Satellite Radio: Seriously, Folks, Are XM and Sirius Serious? Ignoring Marketing Basics Can Cost Big Time
On Aug. 5, 2005, in a column titled, “Dress Codes—Do They Matter?” I described Philadelphia restaurateur Susanna Goihman whose Lexus struck and killed 15-year-old Kayla Peter on June 19 and left the scene of the accident. Goihman arrived
August 2006 By Denny Hatch
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In the News
We Tune In to the Panoply Of Nontraditional Options; The ‘111 Wussiest Songs Ever’Everyone knocks radio, but it must be doing something right. Souping up the old standby has become the business of a growing number of companies. Complaints about the dullness of traditional radio started coming to a crescendo in the late 1990s as the business consolidated and radio conglomerates streamlined operations, creating stations that many people thought sounded the same. Many tuned out; adults spend less time each week listening to radio than they did 10 years ago, according to Arbitron Inc. Among the irritants: an onslaught of ads, too much chatter, repetitive playlists and spotty reception. While frustrated listeners reached for their CD players—and later their iPods—instead, many entrepreneurs spied an opportunity to offer new kinds of radio services using satellite, cellphone, Internet and digital technologies.
—Sarah McBride, The Wall Street Journal, Aug. 24, 2006
If you have an itch to start a magazine, two ways exist to scratch that itch:
1. Dry test. Spend $100,000 to find a universe of likely subscribers, create a direct mail package that makes your magazine so real that people believe it exists, offer three issues free, and see if anybody responds. You won’t know retention, which only comes after the publication has started and readers either love it or are ho-hummed by it. But a dry test will let you see if your idea fogs the mirror.
2. Spend millions starting a magazine and hope someone buys it.
A dry test is far, far cheaper and more efficient than creating product and trying to sell it as an afterthought.
A dry test starts with the customer and works backward. At some point I’ll write a column on dry testing and the arithmetic of starting a magazine.
What happens if a product—such as satellite radio—cannot be dry tested, or tested at all?
If you don’t start with the customer and work backward, you’ll lose your shirt.
In 2005, Sirius lost $863 million, and XM Satellite Radio lost $667 million.
In my book, this isn’t chump change, but it’s clear that chumps are in charge.
The Financial Media Don’t Understand Squat About Marketing or About How Business Works
When I wrote “PRICELINE.COM: A Layman’s Guide to Manipulating the Media,” it was evident early on that this pure-play, dot-com startup had a deeply flawed business model (since corrected) that failed to satisfy its customers. The business press—The Wall Street Journal, Forbes and Business Week, as well as newspaper financial writers nationwide—behaved like a bunch of giddy, scantily clad cheerleaders. They drove the priceline.com stock up from the IPO of $16 to a high of $165, whereupon it closed out the year 2000 at $1.31—less than 1/100 of its obscene high. Only Fortune saw through the smoke and mirrors and continuously raised red flags.
Now comes satellite radio.
On Aug. 15, The Wall Street Journal ran a lengthy story by Sarah McBride with the following headline:
Until Recently Full of Promise, Satellite Radio Runs into Static.
XM, Sirius Post Big Losses As Listeners Prove Fickle; Investors Take a Pass, Too. One-Year Free Trials End Soon.
Takeaway Points to Consider:
* ”Imitation is the sincerest form of collective stupidity.”—W. Carroll (Bill) Munro, marketing director, PepsiCo
* ”God protect us from amateurs.”
—Henry Castor, book salesman
* ”Build it and they will come is bullshit. Build it, sell the hell out of it and they will come.”
—Willard Rouse, real estate developer
* With any new business—or existing business—start with the customer and work up from there.
* “The customer or prospect doesn’t give a damn about you, your company or your product. All that matters is, ‘What’s in it for me?’”
—Bob Hacker
* Go to the Sirius or XM Web site, and you’ll find a lot of “it” copy—radios, discounts, accessories, how to order, schedules and personalities, but not one single benefit of subscribing.
* Neither XM nor Sirius makes any attempt to show why it’s a better deal than the other. They force prospects to spend a ton of time doing research and figuring out which is right for them.
*Direct marketing is basically an impulse sale. If the prospect gets bogged down trying to make a decision, chances are a decision will be put off and the sale is lost.
Web Sites Related to Today's Edition:
XM Satellite Radiohttp://www.xmradio.com
Sirius Satellite Radio
http://www.sirius.com/
Companies Mentioned:
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