Understanding your Competition

Twitter
Visit Us
YouTube
Instagram
RSS
LinkedIn
Share

Applying business strategies to your music career can help you succeed

John Stiernberg
John Stiernberg

You and your competitors have one key characteristic in common: you are both going after the same target customer. There are two basic kinds of competition: direct and indirect. Here’s a quick review of the definitions:
Direct competition: similar businesses in your product category.
Indirect competition: any product from outside your product category that goes after the same target customer’s attention and money.

The total competitive environment includes both the direct and indirect competitors. While this may seem obvious, I’ve found that most music people focus primarily on one or the other. Consider these two scenarios:
Scenario 1: “Oh, music people are one big happy family. It’s sports and other leisure activities we need to worry about.” This is both idealistic and unrealistic. Other performers and songwriters are going after your target customers all the time, and may not view you as “family.”
Scenario 2: “If people aren’t interested in music, I don’t care about them. My problem is that there are so many performers (songwriters or whatever) going after my customers.” This narrow view is also unrealistic. Who do you know that is not interested in music in some way? While sports fans may spend more on game tickets than concert tickets, that does not mean they are completely out of the market. Why do you think the half time show at the Super Bowl features music?

Sure, these are generalized examples, but how real are they for you? Too many music people focus only on one type of competition to the exclusion of the other. We need to focus on both in order to fully understand the competitive environment.

Identifying your direct competitors
It’s tempting to oversimplify when identifying your direct competitors. If you are a performing songwriter, you might conclude that all other performing songwriters, you, and your competitors have one key characteristic in common: you are both going after the same target customer.
There are two basic kinds of competition: direct and indirect. Here’s a quick review of the definitions:
• Direct competition: similar businesses in your product category.
• Indirect competition: any product from outside your product category that goes after the same target customer’s attention and money.

Identifying your direct competitors
It’s tempting to oversimplify when identifying your direct competitors. If you are a performing songwriter, you might conclude that all other performing songwriters are competing for the same gigs. In a general or abstract way, that’s true. However, there are many different customer profiles, which allow you to target your direct competitors much more accurately and precisely.
Consider these examples:
• You are the leader of a jazz-fusion band that performs in clubs and theaters in a five-county area surrounding your home metropolitan area. Other acts that focus on different styles of music (like classical, folk, or gospel), different target audiences, or different geographical areas are only marginally competing with you.
• You are a songwriter seeking alternative country and Americana acts that record and perform all original material and tour internationally. You focus your efforts on producers and record labels that are known for their work with similar acts. While other songwriters are indeed direct competitors, an R&B lyricist (for example) is likely to focus on a different set of producers while looking for a recording or publishing deal.
• You are a pop cover band looking for “general business” or “casual” gigs: weddings, proms, private parties, and retail promotions within a 100-mile radius of where you live. Your direct competitors include similar local bands and mobile disc jockeys, but not touring acts looking for showcase club or concert work in your trade area.

Here’s the point once again. While it is idealistic to think that all music people are “like a family” and not in competition, it is illuminating, even essential, to understand potential competitors’ target customers. That is the first step in developing a competitive strategy.

Understanding indirect competition
Let’s go back to the sports vs. music example. Local sports teams are competing with music promoters for both ticket sales and audience attention. In addition to distracting fans, they tie up the press and may even make venues unavailable.

This has an impact on the performers, agents, and managers involved, too. In other words, the impact of indirect competition crosses over music industry roles. If a fan spends three hours and $90 attending a basketball or football game, he or she did not spend that time and money on a concert, club date, or record purchases. The same can be said of other entertainment forms, including movies, theater, museums, dance, reading, games, and comedy. There are additional non-entertainment sources of indirect competition.

Indirect competitors who target the general public as the customer include:
• Hobbies and leisure activities – from coin collecting to balloon rides.
• Educational pursuits – from sending kids to private schools (often using discretionary funds) to enrolling in seminars or continuing education programs.
• Home improvements – from buying furniture and appliances to adding rooms or remodeling
• Vacation travel – from camping to cruises.
• Health and fitness activities – from exercise to extreme sports. These activities take time and money.

Similarly, there are indirect competitors who target businesses or institutional customers. They may distract your target customer:
• A company who had traditionally hired a dance band for its holiday party may cancel the event altogether and give employees a cash bonus instead. The competition is not another performer, but another kind of bonus or reward for their employees.
• Upgrading computer hardware, software, and systems may distract or prevent a corporate client from using music at its annual sales meeting. The competition is not another act or agent, but time and money spent on company infrastructure.
• A publishing company may be in the process of being sold to one of the majors, forcing a freeze on signing new acts until the deal is done. The competition is not other songwriters trying to place their songs, but time and legal fees spent on the acquisition.

Why indirect competition is scarier than direct competition
Most people find the indirect competitors to be more mysterious and intimidating (i.e. scarier) than the direct competitors. This is true in any category of business, not just the music industry.

Many business people view their direct competitors as predictable and vulnerable – nuisances as opposed to threats. Yet the indirect competitors, like the National Football League (sports), the City of Paris, France (tourism), or Microsoft (computer software) can cause real competitive anxiety. A typical response is, “Yikes! My direct competitors are tough enough to deal with, but these others are just overwhelming.”

Why is this the case? No mystery here. It’s because indirect competitors are often large, capable, and able to distract our target customers with power and consistency. In most cases, there is nothing that you can do by yourself to impact indirect competitors. That’s the job of trade groups like the PRO’s, RIAA, Recording Academy, and Musician’s Union. The point is to recognize and learn to deal with both direct and indirect competition as part of your overall marketing plan.

Competitive strengths, weaknesses, opportunities, and threats (SWOT)
So what do we do about competition? How can we determine where we stand relative to key competitors? An important tool in understanding your market position relative to that of competitors is to conduct a “SWOT” analysis.
Strengths and weaknesses are about your company or the “internal environment.” Opportunities and threats are about both your company and the market or “external environment.”

Here are working definitions of each of the four concepts:
• Strengths: superior resources and skills that can be drawn on to exploit opportunities and deal with threats. Every business has strength beyond “product.” Examples include production capability, marketing capability, financial resources, management capability, information systems, and people.
• Weaknesses: deficiencies that inhibit the ability to perform or achieve results, and must be overcome to avoid failure. Every business also has weaknesses. Any of the items mentioned as possible strengths can be weaknesses if the item is holding the company back in some way.
• Opportunities: environmental trends with positive consequences. Opportunities may suggest a new basis for competitive advantage or present a possibility of improved performance (increased efficiency, sales, profits, or market share) if pursued. Examples include overall market growth, emerging customer segments, vulnerable competitors, political and cultural trends, technology trends, and economic trends.
• Threats: environmental trends with potentially negative impacts. Threats may impede implementation of strategy, increase risk, increase the people or cash resources required, or cause us to reduce expectations for business results. Threats are also called risks. The examples of opportunities mentioned above can also be threats if they have potentially negative consequences.

Note: The music market is full of opportunities and threats that can have an impact on all competitors. The key point: While each music business has a unique set of strengths and weaknesses, there are market opportunities and threats facing us all. How you manage the balance is what makes you more competitive or less competitive.

Your competitive intelligence system
How do you secure information on competitors? Isn’t it difficult to get accurate and useful data? Two key points here:
1. Virtually all information about the market and competitors is readily available.
2. The information is often free or inexpensive to gather.

So where does competitive intelligence come from? Here are some pointers to get you started.

Public Sources of Competitive and Market Information
The public sources listed below are generally free or inexpensive.
• Websites, blogs, and collateral material of competitors and their fans
• Industry directories
• Trade publications
• Trade shows, events, and associations
• The general media
• Published research studies

Private Sources of Competitive and Market Information
Private sources of information allow you to screen out “junk” data by asking specific and detailed questions that are relevant to your competitive analysis. Be prepared to pay for information and service.
• Your network of personal contacts in the industry
• Third party informants
• Insider newsletters, forums, and conferences
• Market research firms and information brokers

Your competitive database
Your competitive intelligence system may consist of a simple file folder with scribbled notes or a computerized database with detailed records on every direct and indirect competitor. Regardless of how you store the information, here are the basics to have at your disposal.
1. Basic profiles of leading direct competitors. In addition to name and contact information, the profile includes each competitor’s product description, estimated sales volume, growth trend (up, down, or flat), and key strengths and weaknesses.
2. Estimated total market segment size and growth. It is important to see where you and your competitors fit in the overall market. When you know the size of the total market segment and each competitor’s estimated sales revenue, you can calculate market share. “Segment” is a key word here, since the global music industry is so multi-faceted.
3. Market trend information. Secure and organize information on economic, cultural, political, and technology trends that can impact you and your competitors.
4. Source information. Create a list of places to go for further information when you need it. Examples include publications, websites, or people in the know.
5. Sample materials. In the music industry it is relatively simple and inexpensive to secure recordings, promotional material, agency rosters, concert schedules, and publicity clippings on each of your key direct competitors.

Keeping this on file not only keeps you in touch with their activities, but can also provide ideas for what to do or what to avoid in your own product and promotional strategies.

Success tip: Use a system to keep track of competition. Make sure that your files are up to date and that you dedicate time on a regular basis to update your information on new competitors or changes in strategy among your core competitors.

0209succeedingLos Angeles-based author and consultant John Stiernberg brings over three decades’ worth of knowledge and experience to the table. He is the principal consultant with Stiernberg Consulting as well as a member of the Recording Academy and the American Federation of Musicians. Stiernberg has guided countless businesses and is a regular contributor to music magazines and websites and panelist and speaker at conferences and seminars.

This article was reprinted with permission from the revised edition of Johns’ book,
Succeeding in Music
. Visit MusicDispatch.com today and enter discount code SM9 when checking out to save 20% and receive free shipping on this book. (Applies to least expensive shipping method, U.S. customers only.)

Leave a Reply

Your email address will not be published.