About Me

John Fahy is the Professor of Marketing in the University of Limerick and Adjunct Professor of Marketing at the University of Adelaide. He is an award winning author and speaker on marketing issues around the world.

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Wednesday
May282014

There is Still Money in the Music Industry

It wasn’t just all the little hearts that were fluttering when the boys rolled into town at the weekend. The cash registers were singing too!! One Direction, or 1D as they have been branded, are not just the most popular boy band in the world, they are also a veritable money making machine as well. And in their short career, they have demonstrated that despite all the technological disruption undermining margins in the music industry, there are still some serious returns to be made for innovative outfits.

 


One Direction was formed in 2010. Initially each of the five members of the group had auditioned as solo performers for the successful British reality TV series, X Factor. They failed to progress but were put together as a boy band and signed to Simon Cowell’s Syco record label on a recording contract reputed to be worth £2 million. Concert Tours and studio albums quickly followed. But it was their use of social media that really helped to propel them to global stardom. Both the band as a whole and the individual members exploit the power of channels like Facebook, Twitter and Instagram. The boys have received coaching on how to respond to messages in order to appear close and accessible as opposed to distant from fans. Interaction is high, with band members asking for suggestions about what to wear or where their next photo shoot should be. Loyal fans are given access to exclusive content. While traditionally, bands have had to rely on radio play to build a following, 1D were the first group to build a global audience largely via social media.

 

And the money is pouring in. About 50 per cent of their revenues are generated from concert tours. Tickets for their shows normally sell out in minutes and it is estimated that concert sales have grossed the band close to US$500 million. With their singles and albums rocketing to number one in the charts around the globe, the group is estimated to have sold in the region of 30 million albums worth a further US$300 million in revenues. Other income streams include movie ticket sales (US$150 million) and DVD sales (US$15 million). Even their wide range of merchandising products including everything from backpacks to pillows to pajamas is estimated to be a business worth US$68 million in its own right. In short, it is estimated that 1D have earned close to US$1 billion. Not bad for four years work and a £2 million investment!   

Wednesday
Apr302014

Does The Growth of Beards Spell Bad News For Shaving Firms?

Facial hair is back with a vengeance. After years of tentative stubble growth, the full-blown 19th century beard is making a comeback particularly on rugby fields and other places where real men hang out. So does this new fashion spell bad news for the shaving firms and what are the appropriate strategic responses that they should be considering?

 

 

First off, this trend illustrates again the fluid nature of markets. Change is a constant and nothing can be taken for granted. The tipping point for beards to make a comeback is unclear but for now they are here and very visible. A truly market-led firm stays on top of these types of developments and is unthreatened by them while others panic and become defensive. As it is, the shaving industry is dominated by a giant of market orientation – Gillette. This is a company that is a true exemplar of how to run a business. It has dominated its industry for over 100 years, still holding a global market share in excess of 70 per cent. Despite being in a relatively narrow product category, it is currently one of the Top 20 global brands with a valuation in excess of US$25 billion. Its success has been predicated on three key pillars, namely, continuous product innovation – the three blade Mach 3, the five blade Fusion and Venus for women, continuous investment in marketing with endorsements from David Beckman to Roger Federer to Jennifer Lopez and a great business model – separating the razor and blades. The razor locks customers in and the blades delivers margins in the region of 3000 per cent.

 

So is all this facial hair taking the glow off this story? Not really. The shaving products industry has seen relatively flat levels of growth for a number of years now. The trend towards the casual unshaven look is probably more important in the medium term than the growth of beards. But while facial hair is becoming more acceptable, having hair anywhere else is becoming less so. Body shaving is a significant growth area and in February the Gillette Body range hit the shops. Growth in this space should counter any losses elsewhere. What about margins? Yes, low price competitors in the form of online businesses such as DollarShaveClub.com, own-brands such as Lidl and Aldi and cheap imports from Asia are all gaining prominence but as yet their share of the market is pretty small. Meanwhile the Gillette machine trundles on. New products like the ProGlide Styler keep coming and Messi and Federer will give the brand significant online and traditional media coverage as the countdown to the FIFA World Cup in Brazil continues.