Music Brains

When a start-up company invades a market with a new product, it can’t spread its forces across a broad front. Instead, the start-up needs to identify a narrow beach-head, concentrate its limited forces there, conquer the entire beach-head quickly, and use it as a base for the invasion of the wider market. Such a beach-head market’s members should be easy to reach, eager & able to buy, and evangelical to others. This beachhead market needs to be small enough that you can dominate it quickly, but big enough to take you to profitability.

Thumtronics’ initial beach-head market for the Thummer is the “Music Brain,” which we describe as a “serious musical hobbyist with a degree and/or job in science, engineering, or medicine.” We settled on this beach-head market after discovering that the majority of people joining Thumtronics’ online ThumClub were, in fact, Music Brains.

Number of Music Brains
How big is the Music Brain market? It turns out to be just right for a beach-head market, at just under half a million Music Brains in the USA and just over a million world-wide.

The US Census Bureau’s 2007 Statistical Abstract contains the necessary data for the USA. According to its “Adult Participation in Selected Leisure Activities by Frequency: 2005,” if we define being a serious musical hobbyist as being one who plays a musical instrument at least once per week, then 3.5% of Americans are “serious musical hobbyists.”

The same source reports that there are 13 million Americans with degrees and/or jobs in science, engineering, medicine, or related technical fields. If 3.5% of all Americans are serious musical hobbyists, then – all else being equal – 3.5% of scientists and engineers should be serious musical hobbyists, too. So, there should be (0.035 * 13 million = ) 455,000 Music Brains in the USA.

How many Music Brains are there worldwide? We can estimate the answer by looking at population or by music product industry revenue.

The USA’s percentage of the global music products industry’s revenue is 44% of the world total (as reported by The Music Trades). The USA’s percentage of the population of the major markets’ population is 34% (USA: 300, European Union: 450, and Japan: 125). So the USA can be estimated to have between 34% and 44% of the world’s Music Brains – let’s call it 40%.

Using this compromise figure, the number of Music Brains in the major world markets is approximately (455K/0.40 = ) 1.1 million.

Characteristics of Music Brains
Thumtronics’ market research suggests that Music Brains are:

• Experienced: have an average of over 20 years of experience in playing and/or studying music.
• Free-spending: spent four times more money on music products in the previous year ($1300) as non-hobbyists ($280).
• Exposed: more than half played in bands, performing publicly on average twice per month to audiences averaging more than 60 people.
• Evangelical: reported that an average of five friends would buy Thummers after seeing the respondent’s Thummer (and infection ratio of 5:1).
  

More than half of the Music Brain respondents reported jobs in Information Technology, so they are particularly Internet-savvy. This makes them easier for Thumtronics to reach, and also makes them particularly capable of (a) adding value to Thumtronics’ open-source software & courseware development efforts, and (b) helping spread word-of-mouse through blogs, YouTube demos, chat rooms, and other meme-spreading vectors.

In short, Music Brains are easy to reach (through the Web), eager & able to buy, and have the potential to be evangelical to others – exactly the characteristics one wants in an initial niche’s members.

Conquering the Music Brains
Is the Music Brain beach-head niche small enough to conquer quickly, while being large enough to take Thumtronics to profitability? Yes.

Firstly, Thumtronics’ outsourcing-oriented, direct-sales-based, viral marketing business model has a very low burn rate, so it can be profitable at a low rate of sales – 1,500 units in the first year, for example. 1,500 units is 0.3% of America’s 455,000 Music Brains, and only 0.1% of the world’s Music Brains. Given how highly connected Music Brains are over the Web, our initial PR (through the popular science & engineering press, in addition to the music gear press) should reach most of them either directly or through word of mouse, giving them awareness of the product and knowledge of where to learn more about it on the Web. From there, an online purchase is just a mouse click away.

Secondly, as stated above, Music Brains report that each will be able to convince an average of five friends to buy Thummers, too – an infection ratio of 5:1. If convincing all five friends to buy Thummers took an average of six months, then the incubation period between generations would be six months long.

At an infection ratio 5:1 and a six month incubation period, Thumtronics’ sales growth would be astounding. If Thumtronics sold all 1,500 Thummers on the last day of the first year of availability (for the sake of argument), then six months later it would sell 7,500 more, and six months later it would sell 37,500 more. That’s 1,500 Thummers sold in the first year and 45,000 in the second. At this same growth rate, the global market of 1.1 million Music Brains would be exhausted by the end of the third year. Those sales would deliver something like $400 million in revenues. Thumtronics’ low-overhead business model would convert a surprisingly-large percentage of that revenue to profit. These profits could fund the development of the ThumMusic System, the Pocket Thummer, and the subsequent assault on the mainstream consumer market with a lower-priced, fully-integrated music-making solution.

Do I expect that Music Brains will actually deliver a 5:1 infection ratio? No. I would love for it to happen, and such faddish growth is entirely possible (and easily accommodated by Thumtronics’ business model). However, I prefer to assume the more conservative infection ratio of 1.8:1, which means that each Thummer buyer will convince slightly fewer than two other people, on average, to buy a Thummer, too. This lower infection ratio will exhaust the Music Brain market within just five years, and still give Thumtronics the profits it will require to assault the consumer market.

This is not to say that only Music Brains will buy Thummers in its early years of availability. Rather, Thumtronics will focus all of its marketing efforts on reaching Music Brains and convincing them to buy Thummers. If other people are convinced, too, that’s great. We’ll keep an eye on the characteristics of our customers, watching for emerging sales trends which we can encourage as the Music Brain market becomes saturated.

However, initially, you’ve got to invade a market along a single beach, and for Thumtronics, that beach head is “Music Brains.”