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Polyphonic HMI Case Analysis

Polyphonic HMI has the combination of management experience and a product


that could revolutionize the music industry; however, the company is operating
on a tight budget, and must quickly define a target market and marketing mix if it
wants to capitalize on this opportunity.
Polyphonic HMIs HSS software is the first of its kind to utilize a catalog of
millions of songs to predict hits with 80% accuracy, drastically increasing
customers functional and economic value. Additionally, the company has low
variable costs and an advisory team of well respected industry insiders.
However, the use of science to quantify artistic value has been met with
skepticism by industry members, and the initial sales presentations have
received little attention by record label executives.
The company has the advantage of having no direct competition. However, HSS
will compete indirectly with the research methods of internet polling and call-
out studies currently used by record companies. Additionally, if HSS is wildly
successful, the low barriers to entry for software products may result in direct
competitors who could take a share of the market.
Polyphonic has correctly identified three potential customer segments artists,
producers and record companies. At over 100,000, artists comprise the largest
group of potential customers and would only look to HSS for selecting an
appropriate breakthrough demo. They are typically desperate for a hit and have
a tight budget, which might not allow extensive usage of HSS. Additionally, being
concerned with artistic integrity and originality, some artists may find that HSS
removes too much creativity from the process.
Producers are the second largest customer segment with potentially thousands
of members. They may be concerned with losing the emotional and artistic
qualities of music, but might value HSS as a tool to help polish the songs they
produce. Additionally, Producers have a greater ability to pay than most artists
and could use HSS for one song demo at a time or request a bulk discount on per
song usage.
A& R executives, the smallest segment with less than a few thousand
representatives, gain their reputations based on their ability to successfully
select hits. Given this high pressure to perform, they are more focused on
economic return and may be more likely to spend money on market research.
They would primarily use HSS as a substitute method for evaluating incoming
artists and assisting in album production. However, some A&R Executives might
feel that HSS is inferior to their good ears.
With limited marketing budget, a further analysis of pricing, breakeven volume
and revenue will help to identify which segment to target.
Artists with a recording contract are unlikely to use HSS since they have already
achieved success, therefore targeting unsigned artists is more reasonable. This
sub-group of approximately 50,000 would have less money to spend so the likely
maximum Polyphonic could charge per song would be $100. With a marketing
budget of only $3 per person , the penetration is expected to be low (5%) due to
the types of marketing available at that budget (e.g. direct mailers). The result
would be a loss for Polyphonic over the course of the first year.
Within the overall producer segment, an appropriate producer target would be
producers with one or fewer hits because they would have motive to bolster
their reputations and further their careers. Based on the tendency of producers
to disregard the benefits of HSS, Polyphonic would likely be unable to charge
more than $300 per song analysis. With a marketing budget of $60 per person ,
Polyphonic could send out better marketing materials such as informational
brochures, or follow up with personal phone calls, increasing the penetration
rate to 10%. The overall expected volume from this segment would still result in
a loss for Polyphonic over the course of the first year .
In contrast, record label A&R executives frequently spend $3,000 or more per
song on market studies, which only yield about a 10% success rate. Polyphonic
could price per song analysis at $1,500 to make it more attractive than existing
methods, while giving record companies a better chance of achieving success.
With a marketing budget of $100 per person Polyphonic could build
relationships with this segment and better educate potential customers, making
the likely market share 15%. The A&R segment is expected to have a higher rate
of utilization as compared with either producers or artists in addition to a higher
price point, making it the most profitable segment.
Based on this analysis, we recommend Polyphonic launch HSS and target A&R
executives specifically at a price of $1,500 per song analysis. Polyphonic can
provide demonstrable value to the A&R segment and should share its positioning
statement as a promotional tool. A possible positioning statement would be: For
record label A&R executives who want to enhance their natural talents, HSS
offers the means to identify a songs hit potential with 80% accuracy. No other
firm in the industry matches Polyphonics functionality, service or price.
Once HSS has been positioned properly, Polyphonic should focus on promotion
and placement. Polyphonic should begin promoting the product by sending
introductory marketing materials directing customers to an interactive website
demonstrating HSSs functionality. Additionally, the company should look into
attending a trade show for A&R executives as a way to reach a concentrated
group of customers. This could be followed up with personal phone calls to key
A&R executives from Polyphonics management team and advisory board.
Furthermore, Polyphonic should strive to achieve a more user friendly report
format that would increase its readability and help the company to persuade
potential customers who may be wary of the application of science to a product
that is inherently creative. Polyphonic should revisit offering free trials after the
first year because with HSSs 80% accuracy rate, the firm could automatically
lose 20% of the customers who expressed interest in the product prior to the
trial for songs that do not become a hit. Placement could be achieved with
minimal effort and little capital investment through a website, which would also
allow product consistency and instant processing time. Additionally, a website
further reduces the variable costs to HSS and increases customer satisfaction,
because songs and reports can be delivered electronically.