26 04 2011

I remember when I was teaching back at Indiana U during my doctoral program. In a Principles of Advertising class, I had assigned student teams to select a local business, and then develop an ad campaign for them.In every case, the “client” was a small Mom and Pop business. The relationship was more or less mutually beneficial: the students received some real-world experience, while the client got some marketing advice.

One client in particular still stands out in my memory. It was a small record store just off the west side of campus. Yeah, this story took place that long ago.

The students came to me one day perplexed, for their client had told them something that made no sense to them. “We have no competition,” he had said. “How could that be?” my students queried me.

“Everyone has competition,” I replied. “But sometimes you have to broaden your horizons to find them”

As it turned out, there were no other record stores at that time in the immediate vicinity, so this shop owner felt pretty good about things. He felt he had the vinyl market cornered, at least on the west side of campus.

So I asked my students, “Who do you think his competitors are? What about record clubs? Other stores across town? The radio? Other forms of entertainment?”

And suddenly my students’ eyes opened up, for they realized that everyone has competition…plenty of it. It just may not always come in a form matching yours.

Today, that record store is long gone, and so are many of the other shops selling recorded music. If we buy CDs (no longer records) at all, we are likely to purchase them from Amazon, or possibly Walmart or Best Buy. But even those vendors are feeling the pinch of digital music thanks to iTunes and over 10 billion songs sold.

Yeah, competition has a way of changing things. For everyone. Forever.

Like how Netflix now has more subscribers as Comcast cable. With Blockbuster, et al already out of the way, now it’s cable TV’s turn to take a punch to the gut. Netflix went flying past Comcast by adding nearly 4 million subscribers (as low as $8 per month) during the first quarter of 2011.

Lest the naysayers remind us of Netflix’ rather limited streaming content, it should be pointed out that Netflix is going down the same road as YouTube by developing original programming (House Of Cards) that will never have to wait for distribution rights.

And just like Blockbuster never saw this freight train coming, I bet Comcast is singing the same song. Why? Because they probably felt like they had no real competition. Sure, cable companies normally enjoy local monopoly power, held to task only by a couple of satellite TV providers. But an entirely new format? WTH?

That little record store owner is now in good company. Well, if you include Companies Who Don’t It. Pride goeth before a fall, and blinders precede being blindsided.

You can drop the needle on that song and it’ll sound the same every time.

Dr “Broken Rec…Broken Rec…Broken Rec” Gerlich



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