Marketing Analysis Polyphonic HMI Essay Example

to consider that skepticism levels will vary among different segments of consumers. This skepticism may hinder the adaptability of the Human-Animal Substitutes (HAS) due to its reliance on human instincts. Therefore, to maximize profits and minimize skepticism, HIM needs to position itself using an effective marketing strategy tailored to the target market.

Strategic Options

Option 1: Target Unsigned artists (AU)

The AU segment consists of numerous individuals aspiring for fame and are willing to invest money to achieve their dreams. These individuals are highly motivated and embrace new technologies such as HAS. Every week, around 300-400 demos are sent to a record label, resulting in approximately 187,200 demos (350 demos per week) sent per year to the various ARCS under Universal Music Group for the US market (Peg., UP). This segment is predominantly composed of a technologically savvy crowd.

Risk Drivers: The main risk factor for CIA is acquiring a contract from Arcs. However, the preferences and scoring criteria of ARCS might not align with those of HAS (Peg. 12, AS), so a positive report from HAS does not guarantee that ARC will sign the CIA. Moreover, the USA faces financial constraints that have prevented them from utilizing options such as Internet Polls and Call-out surveys, which have costs exceeding $1000 (Peg. 0, Pl). The limited budget also restricts extensive advertising efforts, which are expensive but necessary for reaching a large audience in the USA (Peg. 1, UP). Additionally, the complexity of the reports may hinder USA's ability to comprehend them, leading to difficulties in adaptation.

Option 2: Target Producers

This segment consists of 20-30 successful producers, a few hundred producers with occasional

hits, and thousands of minor producers. The use of HAS can help reduce uncertainty and provide producers with a better understanding of their songs' potential. However, there are some risks involved, including a disconnection with the primary needs of the producers.

Producers must create successful songs, but HAS only provides suggestions about which songs have the potential to be hits, demonstrating limited effectiveness in refining songs. As a result, HAS can only be viewed as a secondary tool to fulfill producers' requirements. Moreover, there is a substantial amount of doubt because producers take pride in their artistic skills that cannot be substituted by a machine. Finally, they may perceive a threat that the software will take over their job and therefore resist its implementation.

The core needs of AU to secure a contract from Arcs might not align with the scoring criteria of HAS. Therefore, a positive report from HAS does not guarantee that the ARC will sign the CIA. This means that HAS cannot fulfill the requirements of this segment. Additionally, CIA faces financial constraints, preventing them from using expensive methods like Internet Polls and Call-out surveys, which cost over $1000. Thus, this segment is highly price sensitive. Furthermore, Polyphonic lacks the complete registry of CIA.

Due to the limited financial resources, the shoestring budget cannot afford extensive advertising since it is expensive to reach a large number of people with low adaptability.

Option 3: Target Record Companies(ARC)

This paragraph contains information about the segment in the U.S. market that consists of five major ARCS, which hold a combined share of 84%. Each of these ARCS is home to at least a dozen labels.

Additionally, there are tens of thousands of other small and midsized ARCS. One of the main value drivers for ARCS is to reduce fixed costs, specifically those related to marketing initiatives. As a result, the core competency of HAS can directly address this need by assisting them in filtering hits and identifying their needs.

Arcs aims to accurately predict hit songs in order to allocate the baccalaureate budget more effectively and generate higher revenues. Additionally, Arcs targets a price-insensitive segment with ample resources and budget. A partial analysis of ACCORD indicates that this segment is highly adaptable, with a perceived superiority of 80% accuracy compared to traditional research methods that only offer 10% accuracy (Peg. 10, UP&3). The Highly Adaptive System (HAS) offered by Arcs aligns well with the labels' current practice of sending songs for detailed analysis in the form of reports.

ARCS are familiar with interpreting reports, resulting in low complexity. The extensive use of HAS in the music industry will undoubtedly attract attention and word-of-mouth will help spread appreciation, ensuring high communicability.

The risk drivers for Polyphonic include the collective buying power of record labels under the same company, who may pressure Polyphonic to lower prices for their reports. Additionally, the hierarchical structure and bureaucratic processes of major ARCS would make the implementation of HAS difficult and time-consuming.

Recommendation

Option 3 is recommended as the music industry experiences a decline in album sales. The ARCS are advised to be cautious when launching albums due to consumers becoming more discerning with their spending. The ARC faces a gamble with each album release, as spending over $300,000 on marketing does not guarantee cost

recoupment or profitability. It is an industry axiom that less than 15% of music titles released generate profit, making most marketing investments futile. As a result, HAS intervenes to support the internal operations of Arcs.

HAS is capable of identifying and eliminating albums from the manufacturing line that do not meet the required standards. This prevents unnecessary wastage of the marketing budget. Additionally, HAS can guide the ARCS in prioritizing their efforts towards potentially successful albums by allocating a major portion of the budget to support such albums. Therefore, HAS effectively assists the ARCS in streamlining their marketing initiatives and maximizing the returns from their marketing investments. As a result, the ARCS can generate higher profits by reducing fixed marketing costs. Considering its predictive accuracy of approximately 80%, the ARCS will view HAS as a crucial factor in improving their overall performance.

Justification of Recommendation Positioning Statement

Balance between Science and Art

Hit Song Science (HAS) is a research technology used in the pop music industry by Arcs. It differs from subjective preference sampling done by a few individuals by comparing the test song with mathematical attributes of past hits that have been validated by the masses. HAS is an innovative and scientific tool that involves a large audience, aiming to increase the chances of creating successful songs and decrease marketing costs. It provides unbiased and technical assessments of songs, regardless of the artist's reputation.

When analyzing the finance of each segment, it confirms that targeting major ARCS (Option 3) is the best choice. The $150,000 marketing budget is enough since it only needs to market to a minimum outreach (12 labels or

5 Arcs). This supports the higher arbitrary market penetration rate set at 50%.

Comparing with Option 2 and 3, the marketing budget will be stretched thin due to the larger base of interested parties. For example, only $1.5 can be spent on marketing per unsigned artist, which is close to the production cost of a leaflet for promotion. Despite Option 1 and 2 having higher gross song volumes, Option 3 has a higher market penetration, resulting in the highest effective volume of songs that HAS technology captures (11,000 songs). Additionally, Option 3 is the most financially viable as it delivers the lowest Break-Even Price ($89/song) and highest Total Unit Contribution ($33,000), assuming a 10% price increase above the Variable Cost of $30 for all 3 options.

Value Sharing between ARCS and Humiliated by HAS for Record Companies:

To justify the premium pricing of HAS (see later), we first considered Hiss's value add to the two main sources: (1) Marketing Cost Savings and (2) Increase in Expected Revenues.

On a traditional basis, approximately 3000 singles are released each year. HAS technology captures half of this amount due to a 50% market penetration rate. By utilizing the HAS software, the success rate of marketing hits increases from 10% to 50%. As a result, only 300 singles need to be promoted instead of 1,500 in order to achieve 150 hits.

Assuming each single is marketed and promoted at $400,000 per single (Peg. 8 UP), this would lead to an 80% decrease in marketing expenditure from MOM to $MOM, resulting in potential cost savings of $MOM. Additionally, assuming the hit success rate remains at 10%, there will be an

increase in expected revenues of $MOM. The implementation of HAS technology has increased the predictability to 40%, meaning there is a 50% chance that 1 out of 10 albums/singles marketed will become hits. This generates increased probability-weighted expected revenues of $776. MM for albums and $65. MM for singles.

Sensitivity Analysis to Determine Optimal Procrastinating hit success rate remains at 10%, there will also be an increase of expected revenues of $MOM. With the implementation of HAS technology, there is now 80% probability (instead of 10% based on A;R) that 1 out of 10 albums/singles marketed will become hits, generating increased probability-weighted expected revenues of $776. MM for albums and $65. MM for singles.

The sensitivity table demonstrates that the implementation of HAS technology enhances the success rate of marketing, leading to an increase in SVGA for the Arcs. However, it is noted that SVGA is influenced by the market penetration rate, which depends on HIM's effective utilization of their marketing budget to capture a significant portion of the market. This highlights the significance of Promotion and Distribution strategies in their marketing mix. SVGA is also utilized to determine the price ceiling, price floor, and target price of HAS technology per song. With a target price of $60,105 per song or $600,105 per album, HIM achieves a profit margin of 99.85%.

However, we have noticed that the market penetration rate limits SVGA. This limitation depends on how effectively HIM utilizes its marketing budget to capture the largest portion of the market. Thus, the importance of Promotion and Distribution strategies is reinforced. SVGA was used to determine the price ceiling, price lower, and target price of

HAS technology per song. Based on a target price of $60,105 per song or $600,105 per album, HIM can achieve a profit margin of 99.85%. To assess the mutual benefit of implementing HAS, we analyzed Hiss's deduction of all relevant costs (Peg. 8 UP). With the implementation of HAS technology's target price, assuming Universal claims 32% of the $661 M net value created (refer to Pricing of HAS), this results in an 8% increase in profit margin. PM.

Suggested Marketing Mix for HAS Short Term

The first step for HIM is to focus on one major ARC for industry awareness and accreditation of the technology, as well as securing a deal with at least one major Record Company. By patenting the HAS technology and granting exclusive rights to one ARC, it will reduce the buyer power that major ARCS have when they come together. The suggested pricing for the product is set at $60,000 per song, and it is used on master recordings of well-known artists. In terms of promotion and distribution, HIM will utilize the professional connections of its board members to manage the ARCS' management.

Advertising leaflets are published to inform people about the product. Sales representatives and technical experts would conduct On-site Demonstrations to attract and educate interested individuals. Follow-ups are conducted to keep customers informed about changing market trends and consumer preferences. To increase market awareness, "HAS guaranteed" stickers will be placed on record label albums to make the product more visible. In the mid-term and beyond, the company will target small/medium sized record labels, producers, and unsigned artists. The goal is to increase sales volume in these segments through

the Market and Product Development strategy. Pricing will vary between producers and unsigned artists.

The Product is licensed as software for major Arcs, with personalized and simplified reports for USA and aspiring producers. Promotion and Place initiatives are done through personal selling and one-to-one consultation with ARCS, offering volume discounts as incentives. HIM also provides trials of one unreleased song and four recently released songs to verify predictive and post-detective accuracy. A chart release of the Top 100 songs, screened through HAS technology and online retailers' reviews, enhances product visibility. HIM aims to develop mobile APS and DID online websites for unsigned artists and producers, making it easier for consumers to adopt.