Mt. Hood Records
Strategy and Implementation Summary
Mt. Hood Records will leverage their competitive edge of low overhead and low band count ensuring intimate specialized care and promotion for the lucky few bands that it represents. Mt. Hood Records will employ a marketing strategy that concentrates on developing a large web of networks to assist the visibility of their label as well as developing visibility for the bands it represents. Mt. Hood Records will be extremely active in the local music scene as an effective way of plugging their bands. Lastly, Mt. Hood Records will have an aggressive sales strategy with the goal of getting as many record stores as possible to assist with sales of the various CDs as well as having a heavy live gig schedule as another outlet for CD sales.
5.1 Competitive Edge
Mt. Hood Records will employ a two pronged competitive edge. The first edge prong is having low overhead. Mt. Hood Records’ office will be in Hillary’s home. There is not an immediate need for offices, as all work can be transacted from her home office. Additionally, unlike many record labels, there will not be a recording studio to support. Significant costs are saved by renting studio time as needed. There appears to be no time in the foreseeable future that would dictate the need for a dedicated studio.
Mt. Hood Records will also use their other competitive edge prong by retaining a low band count. Mt. Hood Records will have five or less bands under contract at once. While this will reduce the chance of large records sales associated with having many different bands under their label, it does allow Mt. Hood Records to offer the bands it represents very specialized and intimate care. This is quite unusual in the industry. Most record labels have many different bands under contract; that is the nature of the industry. It is very difficult for a band to pick up a contract that differs from this arrangement.
Mt. Hood Records recognizes the opportunity to get away from the status quo and operate under the business philosophy that specialized customer care and attention is the best way to make money in the long term. Unless you have tons of marketing money volume is not the way to make sustainable profits. Each of Mt. Hood Records’ bands therefore receive far better plugging and placement. Anytime Mt. Hood Records is in a networking activity, they can plug all of their bands at once due to the small number.
This approach to specialized care can be seen in the athlete representation field. Two current great cyclists have adopted the approach, bucking the same trend within the athlete representation industry. Both Lance Armstrong and Kevin Livingston have both chosen contract representatives that only represent a couple of athletes instead of the norm by choosing a large company that has many different athletes in many sports represented at once. They have chosen this arrangement recognizing the more intimate care that they receive.
5.2 Marketing Strategy
Mt. Hood Records’ marketing strategy recognizes the fact that the value in the label is intrinsically based on their reputation within the music community. Mt Hood Records needs to be known as a premier label, creating a compelling reason for bands to sign up with them.
Mt. Hood Records will develop their industry visibility through the release of the various compilation CDs. The goal of these CDs is to get the word out about Mt. Hood Records. This will assist in securing their initial bands. This will be done through aggressive networking. Mt. Hood Records will be in close contact to who’s who in the Portland music scene, for both retail recordings as well as within the live music scene.
Once a few bands have been secured, it then becomes Mt. Hood Records’ marketing strategy to plug the bands as much as possible. This again will be done by leveraging all of their networking contacts. One effective way that Mt. Hood Records will be marketing their bands is to line up as many live shows as possible. For a local scene, it is very important for the bands to be performing quite often, this is the fastest way that demand is generated within a specific community regarding a band. Once the shows have been lined up, Mt. Hood Records will almost always man a booth where the concert goers can buy CDs, learn more about the performing band, as well as providing more information about the other bands that they represent. While this takes time and effort, it is this passionate effort that will assist Mt. Hood Records in becoming a viable label, not immediately, but over time and hard work.
Other activities, as intuitive as they may seem are (not an exhaustive list):
- calling up newspapers and inviting them to sessions, basically letting them know what is going on
- submit press releases
- find good story angles for the print media
- list every show played by the bands
- coddle the radio stations
- develop press kits
- get professional quality photos.
5.3 Sales Strategy
Mt. Hood Records’ sales strategy will focus on the two main sources of revenue: record retailers and consumers at shows. Mt. Hood Records will be in constant communication, always attempting to negotiate agreements for record sales with retailers. Because Mt. Hood Records is small in terms of the bands that they represent, they are able to offer retailers an unusual arrangement where unsold CDs can be returned for credit. This is quite similar to the magazine industry where retailers of magazines can get credit for unsold issues. This is a great idea but is not practiced with the CD retailing industry. This advantage will make is easier for Mt. Hood Records to get into various retailers, an otherwise difficult proposition due to the extraordinary power and influence of the major record labels. In essence is creates a risk free value proposition for the retailer.
Mt. Hood Records will also address the need to sell CDs at live performances. As mentioned earlier, CDs purchased at shows are, more often than not, impulse purchases. The viewer is impressed by the live performance of the band and in a show of support or a desire to have more material from the band they buy a CD. It is likely that other bands’ CDs will be sold by leveraging the goodwill of Mt. Hood Records. Studies indicate that consumers are more likely to experiment with new bands if the bands are found on a record label that the consumer is already familiar with and has confidence in. In essence it is using the positive halo effect of the label to sell other bands the label represents. This is further reinforced by the common element of improvisation that Mt. Hood Records represents. If the customer appreciates the element of improvisation then they are much more likely to try another improvisational band, especially when it comes with a “seal of approval” from the record label.
5.3.1 Sales Forecast
Sales will be slow initially. It is forecasted that the first two compilation CDs will be handed out for free. Sales revenue is not anticipated yet. By the third compilation Mt. Hood Records will have signed two bands and this will be the beginning of revenue generating CD sales. Once bands are signed, Mt. Hood Records’ legitimacy will be developed and they will be able to begin to generate revenue both on band CDs as well as the compilations.
Sales will also be generated through online website CD sales. Margins for the online sales are quite good because it eliminates the retail layer of the distribution channel. This will be Mt. Hood Records attempt to capture revenue from the powerful Internet sales channel.
An additional source of revenue is contract buyout. At some point there is the possibility that one or two of the bands will receive an offer from a larger record label for national distribution. In all of the band’s contracts there will be a buy out clause that will allow a larger label to buy out the contract. This is in recognition that Mt. Hood Records has limited distribution and if a band does indeed “make it” they will need to move onto a new label that has an established distribution system. Having this clause and the phenomenon of a band or two moving on is of value to Mt. Hood Records because it allows them in turn to sign on another new band. This is not expected or desired to be a huge revenue contributor initially. While Mt. Hood Records has no desire to completely cash in on a band moving to a national audience they will certainly make some money when a contract is bought out. However, it is not their goal that all bands will move on to larger labels.
Direct cost of goods includes:
- studio time
- mastering, mixing expenses
- Intelectual property costs
- CD production (including label creation and burning and packaging of CD)
- distribution expenses.
|Year 1||Year 2||Year 3|
|Record retailer sales||$0||$28,090||$39,076|
|Live concert record sales||$0||$19,000||$24,090|
|CD sales from website||$0||$15,070||$25,600|
|Direct Cost of Sales||Year 1||Year 2||Year 3|
|Record retailer sales||$0||$11,236||$15,630|
|Live concert record sales||$0||$6,650||$8,432|
|CD sales from website||$0||$5,275||$8,960|
|Subtotal Direct Cost of Sales||$0||$23,161||$33,022|
Several milestones have been established and will act as a set of goals and a tracking mechanism for achieving the goals. While the milestones are initially static, they can be dynamic if needed. Please see the following table for detail regarding the milestones.
|Milestone||Start Date||End Date||Budget||Manager||Department|
|Business plan completion||1/1/2003||2/15/2003||$0||Hillary||Business Development|
|First compilation released||2/15/2003||5/1/2003||$0||Hillary||Marketing|
|Second compilation released||5/1/2003||9/15/2003||$0||Hillary||Marketing|
|First band signed||2/15/2003||10/30/2003||$0||Hillary||Sales|
|First revenue stream||10/30/2003||2/28/2004||$0||Hillary||Sales|
|Band representation currently full||10/30/2003||6/30/2004||$0||Hillary||Sales|