Satellite Radio: Seriously, Folks, Are XM and Sirius Serious? Ignoring Marketing Basics Can Cost Big Time
The dry test is a beautiful thing.
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.