By Claudio Ludovisi, CMO & Principal, Ludovisi Brand Ventures

customer
noun, | cus*tom*er | ˈkəs-tə-mər: one that purchases a commodity or service

For decades, word “customer” in Hollywood hasn’t been used very much and, as a result, neither has “Customer Relationship Management.” Yet, a new competitive context is making “CRM” an important part of how entertainment companies need to evolve and compete with relatively new entrants, (Netflix, Hulu, etc.) which started as retailers and started producing original content.

CRM, and the ability to address customers directly has been there for a long time. (Heck, the first Sears catalog came out in 1894!). Retailers have worked at this for decades, and players like Amazon and Nordstroms have truly mastered art of attracting and bringing back customers. Moreover, computing power and cloud-based services have made this technology more accessible and faster to work into the marketing process. Yet entire industries, like entertainment, have been slow to build this capability, and continue to rely on paid media to not only build awareness quickly for original content, but also to invite back audiences into franchises they’ve already tried and liked. This is like paying for a first date over and over again, instead of building a long term relationship, where reaching out personally is enough to get some love back.

Contrast this to companies who were born trying to solve a consumption problem first, as retailers – and worrying about content second. I’m referring, of course to retailers like Netflix, Hulu and Amazon, etc. These are the companies who, by their very nature, observe purchase behavior and customer preferences as an integral part of their very operations – just like theater chains and cable companies do, with one big difference: they are now producing content too. These companies are also less dependent on paid media to build viewership for a show as they have an essentially limitless shelf, in contrast to studios which, despite some digital or “pay per view” distribution are more constrained by theatrical windows or network schedules.

That said, things are changing for traditional studios and TV networks:

• It’s clear that competition has changed: Netflix, Hulu, Amazon have now “integrated backwards” and started producing and marketing their own content with the benefit of direct insights into customer purchase behavior
• The traditional business model is hurting. More shots on goal necessary to get a hit and make up for losses in the portfolio – this means more costs, higher total marketing costs (especially paid media) and all this is squeezing profitability
• Parent companies are putting pressure on Studio CFO’s and they in turn are passing on that pressure to CMO’s, who are now need to substantiate their choice of marketing mix and expenditures
• Digital Marketing departments, who manage social and mobile media, and are therefore more focused on end-consumer behavior, are coming up in the ranks and getting better seats at the table
• In the film business, the almighty “Tracking data” (awareness and intent) is showing that, once word is out – especially on wide releases of big, broadly targeted franchise movies, that throwing in additional paid media does not put “butts in seats” or lift the opening weekend as much as it used to in the past and makes both earned media and ongoing contact with consumers – this makes ongoing customer contact even more important for big Hollywood franchises.
• Cloud based service and SAS models are making it possible to build CRM capabilities faster and more cost effectively
• Because of all this, Studios and networks are now enlisting the help of their “numbers guys” like strategic planners, business development and strategic sourcing departments to accelerate this kind of capability building. They are even starting to hire external “marketing attribution” companies to get clear about what part of their spend is actually driving business.

So what does all this mean? Hollywood is just beginning to think more like a retailer, especially for standing franchises, and focus on keeping the customer engaged in a relationship with CRM, rather than asking her out on a first date over and over again with paid media. (ie: Remember first dates are expensive!).

But make no mistake: putting the customer first is going to be an uphill battle for Hollywood.

It’s important to understand why most entertainment producing companies have not developed stronger direct-to-consumer (Customer) capabilities.

• The product – First, we need to consider common wisdom about the very nature of the product. “Every piece of entertainment is organic – you never know what you’ve got until it’s done.” In other words, each show or film is unique and has little in common with any other point of reference. There’s some truth to that, but on standing franchises – which account for a large portion of profits, there’s no excuse for not following customers from point a to point b.
• B to B history. Historically, the focus of big entertainment producers has really been “B to B”, not “B to C.” Sure, Home Entertainment divisions have had “direct-to-consumer” efforts in place for a while now, but revenue from these relatively new areas has not grown as quickly as hoped, and certainly not quickly enough to replace DVD sales. “Over the top” services of traditional TV players are just starting out and not at the point where they are driving the focus of internal development executives or external show runners.
• “Relationship Focus” – When we say that the entertainment business is relationship driven we don’t mean relationships with the people who buy the stuff, but the people who make it and distribute it. This drives a culture that focuses on making on acquiring content first, and then worrying about how to attract customers to it second.
• The pace of launches – Major TV networks cannot just focus on the fall season anymore – midseason and summer shows and holiday specials drive the numbers up to 30-40 campaigns a year. Film studios too are putting out 20+ films a year – that’s about two launches a month! All this sets a monster pace operationally, and we all know that it’s hard to build a new bus while you are racing it to the next stop. And careers these days are made in 18 months… so some of this has to be about providing some job security first.
• Making the case for ROI – proving return on investment requires data which a lot of studios and networks do not have – this is where consulting firms and suppliers can come in very handy (hint: time to do an RFP?)
• Data Silos and control structures – Entertainment companies are often run as separate business units who touch the customers at different points in time (Theatrical, Home Entertainment, Theme Parks, Consumer Products/Retail). Merging databases requires a lot of patience and most importantly political will from the top.

Here’s the good news: marketing technology has come a long way. Faster computing power, cloud based resources, can help “lift the veil” of distributors and agencies to show an unbiased picture of consumption and preferences. External SAS (Software as a service), big data, CRMs, DMS’s (Data Management Systems) are now available that make it cheaper and faster to build whole new capabilities. This means that it is now financially and operationally easier for production companies can build direct knowledge of customer behavior and embark on the pilgrimage to true marketing nirvana: the ability to send the RIGHT message to the RIGHT person at the RIGHT time – directly and much more economically.

What’s that worth? In a new competitive context, this capability could literally determine mean financial success or failure.

The writing is indeed on the wall, dear Hollywood: it’s time to get to know your CUSTOMERS, start a continuous relationship with them and leverage all the technologies out there to help you build that into your marketing process. A simple Request For Proposals could get the ball rolling for you!