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Tech Tip:FAQ: Marketing



 

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What does "Marketing" mean?
The word marketing generally covers all methods used to make the public aware of an album, and includes advertising, merchandising, publicity and media relations, retail promotions, video production and promotion, street marketing, tour marketing and internet marketing. Radio promotion and related costs are also included in the overall marketing of an album, but the implementation is sometimes done in parallel to the overall marketing.

 

Apart from the advances and recording budgets, marketing is usually the biggest expense a record company incurs.

How much money should be spent on marketing my new record?


Record companies have various ways of calculating how much they spend to market a release. Because the initial spending - the "upfront" cost - to set up the release of a record is often going to be very disproportionate to the shipped unit total in the early stages, targets for spending are set in different ways. As an overall percentage of gross sales, some labels anticipate spending about 15%, others may have real costs on developing artists that reach 20%. Some labels base their calculations on a cost-per-unit basis, with spending in the range of $2 to $4 per CD. No matter what the method used to calculate the marketing budget, the goal, at the end of a project, is to have the marketing costs fall into a comfortable range. A label may feel very aggressive about the potential an unknown artist has and internally commit to a plan that initially costs $200,000 or $300,000 to launch the record, while shipping only 30,000 units. That may include promo CDs, tour support, initial product placement, radio promotion and trade advertising, tour support, various merchandising items, and publicity. These figures apply to rock bands; for pop or hip hop new releases the set up will be a significant multiple of that number, especially if it includes making a big production video. On a personal level, try to set a goal that is realistic and will allow you to be successful without going broke. If you are self - releasing, or on an independent, choose a dollar figure based on reasonable sales expectations, which will bring you back to a simple formula, based on hard costs. If selling 10,000 units is a reasonable goal, figure out all your potential costs based on the wholesale revenues, and do not go over them, unless you are approaching your career on a loss-leader basis.

 

Where should I advertise my new release?
If you are a developing artist it is wise to pick and choose your advertising very carefully. Advertising is very expensive, especially with national publications, and it only makes sense when it is targeted at an audience who is already familiar with your music. An expensive advertisement in a magazine such as Rolling Stone will be of little use if the readers of that publication have no awareness of you. In the beginning, stick to local publications in regional areas where you have a known following, and/or highly specific genre fanzines and music mags. The big city weekly papers are usually heavily targeted to music and clubs and are important - especially if your ad is done in conjunction with a store, a show, and a sale price.

 

What are "impressions", and why are they important?
An "impression" is when someone notices your band's name or song. The music industry works under the standard belief that it takes 7 impressions on average to convince someone to buy an album or single. An impression can be anything from radio play to advertising to being handed a sticker at a club. This supports the belief that you are better off spreading your marketing budget on a variety of targeted, related things, rather than spending it all in one place: someone heard it on the radio, saw a poster on a telephone pole, read the ad for the show in the weekly, etc..

 

Will I be charged back for marketing costs?
It depends on the terms of the contract you signed. In most cases, particularly with major labels, you will not see any marketing re-charges appear on your statement with a couple of very important exceptions. The costs of video production, tour support and independent radio promotion are typically pre-negotiated. The range of "recoupment" - how much of the money spent gets reimbursed to the label - is generally between 50% (video) and 100% (tour support) of those costs. Independent labels may expect the band to absorb some of the marketing costs and if this is the case you should have some involvement in the amount and type of expenditure. If you choose to use outside specialists, in press for example, you should make sure the cost charge backs that aren't covered by contract are discussed beforehand. Don't ever confuse recoupable expenditures - money spent on your behalf by the label - with general marketing spending. In a way, if you are successful, it is a pure "loan."

How are video costs recouped?


Again, it depends on the terms of the contract you signed. With most labels, the expense of a music video is 100% recoupable, but only 50% of these costs will be recouped from royalties you earn from record sales. The other 50% will be recouped from commercial exploitation of the video itself, as part of a video compilation for example. The clear exception will be an agreement with a label that commits 50% of the video, up to a reasonable level, as a non-recoupable marketing expense.

Should I make a video?


There is no simple answer to this, but it is only worth making a video if you are reasonably sure that the video has a chance of being shown on TV (local or national), and that the record company is supportive of the idea. As a rule it is better to wait until you need to make a video, rather than making one early, before the market (radio in particular) has responded to your album. It is almost always expensive to make a video and it may be wiser to spend that money in other areas that are more likely to give you a return. The most common exception, in the case of independent bands especially, is the ultra-cheap video made by a friend of the band who owns a digital video camera and makes "indie" films. A video is always a help - if it is good, a very subjective call.

Why do independent marketing companies exist?


Many major labels have a busy release schedule and it is sometimes preferable for both the label and the artist to have an independent company to work on the album. The project may get more attention, and/or the independent company may have an expertise in a certain genre of music that does not exist within the record company.

 

Street marketing, regional video promotion, retail marketing and Internet marketing are often areas where an outside company is hired because 1. they may not exist as departments at a company, or, 2. the outside consultants have complementary skills and access which augment the label's own efforts.

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