Real Networks Defunct Marketing Department

The Wall Street Journal reports Real Networks has slashed prices for downloading music. The RealPlayer Music Store will charge 49 cents a song and $4.99 to download an entire album. In comparison, Apple, which supposedly commands a near 70% share of the download music business, charges 99 cents a song and $9.99 for an album.

So … in an attempt to slice market share from Apple, the Real Networks Marketing Department came up with the BRILLIANT idea to run a three-week clearance sale on its digital inventory of music.

As Seth Godin wrote in the Purple Cow … a low price strategy is the last refuge of a marketer who is out of great ideas [Purple Cow, page 106].

Real Networks needs to realize there is a HIGH PRICE to pay for this low price marketing strategy.

Besides losing loads of money … low price sales promotions means lower margins, lower perceived value of a product/service, and it lowers the ability of a company to raise prices in the future. Plus, it antagonizes competitors to lower their prices resulting in a price war where there will be few, if any winners.

The easiest marketing strategy for any marketer to activate is low price. But aren’t we, as marketers, too smart, too savvy, and too damn creative to fall for this low price trap? This is why I say the Real Networks Marketing Department is defunct. They are investing millions of dollars to focus a promotion based on the low price fallacy.

So, what should Real Networks do instead of promoting 49 cent downloads?

Ditch the low price promotion all-together and focus their Freedom of Choice campaign supremely on their remarkably cool and rebelliously hip Harmony technology. Harmony basically hacks the proprietary iPod music format and allows for RealPlayer downloads to be played on iPods. This is big stuff, really big stuff and … THIS IS A BRILLIANT MARKETING OPPORTUNITY!!!!!

"Harmony enables consumers to buy and download music that plays on more than 100 portable devices, including the Apple iPod. Before RealPlayer with Harmony, consumers buying digital music were forced to buy music that only worked on a particular brand of portable device, meaning that they could easily get "locked in" to that device, often without even knowing it." [source: Real Networks press release]

The Real Networks Marketing Department should focus all promotional efforts on the high value of Harmony and not on the low value of low price. Promoting 49 cent downloads will only clutter the bigger (and better) message of universal digital music formats.

Focusing the Freedom of Choice campaign 100% on Harmony will change it from a trite sales promotion to an all-out movement. And we all know ... movements are far more powerful than promotions.

Comments

[Johnnie Moore]

My 2 cents: For me, Real Networks deserve to fail because of their shabby, intrusive attempts to lure people into paying for their service with tricky software. Few things could be less appropriate for a transparent, network economy.

I will not install the Real Player on my new PC because of mine and others' experiences of it. Real bullshit is an example of the sort of word-of-mouth that puts me off.

[johnmoore (from Brand Autopsy)]

I too have had issues with Real Player’s invasiveness and propensity to wreck havoc on my computer innards resulting in far too many blue screen meltdown crashes. The latest version hasn’t been as destructive to my computer as previous versions have been. Then again, I use Real Player real sparingly.

[Stephen Macklin]

Apple which has a litigious history when it comes to protecting its technologies is not very happy with Harmony's hack of its iPod software. Perhaps the people at Real think that that if they can drive a big enough wedge into the market with their low prices they can gain enough market share for Harmony to render any Apple legal action meaningless.

This of course follows the familiar pattern of Apple's actions against Microsoft when the first versions of Windows hit the streets.

I see this less as a marketing strategy and more as a preemptive strike against Apple and any other provider wanting to protect its proprietary format.

[johnmoore (from Brand Autopsy)]

Okay … good points about the campaign being a preemptive strike against Apple.

As a marketer, I cringe when other marketers reach into their bag of tactics and play the low price card as a way to grab market share.

A promotional low price strategy is not sustainable. Prices will rise again and when a company does raise its prices after the promotion, they better hope and pray the customers lured in with low prices don’t flee fast when faced with paying higher “regular” prices post the promotion.

I contend targeting price-driven cherry-picking customers to gain market share is a marketing mirage. A mirage meaning … during the duration of a sales event you may gain temporary customers (most likely motivated solely by price) but once the sale is over, these price-driven cherry-picking customers disappear and hop, skip, and job to the next bargain they sniff out.

It’ll be interesting to see if Real Networks can make a dent in Apple’s music download business as a result of their 49 cent download promotion. As we know, the real measurement of a sales promotion shouldn’t be how many customer you acquired during the sale … but rather, how many new customers become regular customers after the sale.

[Stephen Macklin]

I think the retention issue will ultimately depend on two factors. Ease of use - that is finding the music you want and getting onto the player you want. And how high the price goes up after the promotion.

If it is a major hassle to get Real downloads onto your iPod (and it can't possibly be simpler than iTunes) Real would have to set their post promo price far enough below Apple's $.99 to make it worth the extra steps.

The danger is that Apple could very easily counter any permanent price drop since one of the primary functions of iTunes and the iTunes store is to sell iPods. Which have a much nicer margin.

[Stephen Macklin]

Based on what I read in this story, Real is not going to come out of this unscathed. Their stock price is falling based on the low price scheme and their online petition is support of their Freedom of Choice campaign has taken a serious beeting.