Posted by Whenever an industry shifts from physical products to digital ones, that’s when the real trouble for the traditional players starts.
Think about the music industry, the film industry (both camera and movies), the publishing industry and the list goes on. Whenever the final products shifts from its physical form to a digital one, all hell breaks loose.
Industries respond in the stupidest ways because their gut instinct is to charge the same price they charged for their physical products (sometimes they even try to charge more). After all, it’s the consumers’ choice if they want a physical CD or twelve MP3 tracks, but it’s all worth the same amount, right?
Wrong.
And, the problem with it being wrong is that no one really knows what the right answer is. That being said, we do know – with one hundred percent certainty – that the answer is definitely not, "charge them the same amount." That was the main inspiration behind yesterday’s Six Pixels of Separation Blog post titled, New Business Models. It also speaks to something that most of us know, but don’t like to talk about: change.
We all love quotes about how change is good, it’s the only things that is inevitable (along with death and taxes) and, "if you don’t like change, you’re going to live irrelevance even less" (General Eric Shinseki, US Army), but no industry can handle or deal with dramatic change – like when a product goes from physical to digital. On a recent trip to a speaking event, the driver was pointing out the ocean and how that specific part of the world was once a great industrial port where ships came to load and unload their stock and fill the whole north-eastern part of North America with goods. He went on to talk about how the shipping has slowed down to the point where that port was now empty, and what a shame it is. We’re still shipping, it’s just bits and bytes now… not crates and barrels.
Here’s the marketing challenge: this is all so new, that most companies would rather hold on to what they know with everything they have than dip some toes into the blue ocean strategy that is partly the present, but mostly the future. Marketers can shape that future. As stewards of the brands, we get an exclusive glimpse into our consumers and what makes them buy and click. We need to be better at looking at our analytics and our trends to help shape not just our companies, but the industries they serve.
It’s a tall order. It’s one that I don’t think the sales, financial, operations and technology departments of a company are focusing on. It’s a marketing issue in the purest definition of the Marketing Four Ps. Particularly the "product" one.
Think about your company and the industry you’re in, how well would you be able to cope, change and evolve if the very product you sold changed entirely overnight?
Never another podcast episode or article 
Mitch – a great challenge. There’s a great post by Heather Fraser (of Design Works) in Business Week that focuses on how design constraints are great for innovation (http://lin.cr/8rv). I think a great question for marketers is: what would you do if all of a sudden you lost 90% of your budget for next year?
The problem is companies want to have their cake and eat it too. They want all the benefits of a less expensive distribution, but none of the downsides.
Reminds me of manufacturers moving to China. They all loved the lower costs, but were all surprised when children’s toys were being made with lead paint.
Nothing is free, it’s all a give and take.
i’ve been reading for a while and have never posted, but feel the need to do so now. 🙂
you raise a great points, but i’m not a marketer and wouldn’t know where to begin with a marketing response; however, i am currently living within this new “digital disruption”. that is, i work for an agency that represents songwriters and publishers for many forms of musical reproductions made in canada and sold to canadians.
my industry provides the classic example of an industry that has :
1 – been flipped on it’s digital head
2 – not responded well initially, and
3 – continued to not respond fast enough or well enough to satisfy the fast pace of technology and just as importantly consumer demand
4 – all the while trying to take into consideration some level of compensation to the songwriters and publishers.
all day and every day we struggle to make the best decisions possible, but it’s hard. new uses, new scenarios and new innovative ways of digitally delivering product (once upon a time called a “song”) come at us on a daily basis.
it’s a fine balance to not only try to keep the industry going, but to also ensure that consumers and services are not unintentionally infringing copyrights.
what this all means to and for marketers, i’m not certain. in fact, i’m questioning the validity of posting my comment, but all i know is that i saw your status on facebook and it made me want to respond.
In our Industry – music licensing – we could not even exist the way we do if our product was not entirely digital. Broadband rapid expansion has opened up a whole new territory: The Entire World. Of course music licensing existed before the Internet, but the accessibility and speed of delivery today is nothing less than revolutionary. Businesses like ours are open 24 hours day, 365 days a week, everywhere in the world at all times. The purchase is done instantly online and the product is delivered within 5 minutes. That was unthinkable just few years back. Some older companies in the Industry are just not adapting fast enough to this new reality and they are losing ground.
Is is disruptive? Yes it sure is. But it is a glorious time for innovation. And this is creating amazing opportunities for all creative people with digital products. It does not matter where you are located geographically – whether you are in a small town or a large city. In reality we are located on people’s computer screen – right in front of their eyes.
I always thought that where the music industry went wrong wasn’t in their pricing online but in their pricing offline.
It seems to me that those made the decisions were too busy raking in the cash to understand that once customer habits change they are virtually impossible to change back.
If CDs were priced at $10 vs. the $23 & $24 price tags, maybe so many kids wouldn’t have started to learn how to download for free.
There always has been change, there always will be, the difference between the past and the present is the speed of change. It was not so long ago that cars started being produced on mass in factories that created new occupations, new skills and new economies. But these new technologies and industries disrupted and made many traditional industries irrelevant. Horse tackle, cart builders and farriers suddenly found the market demand for their products and skills plummet to unsustainable levels. They had to be retrained and join the production line.
The trap for business is expecting that their products, services and even communications will REMAIN relevant to consumers in an ever changing environment. It is businesses with this ethos who will wake up one day and find out the marketplace has moved on and somebody else is providing the value the customer is seeking. It is this ethos that will blame somebody else for their dropping profits and seek to legislate and secure the future of their irrelevant products and services.
Edward deBono states “We have left the era of manufacture and entered the era of valufacture”. This simply means that it is not good enough to produce products and services on mass and expect that there is an economy in those products and the marketplace will consume them. It is our role (as businesses) to provide ‘real and enhanced value’ to consumers, not what we the business believes is value, but what is fundamentally valuable to the individual.
If a business is concentrating on the customer, the person, their needs and wants, then change is a natural part of their ethos, of how they serve. But if a company is looking towards themselves and how they maintain their structures, their marketshare, their jobs and how the consumer serves their bottomline, then they will become irrelevant. Expectation is a dangerous road.
Digital is changing where people find and perceive value at a pace never seen before in the documented history of humankind. In this environment you must ask yourself, are you serving? are you providing value? are you relevent?
great post, Mitch.
For a moment I thought you were going to be saying that disruption (ie non-permission) was the way in the digital era but fortunately it wasn’t!
Working in Financial Services (where the magic happens, right?!) we don’t have too much difficulty moving from physical to digital as it’s really all just pretend anyway.
The issue for corporations is we try to use digital to help meet the downward pressure on cost – but once we’ve done that once, where do we go.
I am hopeful that we will embrace being a provider people want to build a relationship by serving our communities (of customers, employees and neighbours) – creating digital community around what we do. That way we can get people into more of what we offer!
Perhaps a bit off topic, but you get the drift, right?
Nice post. I learn something new and challenging on sites I stumbleupon everyday.
It will always be exciting to read content from
other authors and practice something from their sites.