Most of you are probably familiar with the movie Groundhog Day . The storyline for the movie is that a selfish, self-centered man, Phil Connors, is trapped in a single day, Groundhog Day, that goes on eternally. After the initial shock of finding himself in such a circumstance, Phil Connors realizes that he is beyond consequence, where no matter what he does, he will start fresh the next morning and live the same day, once again. This initially appeals to him because he is egotistical and self-absorbed. After this stage passes, he becomes depressed, realizing that there is no purpose to his existence, only to discover that he cannot die in his long list of attempts at suicide. The moral redemption of the movie comes as he finally realizes that happiness originates from serving others and personal development. How long this takes him is left vague but it is a very long time as he learns to speak French and become proficient on the piano. Surprisingly many people consider this movie one of the finest ever made. Stanley Fish, a noted professor and author writes in an article in the New York Times that this is one of the 10 best movies ever made. It's only after Phil Connors comes to the understanding of what really makes life meaningful is he allowed then to live on happily ever after with Andie MacDowell.
Coming to understand how life really works is a quest that all of us engage in. A small portion of that quest is how the business "really" works. As we explore that question today, I would like to focus on the movie business, not about the studios but about the theaters and those who show the movies. Theaters are like any business around us in that they are going through change. The magnitude of that change can be seen in the raw numbers. In 1946, in the context of a population of 141 million in the United States, 90 million people would go to the movies EVERY week, spending 23% of their entertainment dollar on movies alone. You can see the impact of this type of attendance by the giant movie theaters that existed at the time. Huge auditoriums built for large numbers of people who were going every week to the movies. Architecturally you can see the change as we come to our current day though revenues have increased over time because of rising ticket prices, actual admissions to the theaters have dropped profoundly. Only 20 million people now go to the theaters each week and only 2% of our entertainment dollars go toward movies. Competition for that entertainment dollar is everywhere, television and home theaters, games, the internet. At the local Cineplex, buildings are chopped up into small theaters as the movie studios try to segment the market appealing to the young with animation, appealing to the teenagers with movies that are targeting their hormones rather than their good sense and making an attempt to appeal to adults with themes that require some thought. But traditional segmentation in the films alone is not the only thing that is taking place in the theaters. We are seeing attempts at bringing nontraditional entertainment to these complexes. Recently your local movie house could very well carry opera. As I looked to go to a movie over the holidays, 2 operas (The La Rondine, The Orfeo ed Euridice) were being advertised in the coming attractions as well as a live showing of the BCS (college football's bowl championship series) championship game in 3D. I am going to assume that the audience for these two are quite disparate. The goal of the theater manager is to bring in as wide an array of people as he can. The reason for this is that a high percentage of his profit comes not from the showing of the entertainment but from the selling of concessions in the lobby. To a certain extent he doesn't really care what is taking place in those small theaters in the back because the real action is in the lobby.
In a way this mirrors the strategy within the business. People become interested in the business for a variety of reasons but we want them all to pass through the lobby as they move toward their destination, to be exposed to the broad array of what we have to offer before they focus on whatever product or opportunity sparked their initial interest. This just makes business sense. It isn't just the movie theaters that have used this strategy, when supermarkets came into being in the 1930's, small grocery stores and butcher shops became so alarmed that there was a movement in Congress to make supermarkets illegal. By putting everything under one roof the shopper found more convenience and a greater variety of choices. We can see this strategy as it has extended itself over the years in stores like Costco and Walmart which exemplify the tactics of huge stores, plenty of choices and lots of opportunity for impulse buying. It is also, to a certain extent, the strategy of Amazon, using their trademark ease of purchase to sell a much wider variety of goods beyond their originating point of books.
Your local theater also wants to sell you the future. Coming attractions signs adorn the lobby and in the theaters themselves you see the trailers for future offerings. This is also part of our business. We sell not just what we have today but also what we anticipate having tomorrow. This creates a far more vibrant environment, not just for our customers but also for those who are pursuing the business.
This discussion of product diversity contrasts with what we see with some of our competitors. Focusing our efforts on selling a single, simple product, like a juice, seems like an attractive option. The difficulty is that after that market is penetrated and competitors are drawn into it and your market share begins to diminish, you don't have any substitutes for the dollars being lost to your competitors. Over the last few months I have been able to talk to distributors of some of the more mature juice companies and I understand the pain that they are experiencing as the competition have made inroads into their volume. The reason is that I experienced this personally in the early 80's when I was with a company that sold a single product that was first in the market but never truly expanded beyond that originating product. Certainly there were different flavors but the category remained very narrow. There is more stability with a broad array of product usage among distributors and customers. And there is greater opportunity as you create sponsoring potential across category lines as we have seen in the migration over the last year and a half or so from Pharmanex into the world of the Galvanic Spa which has increased sponsorship and elevated the potential that we now find in our future.
There is a lot to think about in this arena, but Nu Skin has showed itself as agile as any company in the industry in the creation and the recreation of opportunity for its sales force and that should give us great confidence about the long-term possibilities.
Post new comment