2. • Key Issues/Opportunity Areas
• Industry Analysis
• Possible Alternatives
• Implementation of selected alternatives
• Contingency Plan
• Summary
• Q&A
OPPORTUNITY SWOT ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&A
Polyphonic HMI
Human Media Interface
3. • Profitability
• Target Market
• Marketing Plan
• Pricing Decision
• Licensing Technology
OPPORTUNITY SWOT ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&A
Polyphonic HMI
Human Media Interface
5. STRENGTHS WEAKNESS
• Management expertise • Low budget ($150,000)
• Unique and innovative product • Unproven technology
• Estimated rate of success (80%) • High operating cost
• First mover advantage • Long sales cycle (hardware providers)
• Group AIA subsidiary • No emotion (only mechanical)
• Global brand presence
• Access to industry expertise
OPPORTUNITY THREATS
• $32 Billion music industry • Skepticism and reluctance
• Decreasing sales growth (-10.4% in 2002) • Traditional “instinct and guts”
• No direct competition • Low barriers to entry for competitors
• High market research costs • Falling music sales
• Low success rate (10%) of traditional
• Tough economic situation currently
methods
OPPORTUNITY SWOT ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&A
Polyphonic HMI
Human Media Interface
6. Implementation Contingency
Assessment
Plan Plan
Unable to reach Break-Even Point (10 Album Sales)
1. 80% of Marketing Budget Exhausted
or
2. 8 Months of Implementation Plan have passed
OPPORTUNITY SWOT ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&A
Polyphonic HMI
Human Media Interface
7. Unproven
Product
Low
Low Sales Reputational
Capital
Perceived
Risk
OPPORTUNITY SWOT ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&A
Polyphonic HMI
Human Media Interface
8. Unproven
Product
Low
Low Sales Reputational
Capital
Perceived
Risk
OPPORTUNITY SWOT ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&A
Polyphonic HMI
Human Media Interface
9. The user fee for our software ($5000) will be
returned in full to the A&R executive if:
1. HSS categorizes a song to be a hit
2. The song is marketed by the label
3. The song is unable to reach the top 40 chart
OPPORTUNITY SWOT ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&A
Polyphonic HMI
Human Media Interface
The principal challenge involved in marketing Polyphonic HMI’s HSS software is its novelty. Essentially, HMI’s goal is not only to launch new software, but to build a new market. The crude marketing challenges associated with this task, necessitate the development of a sound, contextually based contingency plan. If HMI has exhausted 80% of its marketing budget (120K) or passed the 8 month point of its implementation plan without successfully reaching its break-even sales goal of selling 10 album assessments we recommend that the firm initiate its contingency plan.
A&R executives may be unreceptive to the firm’s marketing efforts because HSS is an unproven commodity and thus presents itself as a costly gamble for labels, particularly in the current risk-aversive financial climate of the industry. The proposed contingency plan eliminates the financial risk associated with investing in the HSS software, by providing its customers with a money-back guarantee. This aggressive sales strategy will incentivise high trial rates, builds reputational capital for the software, imposes barrier for the entry of competing software and help expand market share in the short term and long term.
A&R executives may be unreceptive to the firm’s marketing efforts because HSS is an unproven commodity and thus presents itself as a costly gamble for labels, particularly in the current risk-aversive financial climate of the industry. The proposed contingency plan eliminates the financial risk associated with investing in the HSS software, by providing its customers with a money-back guarantee. This aggressive sales strategy will incentivise high trial rates, builds reputational capital for the software, imposes barrier for the entry of competing software and help expand market share in the short term and long term.
The terms of our guarantee are as follows. The user fee for our software ($5000) will be returned in full to the A&R executive if HSS categorizes a song to be a hit and if the song is subsequently marketed by the label yet still unable to reach the top 40 chart. This offer will be extended to all new and existing customers of the HSS software as a limited one-year offer. Temporally limiting the offer will inflate its perceived value, further encourage trials and manage financial risks associated with the program.
HMI has a strong evidence base which demonstrates that HSS can effectively asses a song’s ability to be a hit with an 80% accuracy rate, suggesting a 20% error rate. The error rate will be distributed over songs which HSS categorizes as hits and non-hits. The money-back guarantee is only extended to song’s HSS categorizes as hits; we would thus expect a money-back refund rate of less than 20%. However, even if we conservatively predict a refund-rate as high as 20% we would still only need to sell 13 album assessments to break-even in our first year, an increase of only 3 albums from the projections associated with our initial implementation plan. Furthermore, the more album assessments sold the greater our buffer room for refunds. If HSS could predict hits as poorly as A&R executives (ie a 10% accuracy rate), and had to refund 90% of sales, it would still be able to break-even once it built a 4.28% market share (107 album assessments). Building brand credibility and securing sales for the HSS software are not only priorities for HMI, but given their current financial situation they are absolute necessities in ensuring the financial security of the firm. Thus, although it may appear that the proposed contingency plan is overly-aggressive or financially risky, it is neither.
