B-to-B publishers with a knack for aggregating industry data are often rewarded with a customer base willing to spend thousands of dollars a year on subscriptions for reports and other products. The key to this success is relying on a combination of industry expertise and technical know-how to create products that become critical benchmarks in their niche.
That was the approach followed by Clark Johnson, Co-Founder and President, MI SalesTrak, a retail sales tracking service for the musical instrument industry. Clark, a veteran of retail research firm NPD Group, created a system that collects point-of-sale data from large and small instrument stores, aggregates and analyzes it for market trends, then emails PDF reports and Excel files to instrument manufacturers.
The service launched in 2003, and MI SalesTrak now has more than 40% of the total retail channel represented among its data providers, including industry giant Guitar Center, and its manufacturing customers represent more than 50% of all sales in the industry, including Fender, Gibson and Yamaha.
But publishers face a long, difficult road to achieving critical mass in their industries. “The specific challenges are different in each industry, but the first thing you have to overcome is skepticism that retailers’ data will be kept confidential, and that the data is useful information,” Johnson says.
Given those challenges, we spoke to Johnson to learn the key factors that helped launch and grow MI SalesTrak. Here are six strategies other B-to-B publishers should keep in mind when planning, implementing and maintaining a data-driven subscription service of their own:
-> Strategy #1. Market research
Although Johnson and his partner, Jim Hirschberg, were veterans of the retail data industry and music, they didn’t rely on their own assumptions to create MI SalesTrak. Their first step was to consult potential customers and data providers to see if the proposed service was viable.
- Conversations with manufacturers helped gauge interest in the product and provided recommendations for designing the service. Johnson didn’t treat these as sales calls. The goal wasn’t to sign up customers immediately; it was to get feedback to move on to the second phase: talking with retailers.
- Conversations with retailers also helped gauge interest in the potential system but also highlighted key concerns, such as ensuring that each store’s data would be kept confidential. For example, Guitar Center said they needed to see other large retailers in the system to make them more comfortable that their own data wouldn’t stand out.
-> Strategy #2. Sign up data providers
The right supply of data will make or break a subscription-based product, so it’s important to target sources that provide both the volume and the diversity required. “The challenge is not to get X number of stores that all sell Peavy and Fender, but to get a number of stores that sell different things.”
Johnson started by looking at market research that helped define the scope of the retail music sector. These estimates, although not always accurate, at least gave some sense of the major retailers and the dollar volumes they accounted for.
The next step was to stratify that universe into logical segments, such as large, national retailers, regional chains, small, independent retailers, specialty stores selling certain categories, etc.
For each segment, the team targeted representative retailers, using an extrapolation model to determine how many participants they needed in each channel. “It was a long, hard slog. It took almost a year to get a sufficient panel of retailers to get reports that were worthwhile.”
The work isn’t done, either. Maintaining the right mix of data providers is an ongoing challenge. Retailers merge or go out of business every year, and new ones start up. So Johnson says he never stops recruiting new participants.
-> Strategy #3. Ease of use for data providers to contribute
Maintaining the flow of data is essential, so Johnson’s team makes it as painless as possible for retailers to submit their sales records. Participating retailers submit monthly sales reports online, either by emailing files or by logging in to a secure Web site.
While retailers are required to report data down to the SKU and price level, Johnson did not impose format or style guidelines for that information. “One of the reasons we get such a variety of data inputs is that we don’t demand a certain content or format.”
Because there’s no unified product tracking system for musical instruments, such as UPC codes for consumer packaged goods, this presents some challenges:
- Large retailers often sell dozens of products in each category and submit huge files that use manufacturers’ own product serial numbers or other systems for SKU identification.
- Small retailers might only submit text descriptions of their product sales, such as “Fender American Stratocaster, Black.”
This puts the burden on Johnson’s team to harmonize disparate data from all participating retailers according to a standard product coding system they developed. However, most of the heavy lifting takes place up front, when integrating a new retailer into the system. After that, Johnson says they typically see only 3% to 5% new items a month from participating retailers.
-> Strategy #4. Package data for customers
Raw data must be transformed into metrics and benchmarks that are useful to the customers -- in this case, musical instrument manufacturers. Johnson’s team developed a range of metrics that highlight current market trends and guide manufacturers in future marketing or product development projects.
Metrics available in monthly reports include:
o Sales volume and trends -- is the product category growing or declining?
o Price points -- which are most popular, and are they moving up or down?
o Top brands each month vs previous months
o Manufacturer market share -- who’s gaining and who’s losing?
o Best selling products -- which are on top, and how does it compare to previous months?
o Feature clusters that are most popular, which manufacturers say have helped them design new product lines.
Besides internal reviews, customers have used MI SalesTrak data in external applications, such as making claims about product popularity in ads or convincing retailers to stock certain products. “Once it becomes the common currency, manufacturers will use it with retailers and retailers will use it with manufacturers. It can turn into a nice feedback loop.”
-> Strategy #5. Flexible pricing
MI SalesTrak customers pay an annual fee to subscribe to reports about particular product categories. The prices vary according to the size of the category and the amount of data Johnson’s team must process. He declined to give specific numbers, but said annual subscriptions range from thousands of dollars to more than $25,000 a year.
While the company does offer discounted arrangements, such as new customer offerings and multiple category discounts, Johnson says it’s important to make sure those discounts are standardized and apply to all customers. “If you give someone a much better deal than anyone else, that’s a death knell as far as I’m concerned. They could show up at another company and want the same deal.”
-> Strategy #6. Product development ideas
Johnson started MI SalesTrak strictly on spec, deciding to compile data on the largest categories in the musical instrument business -- guitars, amplifiers, drums, etc. Since then, the product has been largely customer and retailer guided.
Participants can suggest new product categories to track, and once a new category is added, it creates a whole new field of potential customers for monthly reports. As a result, the amount of data the company tracks today has doubled since its first reports. For example, customers recently suggested that MI SalesTrak report on deejay equipment, which in turn led the company to new customers who manufacture those products.
To that end, Johnson says it’s critical that publishers maintain close, enthusiastic relationships with the companies in the industry. For his team, this means attending the two major industry trade shows each year, frequently calling customers and potential customers, and small touches like including a short, personalized note with the email that contains each monthly report.
“We’re in a good position that this is a pretty small industry. But by this time, we have personal contacts with virtually every company out there.”Useful links related to this article
Creative samples from MI SalesTrak: