight cust.
Dev. new finance models to
recruit and retain emerging
bands
Go global
Long term
Recruit new bands to target new
segments and spread risk
Widen service offering

Digital (DRM) Star


Differentiate through
innovation

Weak

Existing
markets

New
markets

Existing products

New products

Market penetration strategy

Product development strategy

Increase customer loyalty


Cross and up-sell
CRM
Innovation
Market development strategy

Target different age groups


Dev. dist channels
International markets

Recruit new bands


Video clips, podcasts, interactive
comics, video games with music
Merchandise
Diversification strategy

Move into publishing, promoting


Offer recoding, production and
distribution as consultancy services
Develop new financial model
Brand consultancy

Figure 7. Segmentation and Targeting

Segmentation
10-14

15-24

25-39

40+

Tweenies
Silver Surfers
Social network
Young at heart
Live online
Technophobs
Text addicts
Private
Share info
Sceptical
Info = free
Art v entertainment
Fashionable
Quality
Trendy
Analysis based on forecasts of market value and age profile of
Value
Emotional
consumers (as %) from 1996-2005.
Rational
Innovators
Overall market is declining and although the digital explosion
Late majority
Impulsive
has boosted the industry, it has not offset drop in CD sales.
Wealthy
Cash conscious

Environmental
Short term 15-24
Leisure time
Good knowledge of this sector and key to short term earnings
Long term 40+
Eliterate and comfortable with sharing info through digital Growing eliteracy but more acquired taste
means
Develop research programme to understand this sector
More impulsive buyers and easier to target
Evolve a proposition for this sector through targeted
Develop relationship to increase lifetime value
A&R
Increasing segment so key to sustainable growth (SVA)

Declining segment
Figure 8. Positioning

Differentiate
Innovation
New products and services to consumers
Reaching cust. via multiple comms channels
Develop interactive relationships (artists/cust)
Ethics
Mutually beneficial deals for artists
Stance against illegal piracy
Embrace non DRM tracks
Reduce carbon footprint
Environmentally friendly products
Plant a tree per co2 emissions from travel
and tours
Brand Evolution

Figure 9. Branding
Personality Improve quality and access to music globally
Values

honesty, collaboration, winning, fun

Emotional Reward artist and environmentally friendly


Rational Benefits
Functional benefits

audio stimulation
availability, format

1.Label as industry brand A&R


2.Artist as consumer brand Fans 15-24
3.Artist as branded brand 4.Label as consumer brand Cross sell

5.Label develop new brands for 40+ artists


6.Label as brand consultant - Diversify

Figure 10. Product

The Furze

Strengths
Core- Quality indie music Successfully rebranded
Innovative brand name
Actual- Furze brand,
Tacit knowledge- Kid G
sleeve design, wed design, Interactive website
sales channels, platforms Global dist. (iTunes)
Synchronisation - ads,
available
films, games
Augmented- interactive Create awareness
Celebrity endorsements
website, cartoon
No bank loans
serialisation, comics
designed, merchandise,
Opportunities
games
Relationships with fans
Artists more powerful
Although the band have
been successful in creating Existing contacts
awareness through
Global reach of web
innovative marketing, they
New financial models
have been unable to

generate a significant ROI. Signing with label


Resource and expertise of a Radio playlists
suitable label could propel Digital platforms
them onto bigger things
Gigs/concerts

The Label - Consumer


Core- Portfolio of artists
Actual- Individual artist brands, style
of music, image, various channels and
formats, web design, sleeve design
Augmented- CRM, merchandise,
interaction with fans, videos, blogs,
games, green, fair to artists
The Label - Industry
Core- Record, produce, distribute
Actual- Ability to convert lyrics into
musical recordings. Quality of
equipment, studios and dist network.
Augmented- Supporting artists, key
account management, managing
customers, promoting artist
Figure 11. Price

To create sustainable comp


adv, and max. shareholder
value, long term relationships
must be cultivated.
By moving customers up the
value / loyalty ladder, comp
and prices sensitivity declines.
Loyal cust. will pay premium
prices for innovative products
and services so to progress
cust. up the ladder, added
value must be offered.
With comp. and piracy intense
at the lower level, margins are
low and cost leadership
strategies are unsustainable.
Figure 12. Promotion

Value Ladder

Customer
Innovation

Added

Comp

Loyalty Ladder

Customer Offering

Partner

Customise web page,


personal messages, access to
live podcasts, instant
messaging, access to pro
tools, exclusive
competitions, DIY album

Deliver Emotional
Value

Advocate

Offer more social, personal


or psycho benefits (emails,
news updates, exclusive
offers, song previews,
competitions)

Quality Product /
Service

Supporter

Provide methods for feedback


and registrn

High quality
product

Client

Improve CD offering
(recycled packaging, videos),
DRM free high quality single
downloads

Product meets
requirement

Customer

Music available in right


format and channel

Product knowledge

Prospect

Awareness

Value

- +

Weaknesses
Generating profit
Access to unique
identifying song codes
Difficult to get
royalties
Difficult to break into
charts
Operating at less than
break even at present
Radio presence
Threats
Low barriers to entry
Competition
Lack of resource
Loss of control
Band falls out of
fashion
Meteoric rise could
create resource problem

Communications Strategy
Push

Pull
Label
Retailer

Target consumers

Target channel intermediaries

Comms focus on product/service

Comms focus on product/service

Goal purchase (direct/indirect)

Goal dev. relationships and dist.


channels

Profile

Digital
Consumer

Raise awareness with stakeholders


Project image into industry

Figure 12. Promotion (cont)


Awareness
Ads low info,
emotional appeal
Volunteer marketers
Peer 2 Peer web
Viral marketing
Radio / press PR

Low Involvement Decision Making Process


Short Internal
Trial /
Attitude / Future
Info Search
Experimentation
Intentions

Free
online
sample
Product
Usage
Websites
(artist / label)
Retail store demo
Artist success
Packaging / web
3rd Party
Social
design
Support
networking sites
(artist / label)
Promos (added
value)
Price
Benchmarking The Furze

Opinion formers /
leaders (celebs, shop)
In the first instance, the challenge for labels is to raise
awareness of artists. The internet represents a cost effective
opportunity for raising awareness through word of mouth.
Social networking sites are accessed by 150m people and
they have democratised A&R.
However, this must be supported by press and media
promotion to access the mass market.

Label and artist sites must be kept updated and offer options
for visitors to sample music before buying. Point of sale
material is equally important online as it is in retail outlets.

Long-run
Behaviour
Develop
relationship
Music quality
Regular comms
Special promos

Personal selling

PR

Plugger

Music press (NME,


Kerrang)

Concert / gigs / festivals


Advertising
Own website, MySpace,
YouTube, iTunes
MTV (Kid G)

When a purchase is made, efforts should be made to turn the


Radio
customer into a client. By shaping attitude and developing
relationships, future intentions can be influenced and long run Direct Marketing
behaviour can be shaped to generate profitability.

Online fanzines (Kid G)


Celebrity endorsements
Sponsorship
Adverts, films and games
Sales Promotion
Online videos / song
samples

Figure 13. Place

Record stores still a key channel for full length CDs


CD sales dropped 20%+ from peak in 1999/2000
Internet, digital and concerts growing channels
Global portable player sales120m in 2006 (+43%)
Broadband household penetration rising (Europe)
Digital sales doubled to $2bn in 2006 (globally)
795m single track downloads in 2006 (globally)
3 sell 1m music video and audio tracks a month
Digital format is environmentally friendlier

Recommended digital formats:


Mastertone- extract from full length dig. sound recording
looped for mob. Phones (com dist recording) (Fra, Esp)
Mobile singles (fastest growing format U.K, also It, Esp)
Online singles (UK -78% of all singles, Ger)

SOFT

HARD

Figure 14. McKinsey 7 S


Structure

Flat, cross functional teams, empowerment

Systems

Develop e-capability, continual improvement,


environmentally conscious

Strategy

Differentiate based on service propositions


which encourage loyalty and long term
profitability

Shared
Values

Innovative and socially responsible

Skills

Train / recruit innovative staff, empathetic

Staff

Embrace market led culture to capture info and


satisfy needs profitably

Style

Achievement, motivation and winning

The model shows how the various aspects


of the business relate to each other and is a
useful way to illustrate the way culture fits
into the org.
Soft human resource issues
Hard process aspects
When implementing strategies the label
must focuses on BOTH hard and soft
issues. Overcome resistance by:
Develop market orientation
Project management
Change management
Internal marketing

Figure 15. Balanced Scorecard

Financial Perspective
Return on Capital invstd
Differential pricing

Reliability of performance
Customer Perspective
Awareness
Relationship
Satisfaction
Loyalty

Internal Bus. Perspective


A&R
-Invest 200k per artist p/a
Marketing
-commercially priced service
Recording/Producing
offering
Procurement
-sales forecast v actual
Distribution
Innovation & Learning
-Web hits
Technology
-No. registered subscribers
-Top 40 hit
Marketing
-Purchase behaviour
investment
Continuous improvement
Distribution

-New artist recruitment


-New products / services
-Improve quality, pro-tools
-Socially responsible
-Trees for travel
-No DRM, mastertone
tracks
-Strategic plans, CRM
-Employee suggestions
-Increase in digital sales

Use balanced scorecard to clarify and update differentiation strategy based on innovation and ethics. Comm throughout org and
conduct regular reviews.

Compatibility/capability

Figure 16. International Markets


Country attractiveness/priority (%3G subscribers)
High

High

Medium

Mature
U.K (14%)
USA (8%)

Mature
Italy (24%)
Spain (11%)

Medium

Mature
Germany(9%)
Australia (9%)
France (8%)
Canada

Emerging
Russia
Eastern Europe

Low

Mature
Japan (53%)
South Korea (35%)

Emerging
China
India

Low

Developing
Countries

Characteristics of Mature Markets:


High GDP, advanced economies,
wealthy consumers
Higher propensity to listen to English
language music
Established music industries with
multinational orgs
Low rates of piracy (<10%)
High levels of hardware penetration,
broadband access, etc
Example Germany
Largest Euro market for UK
435,000 airplays for 320m audience
3G penetration 9%
Digital sales- 39% online single, 25%
online album, 20% mastertone, 5%
mobile single

Measure in terms of:


Suitability - Cultural fit, Screening options and criteria Feasibility- Cash flow, Break-even, resource, capability and
capacity Acceptability- Shareholder (esp artist), level of risk involved potential returns.