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Marketing Stategy for the Mini-Disc - Essay Example

Sony has changed the way that the world listens to music. They introduced the Walkman, the Compact Disc and now the MiniDisc. Developed in the late 80’s the MD was introduced into Japan in 1992 that saw an instant success. The same year the MD was introduced into the United States. The MiniDisc was a product that was new to the world. It was the first time that that 74 minutes of music could be recorded then re-recorded over and over again without losing any of its near perfect digital sound quality, on 2 1/2 inches.

The target market in 1992 was described as the ‘MTV Generation’ but the MD failed to impress and was therefore re-launched in 1994. The main reason for failure here was due to very high prices and not enough information to the public that the MD was not a replacement for the CD, which had just been introduced, but a replacement for the cassette. It was then re-launched again in 1996 and again in 1998. The target market was defined as 18-34 year olds with a higher than average income, who purchased more than twelve CDs per year.

With each re-launch prices fell greatly. The main reasons for the failure of the MD in America were the high prices and the product launch. Sony then had to spend millions and millions of dollars trying to convince its target market- the young, cool people of the USA that the MD was the way of the future. However, competition from the likes of the MP3 player has seen Sony introduce a cable called the PC-to-MD that allows PC users to download their digital music stored on their computers onto a MD.

Also new long play MDs mean that 340 minutes of music can be stored onto the same 2 1/2 inches of plastic. Founded in 1946 by Masaru Ibuka and Akio Morita, Sony opened for business in an old department store in Tokyo with 20 employees. In the beginning the company tried its hand at any work that came in its direction such as electrical repairs and maintenance, whilst still trying to build its own products. In 1950, the company had major success when they introduced Japans first tape recorder and obtained a licence to make transistors.

Since then Sony have went on to have major success and have introduced many world firsts. Examples included the first colour television in 1968, personal stereo (Walkman) in 1979, the 3 1/2″ floppy disc in 1989, the CD player in 1982 and the first camcorder in 1993. Today Sony has transformed itself from a small electronics company to an international entertainment company with over 138,000 employees world wide (Sony, 1998) and an estimated annual global media spend of over $1. 5billion making the company the worlds 11th biggest advertiser. (www. mind-advertising. com)

Sony has changed the way in which people listen to music with the introduction of the Walkman, the CD and now the MiniDisc. The MiniDisc was launched successfully in Japan in 1992, however in America the market proved to be less receptive. Re-launched in 1994, 1996 and again in 1998, only now the MD is growing in popularity. Sony intended the MD as a replacement for the cassette. This proved to be a success in Japan but the opposite in the US. This could be due to the fact the MD was viewed by the American market as a replacement for the CD, which at that point was still in its early growth stage.

Although 80% of Sony’s new product activity is through modifying and improving existing products (Trott 1999), the MD was a product that was ‘new to the world. ‘ It was the first time that 74 minutes of music could be recorded on to a 2 1/2″ disc time and time again without the loss of quality. Products competing with the MiniDisc include the digital compact cassette, which was also introduced in 1992 by Philips and Matsushita, CD-R and CD-RWs, MP3 players and the most recent competitor to be introduced into the market is DVD audio.

MARKETING STRATEGY

When Sony introduces a new product, they do not believe in product research before the launch. They believe that if the product is going to be a success, the customers will decide. (Sony, 1998). When the MD was introduced in 1992, the target market was the ‘MTV Generation’ (Trachtenberg, Wall Street Journal, 24/07/98). Due to the fact that the first and second launches was extremely unsuccessful, a Sony executive -Mark Viken, admitted that for the third launch, Sony had done its research and that the target market was people aged 18 to 34, who buy twelve or more CDs a year and who have a higher than average income ($50,000).

In 1998, 3. 5 million people in the United States fitted into that category. 2. 2 PRODUCT The MiniDisc looks similar to a CD but is half the size (2 1/2 “). It is magnetically encoded that makes it more shock-resistant than the CD. Sony developed a system called the Adaptive Transformer Acoustic Coding (ATRAC) which only records audio sounds and then compresses them, thus enabling 74 minutes of high quality music on one small disc. The MD is similar to a computer disc in the fact that the music is stored in segments, and has a table of contents.

This enables the user of the MD to edit and erase whole tracks or even just small sectors of specific songs. Today, a MD Walkman with batteries weighs on average between 83g and 142g. The latest innovation from Sony is that of a network MiniDisc that can be connected to laptop computers, and also a PC kit that enables users to download digital music files stored on their computers hard drive on to a MiniDisc. 2. 3 PROMOTION With a product that was such a major success in Japan, Sony knew they had a world-class product. December 1992 saw the launch of the MD in the USA.

This proved to be a failure. This was because of the high prices aimed at a young market, and the CD was still in the introductory stage of its product lifecycle. Two years later in 1994, the MD was re-launched and named The Media Blitz Campaign. It was regarded as one of the biggest ever music giveaways. It lasted eight months and saw extensive magazine advertising. The Rolling Stone Magazine published coupons redeemable for MiniDiscs and had a giveaway program called ‘Sony Mini Music. ‘ It gave those who purchased a playback model, $300 of MD music.

Sony also gave away over a million MDs. Although MD sales had rose to 400,000 units being sold (Seong-Shin Hong, 2000), it was still a considerable amount less than the million units sold in Japan in the same year. Sony concluded that the reason for this is that people saw the MD as a replacement for the CD and not the cassette as intended. A factor that made things far more difficult for Sony was the lack of support from the record companies. They did not support pre-recorded MDs due to the lack of demand from consumers.

Support from Sony Music and also Time Warner meant that by 1999, there were only 500 pre-recorded MDs available compared to thousands of CDs (Seong-Shin Hong, 2000). 1996 saw the third attempt by Sony to increase America’s awareness. Entitled ‘Where the Music Takes You’. Sony’s Vice-President of Personal Audio, Robert R. Nell stated that this was the ‘most aggressive and largest advertising and promotional campaign that has ever been conducted by Sony’. The focal point of the campaign was declining cassette sales and that the MD was not a replacement for the CD

‘The horse, the automobile. The typewriter, the computer. The cassette tape, the digital Recordable MiniDisc’ (Sony 1996) Nell stated that 50% of Sony’s total print advertising was spent on the MD. 1996 also saw more of a focus on portable MD players. At this point Sony believed the only reason for poor sales in the US was due to poor marketing. 1998 was dubbed ‘ The Year of the MiniDisc’. By this time only 25% of American adults were aware of its existence (Wichner, 1999). However Mark Viken announced that this was to be the ‘biggest campaign in audio history of the US’.

The LA Times estimated that Sony would spent $30 million on the campaign including standard print, tv advertising, retail promotions, sponsorships and co-branding opportunities. Increased competition from companies such as JVC, Sharp and Pioneer meant that there was more support for the product that saw sales increase. Since 1992 Sony worked hard to try and convince the US market that there was a need for the MD. The main aim of the marketing from the beginning was to show people that the MD was a cool product, which was the way of the future and is a product that fits into our new digital age.

In 1987, the Smithsonian Institute in Washington DC recognised the Walkman as a cultural icon, and so since 1996 when the main focus of the campaign was the portable units of the MD player, Sony have tried to focus on the points that made the Walkman so successful. With a redesigned Walkman logo, Sony has highlighted many similarities and differences between the MD Walkman and the original. Also the use of the Sony Walkman brand name has been used to suggest that the MD Walkman is an upgrade of the original for the future.

With adverts such as ‘go create’ and ‘create the soundtrack to your life’ the MD is aimed at the fashion conscience, youth culture and to ‘cool’ people emphasising features such as portability, mobility, edit features and superior sound quality. Finally the American people are becoming aware and converting their cassettes to MDs with sales up 35% between 1999 and 2000. ( Iverson, 2000) 2. 4 PRICE Each time Sony re-launched the MD prices were cut as they realised that the price was limiting sales, however they were also aware that it would take sometime before the MD would become affordable to the public.

Sony used a price-skimming strategy charging the highest possible price for the MD. This strategy worked in Japan. Due to the fact that in Japan CD prices are extremely high, it was more cost effective for the Japanese to buy a MD and to then hire and copy to MD. Demand therefore increased allowing the price to fall due to economies of scale. In America on the other hand CD prices were low and therefore there was no demand for a high-quality recording device. Another theory is that the people of America have less disposable income as they tend to spend more on real estate and larger products for the home (Popular Mechanic, 1998)

The price of the MD has clearly been reduced since the introduction making the MD more affordable to the target market. (Appendix 1). Today the cost of a blank MD is less than that of a high quality cassette. 2. 5 PLACE (DISTRIBUTION) 1998 saw an unexpected acceptance of the MD by several large scale retailers who dedicated displays that were built with Sony’s support. By 1998 over 9000 retailers were selling the MD. Sony also has a number of independent dealers who deal only in Sony products.

Products are distributed to these dealers through a central distribution warehouse who order the products when needed. MDs are widely available on the Internet too. 3. 0 PRODUCT DEVELOPMENT PROCESS Sony uses an early form of New Product Development for developing products called the Departmental – Stage Model (Saren 1984). It is a four stage process that starts with planning, then design, procurement, then manufacture. (Appendix 2) When the MD was developed it was a product that would have been a multi-format disc that could be used to store computer data, play films and play music.

However due to copyright rules in America, Sony whose earlier product Digital Audio Tape which was required by law to insert a circuit which prevented DAT to DAT copying called the Serial Copy Management System, Sony decided to make the audio MDs incompatible with MDs that stored computer data. It is an important fact to note that one of the main priorities placed on a product in the planning stage is environmental compatibility. With reference to Booz, Allen and Hamilton’s eight-stage process, this Planning stage would cover the Idea Generation and the Idea Screening concepts

Design at Sony is organised in a way in that enables the company to make products that both create and respond to customer needs. Designers of products are kept closely in touch with cultural trends and cultural practises within target markets. Showrooms in major global cities such as Tokyo, New York and Paris are part showroom, part shop and part R & D laboratory. Customers were invited into lifestyles settings such as bedrooms and offices and are encouraged to touch and experience new products. Sony staff then monitor their behaviour and preferences.

This information is then sent to Sony HQ who can then refine the design of the product if necessary and can then develop marketing and merchandising strategies. This stage would relate to Booz, Allen and Hamilton’s Concept Testing stage, and Business Analysis stage. It could also cover the Test Marketing stage to a certain extent. The procurement stage is concerned with what materials will be used in manufacturing and disassembly, also the environmental impact of the product during use and recycling. Once these have been considered, the product can then be passed to the manufacture stage.

This stage could be compared with the Product Development Stage. The Test Market for the MD was in River City, Austin. Sony chose this city as it best met the four criteria they set – high proportion of 18 – 34 year olds with incomes greater than $50,000, a tendency to own a CDs and a tendency to purchase electronics. River City is a music oriented town and met the four criteria with 60% of the population aged between 18 and 34. 4. 0 ASSESSMENT OF PERFORMANCE There are three key factors that make a successful product – product uniqueness and superiority, market knowledge and marketing proficiency and technical and production synergy.

(R. G Cooper) The MiniDisc was a unique product that was highly innovative and new to the audio market. It allowed customers to have a higher quality recording device that would last longer and is more reliable than competiting product (cassette). Cooper stated that a product is successful where the market oriented activities were expertly undertaken were more successful, especially if the firm has a sound understanding of the market. A great understanding of the marketplace with an effective launch is vital to new product success.

Sony failed to have an effective product launch, not once, but three times. There are also three barriers to success. These are having a high priced product, being in a market with many new product introductions and being in a competitive market where customers are already well satisfied. The MiniDisc was a extremely high priced product in the US audio market, a market where new models are constantly being introduced by a number of competitors. The CD was still in its growth stage and therefore consumers were already satisfied both with the cassette and the CD.

CONCLUSIONS

Nearly ten years after its first introduction, today the American market are finally responding, and taking interest in Sony’s MiniDisc. The MD was an instant hit in Japan, which proved to Sony that they had a world-class product – if they could satisfy Japan, then the rest of the world should also respond. Overall I feel that Sony’s introduction of the MiniDisc in the United States of America was a failure. The main reasons for the failure of the MD were the high prices and the product launch. The American people saw the MD as a replacement to the CD that had just been introduced, and not as a digital replacement of the cassette as intended.

Sony then had to spend millions and millions of dollars trying to convince its target market- the young, cool people of the USA that the MD was the way of the future. With the innovative ideas such as the MD recording deck on the latest laptop computers, and the introduction of the PC-to-MD cable which will compete with MP3, the falling prices, new long-play MDs which can give up to 340 minutes of music on one small 2 1/2 inch disc and also Sony’s current advertising campaign – MTV awards, I think that in the not to distant future the MD will finally become the success that Sony aimed for in the US market.