Loss Leaders and Flipping the Switch

LOSS LEADER:

Definition: “a pricing strategy where a product is sold for free or below its market cost to stimulate other sales.”

Loss leaders are the discount CD’s sold in Best Buy, ultimately leading to the purchase of your new TV, or the inkjet printers sold at a loss, because you can now only buy their proprietary, hyper-expensive ink cartridges for many years.

The most common example of loss leaders in music is when new artists offer music for free to “gain exposure”. The challenge, then, becomes creating a real (like, really, REALLY real) strategy on how to maximize that exposure, and ultimately drive it somewhere more costly. The marketing and sales plan of: A) uploading a track on Soundcloud, B) posting that link on Facebook/Twitter, and C) crossing your fingers, is pretty limited.

But music is different than inkjet printers, and selling creativity is different then selling a microwave, because, just as people like to know what a painter was feeling while creating a masterpiece, music consumers like to know the story behind the artists they love.

With the rise of the internet, and resulting decline of one-size-fits-all mass advertising, an artist’s story now truly unfolds online, gradually. If someone relates to the story behind a song (and not purely the song itself), they are much more likely to share that song with a friend. That is why stage two, after offering your music for free, must be to first identify and then amplify your story online.

Once you have both tons of exposure and a story people are connecting with and sharing, then you flip the switch. Flipping the switch could mean announcing your first tour, line of merch, or making those same songs that had been free now available exclusively for sale… or all of those things back to back over the course of a few months.

If you take the long road of truly developing your project, by first offering something to spark interest, then building a story, and finally flipping the switch, your odds of building a trusted brand and career skyrocket.

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How The Mighty Fall

I just finished Jim Collins’ truly enlightening book, “How The Mighty Fall”. It’s a short read covering the five steps to an organization’s decline, and is one of the best books I’ve read in a LONG time. It’s just too good not to share, so below are some quick notes I took while reading:

How the Mighty Fall

THE FIVE STAGES OF DECLINE

1. Hubris Born Of Success

  • Biggest mistake is confusing what and why
  • “We’re successful because of what we do so well” replaces “we’re successful because we understand why we do specific things, and under the conditions in which they would no longer work.

2. Undisciplined Pursuit of More

  • Leaders stray away from the key to success: disciplined creativity
  • The company dives into areas where they cannot be excellent or are outside the scope of work that made them successful to begin with

3. Denial of Risk and Peril

  • The company and its leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data

4. Grasping For Salvation

  • Leaders panic, and begin to take bold leads into unknown/unmastered territory, look for mergers/acquisitions, and pursue untested strategies.
  • Only hope left at this stage is to go back to disciplined creativity

5. Capitulation to Irrelevance or Death

MISC NOTES:

  • You can be profitable and bankrupt. You pay your bills with cash.
  • The best leaders feel a sense of urgency in both good and bad times.
  • Recovery lies in sound strategic thinking.

MISC QUOTES:

“Circumstances alone do not determine outcomes. We are not imprisoned by our circumstances, our setbacks, our history, our mistakes or our staggering defeats. We are freed by our choices.”

“The point of struggle is not just to survive, but to build an enterprise that makes such a distinctive impact on the world it touches, and does so with such superior performance, that it would leave a gaping hole – a hole that could not be easily filed by any other institution – if it ceased to exist.”

RELATED POSTS:

1) Why Ignoring Labels is the Best Way To Get Signed

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