Filed under: Products and services, Consumer experience, Marketing and advertising, Media World

The International Federation of the Phonographic Industry reported Wednesday that despite the growth of digital sales in 2007, the format is still not “making up for the decline in CD sales or the effects of piracy.” Sales figures for music were also the lowest in ten years, as the IFPI did not begin publishing sales figures until 1997. Total global sales for 2007 were $19.4 billion, with CDs and DVDs pulling in $15.9 billion (down 13%), and digital downloads $2.9 billion (up 34%).

The chairman and CEO of the IFPI, John Kennedy, also revealed that “digital sales are growing healthily but, crucially, not fast enough to arrest the overall decline of the market.” The report also noted “physical and digital piracy cost the U.S.” arm of the music industry $5.3 billion, with digital piracy counting for 70 percent. Kennedy indicated that 39% of U.S. teenagers used file-sharing networks to illegally download music, with over 30 billion illegal downloads taking place around the globe. The IFPI has been at the front of a movement to “engage the support of World wide web service providers” in order to curb users from illegally downloading via threats from ISPs.

Despite digital sales slow growth as physical sales continue to plummet, the advances made in accessibility and quality of music in 2007 should prove beneficial for the industry. With labels and music companies dropping anti-piracy technology in the face of continued illegal downloads, there remains apparent trust and hope in consumers. A 34% increase in one year may seem small, but if digital marketing can continue to improve in that fashion then the music industry may not have too much to lament.

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Filed under: Products and services, Consumer experience, Marketing and advertising

Teen rocker Teddy Geiger is leaving the track listing and final release details of his new album, due in September, to a consensus among his fans. Billboard reported Tuesday that the album, tentatively titled The March, will be comprised of eleven songs pulled from the thirty three he has recorded for the album. Fans will be able to simply listen to the tracks and vote on them or buy the songs individually for 99 cents apiece from his official website.

Per the website now, fans have the option of buying all 33 tracks, which might be a stronger marketing tool than the eventual CD release, but Geiger is apparently “not worried about whether the promotion will cannibalize album sales when The March comes out in September.” The singer told Billboard that he’s “just happy [fans] have the music” but noted “they’re still buying the music, so that’s nice.” The album’s final tracks will be determined by votes from fans, but also what songs are purchased most.

Despite the promotion’s promise of giving fans total access to what Geiger has recorded for his new album, at the end it still states that money and profits are driving what the musician and label executives want for the music. It would be an entirely different story if the teen rocker only offered streams or even free downloads for the votes and final track listing, but asking fans to buy digital downloads and later a CD comprised of the most popular tracks says quite the opposite.

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Filed under: Press releases, Products and services, Consumer experience, Marketing and advertising

Industrial progressive rock band Nine Inch Nails’ most current album The Slip will be available in physical formats on July 22, Billboard reported Wednesday. First reported on Might 5, the album is the band’s third album in a little over a year and the second since leaving music company Universal Music Group. Unlike other physical releases though, a CD version will be limited to 200,000 copies in the United Says, Canada and Japan, while a later vinyl version will be unlimited. Band leader Trent Reznor also told Billboard the album “will remain free to download ‘indefinitely’ from the band’s site.”

The availability of a vinyl copy of The Slip versus that of the CD version mirrors similar sentiments that I commented about yesterday. Music company EMI packaged the vinyl version of Coldplay’s Viva la Vida or Death and All His Friends with a CD version, indicating that despite vinyl’s allure, the industry is aware that listeners want versions that can be transferred to portable devices.

NIN leader Trent Reznor was obviously aware of this desire from his fans, since the album will feature an unlimited release for the vinyl version. It could also indicate his own preference, which would not be surprising. Either way, when The Slip is released physically, consumers and listeners will still have the option to download the album for free if they decide to purchase a physical copy, whether it’s the limited CD or the unlimited vinyl. Numerous formats may seem tedious, but if the experience is part of the joy of listening to music then it is being accommodated.

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Filed under: Products and services, Marketing and advertising, Kellogg Co (K), Commodities

Like all processed food producers, Kellogg Company (NYSE: K) is facing rapidly climbing costs for corn, wheat and sugar, the basic building blocks for many of its products. Rather than passing those costs on to consumers in a straightforward manner by raising prices, Kellogg is taking a sneakier route: making some of its cereal boxes smaller while keeping the price the same.

Starting this month, Kellogg will shrink the size of boxes of Apple Jacks, Cocoa Krispies, Corn Pops, Froot Loops and Honey Smacks by an average of 2.4 ounces.

Of course, using this approach is in the end the same as simply raising prices. The key is price per ounce, which goes up whether you reduce quantity or increase price. So although you’ll pay the same price for a box of these sweet cereals, the per ounce cost of a corn syrup high in the morning will go up.

Although reducing ounces per box amounts to a price increase, smaller boxes have a different psychological effect than adding a few pennies to the retail price. Food companies use this approach in the hope that most consumers won’t notice, and research advocates that this is in fact true.

I suppose this means that most shoppers don’t look at the per ounce cost when buying things like cereal. When it comes to inflation, maybe ignorance really is bliss.

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Filed under: Products and services, Dell (DELL), Marketing and advertising

After decades of being a direct personal seller through its website and phone lines, Dell, Inc. (NASDAQ: DELL) has embarked on the only path it could to shore up sales in 2007: retail. As cost cuts and manufacturing efficiency was duplicated by the competition, Dell found that it could no longer survive just by selling direct, and launched a huge foray into retail in the U.S., including selling at Wal-Mart Stores, Inc. (NYSE: WMT) and Ideal Buy, Inc. (NYSE: BBY). It didn’t stop there — Europe is on it’s mind, too.

But the consumer market is not the only one Dell needs to reach in Europe. The personal maker wants to snuggle up to more system integrators and corporate resellers by getting its products into the reseller channel. This after years and years of battling the reseller channel by only selling direct. Can you cozy up to a former nemesis in the market and play nice on a dime? Sure one can, but Dell will need to exemplify cost competitiveness as well as ensuring those resellers are trained on knowing what advantages all those Dell systems can provide. To that extent, Dell is providing a certification program and is encouraging any and all resellers to become “Dell Certified.”

Dell’s Josh Claman states that the computer maker has tried to really warm up to European personal system resellers by “establishing processes, consolidating our sales team across Europe, making sure that we focus and understand the needs of the partners we’ve inherited.” Well, that’s great — and it will need to continue doing that. Larger competitor Hewlett-Packard Corp. (NYSE: HPQ) is positioned very well (and has been) in the European reseller market. Dell can’t just encroach on this territory by proxy — it will face quite a few obstacles in stealing corporate market share from HP in Europe. As always, it’ll be a long haul, not a year-long process.

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Filed under: Products and services, Marketing and advertising, Hershey Co (HSY), Wrigley, (Wm) Jr (WWY)

Hershey (NYSE: HSY) is having growth problems. Not only is it tough just navigating this high-inflationary period, but it’s difficult keeping up with the competition. Consumers have a lot of candy choices, and even though Hershey is a massive brand name in confections, it thinks it can do better in the marketing department. According to this Wall Street Journal (subscription required) piece, Hershey intends on implementing a 20% increase in spending for promotions.

This double-digit jump in marketing is a smart move, but it won’t be easy to digest. With the aforementioned inflationary pressures on the rise, Hershey is going to be sufficiently challenged to push growth while balancing the upward trends in input costs. But is there really a choice here? When you have a super brand like Hershey running into trouble, the thing you need to do is get out there and prop up the inherent equity of the product portfolio.

Yet, there’s a bit of a conundrum here, I think. Hershey needs to get people to buy its delicious candies (I’m certainly a fan of the awesome Reese’s Peanut Butter Cup). Which demographic loves sweets? Younger kids. They would have represented a great group for growth opportunities, but Hershey has to be careful about marketing too much to this demo since the country has, rightly so, been focusing on healthy alternatives to fatty foods. Although Hershey has been trying to make some of its portfolio healthier, the flagship brands will always be, one assumes, sugary and full of empty calories. In fact, Hershey is more than aware of this issue, as this corporate link demonstrates.

Hershey’s management will have to be as creative as possible to produce innovative advertising campaigns that are both fun and aware of who is being targeted. If it were up to me, I’d go after the college-age demo via a crafty, humorous television campaign, something really funny, like those messing-with-Sasquatch ads. Differentiating its brand is more important than ever considering the current marriage between competitors Mars and Wrigley (NYSE: WWY).

As for the stock, it isn’t far from a 52-week low, and even though I believe very long-term investors will do well with it considering its yield, I think the shares will be stuck in the basement for a lengthy period of time. Once Hershey gets its act together, things will obviously improve for shareholders, but for now, Hershey is hitting a difficult rough spot.

Disclosure: I don’t own any company mentioned; positions can change at any time.

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Filed under: Products and services, Consumer experience, Apple Inc (AAPL), Amazon.com (AMZN), Marketing and advertising

Billboard reports that Amazon.com (NASDAQ: AMZN) and eMusic will soon offer new pricing schemes in an effort to boost digital music sales. While Apple Inc.’s (NASDAQ: AAPL) iTunes Store retains its popular $0.99 per track price scheme, Amazon.com will offer “Daily Deals” and a “Friday Five” promotion. At the same time, eMusic will be raising prices for new customers, increasing the entry-level plan from $10 to $12 a month, but offering existing customers 10 more downloads per month for the extra $2.

Amazon’s “Daily Deals” plan “will feature a new album every day, sold at a discounted price that’ll vary by title.” Billboard cites the current offer with Coldplay in which the band’s first three albums offered for $2 in promotion of the band’s newest release, Viva la Vida or Death and All His Friends. The “Friday Five” plan “will feature five albums for $5 each” on Fridays.

Both plans come at a time when the music industry has been pushing digital stores to offer variable pricing models, but with Amazon.com the labels exercise the control they really want. Amazon.com’s MP3 store operates as little more than an outlet for the labels to sell music and all sales go directly to the label with Amazon.com taking only a small handling fee. Assuming that Amazon.com’s new pricing offers are directed from the labels, it’s a sign that the music industry is taking another look at what consumers want and how much they are willing to pay.

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