Market Analysis Summary
Mt. Hood Records will target two primary market segments, record stores and consumers at live shows. These will be the sources of income so they will be the main targets. Initially, Mt. Hood Records focus will be to develop visibility within the community, enough to be able to sign up bands which are the key to revenue generation. The need to sign up bands will drive the marketing activities that Mt. Hood Records will undertake in order to generate revenue in the future.
4.1 Market Segmentation
Mt. Hood Records has identified two target market segments which will be the main targeted customers.
- Record retailers- This segment sells CDs to the end consumers. This is the retail channel that typically moves the greatest quantity of CDs. The ability of the record stores to move decent quantity takes time, it does not occur initially. The bands must develop a name for themselves, through the compilation CD release as well as through live performances in order for the record stores to be willing to sell their material. This customer segment will be used to sell the compilation CD and band CDs eventually, although not initially.
- Consumers at live concerts- This segment attends live music performances, typically at the local level. While at the show, enjoying the music, they often purchase a CD of the band that they are currently viewing. This is, more often than not, an impulse purchase. They hear the music, they are impressed and they decide they would like more material from the band. Additionally, the patrons will also purchase the compilation CD as a means of hearing new music.
4.2 Target Market Segment Strategy
Mt. Hood Records has chosen these two distinct market segments because they are the main source of revenue. Mt. Hood Records will remain focused on their important marketing activities aimed at developing visibility for the record label, however, ultimately it comes down to CD sales for business viability and the record stores and consumers at live performances being the source of this revenue. This is a fairly intimate industry, most of the industry participants within a region know each other. Keeping this in mind, networking will be the most efficient and effective activity. The only way to get into record stores is by showing potential record sales. The way you begin to do this is to have good contacts within the stores to get the right people to listen to you.
Another source of revenue will be the buy out of a band from their Mt. Hood contract in favor of a larger, national label. These events will not be marketed for, they will tend to occur on their own. This source of revenue is, however, tracked in the sales forecasts.
4.3 Service Business Analysis
In general, the record industry, at least when based on overall sales, is a highly concentrated national industry. There are several huge international corporations that control the bulk of record sales. For bands looking to break through into national stardom and significant record sales, this is the distribution/promotion channel that they must concentrate on.
There are also the "Indie" labels which are broader than regional companies, but do not have the same breadth as a national player. The Indie labels can be quite large, they just tend to do business in less commercial ways. Many Indie labels can support national acts who are professional musicians.
The last segment of the market are local record labels who typically support musicians who are not professional in the sense that they typically have day jobs that occupy their time in addition to the musical interests. Most of the regional labels must concentrate on a region that encompasses at least one state, often two or more. There are very few labels that will only concentrate on a specific city such as Mt. Hood Records in Portland, it is often too difficult to concentrate on such a small audience. It is certainly a viable business model, you just need to be strategically focused to pull it off.
4.3.1 Competition and Buying Patterns
- National record labels- Atlantic, Sony, BMG labels, etc. These distributors care about one thing, CD sales. The more CDs they sell, the more money they make. Bands do not get much individual attention. They are carefully trained to develop mass appeal. Commercialization is key. These companies' mantra is widespread acceptance, not niche fringes.
- Indie labels- Sub Pop, Ropeadope, Ozone, etc. These companies are also quite concerned about CD sales, however they tend to choose bands with less commercial appeal and exploit whatever niche that band exists in. This competitor also faces the pitfalls of not being able to offer specialized attention as their "reach" is also quite broad. They are basically a smaller, better behaved version of the large record labels. They are only concerned ultimately with CD sales, and achieve these goals with less commercial means.
- Regional labels- This is almost a catch all gathering of labels, with so many different types participating in the space. Some labels are similar to Mt. Hood Records (not in Portland or Seattle however) where CD sales are key, but are looked at more holistically so that a band's health and popularity is concentrated on, recognizing that if this is addressed, CD sales will fall into place. There are also many different types of labels that represent a large number of bands within an area, not having the same reach as the larger companies, and not caring much about the bands themselves, just like the larger labels.