“Marketing inertia” and the music industry
I came across a scaremongering front page newspaper story about the music industry at the weekend. It was in an exhibition at Somerset House called "About the Young Idea", about one of my favourite groups of all time, The Jam.
The article opened by warning "The war against music lovers who rob the music business of millions by pirating is being moved into top gear." Peter Scaping of the BPI went on to say "It is a real peril now and it we don't do something about it, running a record company will become so unprofitable that it just won't be worth taking risks with new acts. It will become stodgy, boring and dead."
Sounds familiar right? The quote above could have come from a recent new story about the woes of the music business.
In fact, the article was from 1977, almost 30 years ago! The pirating in question refers to people using tape machines to record songs from the radio and records onto blank cassettes*
* For our younger readers who may not know what a "blank cassette" is, here is a picture of one, along with an ancient machine called a Sony Walkman used for playing one on 😉
The decline and even death of industries like music, video stores and newspapers is often blamed on "marketing myopia": being blind to the discontinuous changes re-shaping the world. However, in the case of music I suggest the issue was not marketing myopia, but rather "marketing inertia": seeing change happen but then being so stuck in your ways you don't evolve. As the article from 1977 shows, the music industry knew that people would try to pirate music and copy it for free decades before digital downloading was invented. The problem was the failure to respond fast enough to the threat.
So, how can we avoid suffering the consequences of marketing inertia in our own industries?
1. Be paranoid, even during the good times
The doom and gloom of the article from 1977 did eventually come true for the music industry, but only after 20 years of growth fuelled by the invention of the CD, as the graph below shows. The challenge is to remain alert to threats even during the good times. In the words of Andy Grove of Intel, "Only the paranoid survive". Just because your market is in growth now, don't assume it will stay like that for ever.
2. Look at changes at the edge of the market
The main part of your market might be steady, but what are the changes going on at the "edge" of the market? For example, machines that do away with the need for washing powder in laundry cleaning and subscription services for razor blades may be niche markets today, but that might not always be the case. Look at Nespresso and coffee. For years it was small, but now its a multi-billion dollar brand.
3. Avoid arrogance about the upstarts
One of the most dangerous aspects of marketing inertia is arrogance about the quality of "upstart brands'" offerings. The music industry sneered at the lower quality of illegal downloads, Encyclopedia Brittanica didn't consider Microsoft Encarta to be a "real" encyclopedia and Blockbuster looked down on Netflix. Stay humble. respect the upstart and try to learn from them
4. Place your bets early
Marketing inertia means that even when companies see the early warning signs of change, they fail to act. One handicap is a fear of undermining the existing core business by launching a new service that may initially be less profitable. One option is to create a separate spin-off business to start experimenting with the new offering, unconstrained by the reality of the current business. The second and maybe easier option is to "place bets" on new businesses early. Blockbuster video could have bought a share of Netflix when it was small. And would record labels have been better off buying shares in early digital download companies like Napster, rather than trying to close them down?
In conclusion, be vigilant in looking for changes affecting your market and avoid the mistakes of the music industry by responding to, not ignoring, these changes.