What do the pharmaceutical and entertainment industries have in common? More than you might think, says John Quelch. For starters, both run a greater risk in not pursuing the blockbuster than they do in pursuing it
The importance of blockbusters has been challenged recently by Chris Anderson's long tail theory that you can make money in many creative industries by selling specialized products to niche markets identified via the internet. For example, the new CEO of GlaxoSmithKline, the pharmaceuticals giant, likens the search for blockbusters to "finding a needle in a haystack when you need it." He also worries that a company is at risk if sales depend too much on one or two megabrands that could run into lawsuits from generic competitors or regulatory challenges.
On the other hand, the president of Warner Brothers (think Batman etc) aims "to take advantage of what has become a very global market by focusing on bigger films that require a bigger commitment." He believes in blockbusters and his strategy is to create more of them.
The pharmaceutical and entertainment industries are similar. R&D costs in both are high. Results are unpredictable. Drug research initiatives often dead end but occasionally lead in an unexpected direction to a blockbuster result. Some big budget movies are flops, others are sleepers, others meet expectations.
Perhaps the CEO of GSK is really telling us that he sees no promising blockbusters in the drug pipeline. In a globally integrated market, blockbuster brands that address common consumer needs are more important than ever. Consumers around the world are excited to share common experiences. Blockbusters also motivate salespeople, get them access to customers and drive distribution for other products in a company's portfolio. A company's commitment to searching out potential blockbusters and then investing in marketing to convert potential to reality attracts and retains top scientists and creatives.
Of course, any company needs a portfolio of development projects, some with predictable sales results, others more risky. The former pay for the company's daily bread and butter and fund R&D on future blockbusters. Inverness Medical Innovations, for example, is doing exactly that, milking its number one worldwide position in pregnancy test kits to fund frontier research into cardio diagnostics.
More risky than pursuing blockbusters is not to pursue them, to condemn your enterprise to a lifetime of slave labor harvesting the long tail of micro-opportunities rather than imagining, pursuing and marketing the global solution to an important, widely shared problem.
What then makes a blockbuster? Here are the Five S's, the five defining characteristics of blockbusters. How does your brand stack up?
#&149; Sheer size. A blockbuster has a transformational impact on a company and an industry, often opening up new markets worldwide. Blockbusters break sales records and exceed expectations. Around 100 pharmaceutical brands exceed $1 billion in annual sales. Procter & Gamble has 23 such brands.
#&149; Speed. It's not just the sales volume, it's the speed of the sales trajectory. Remember that the original blockbuster was a bomb that could destroy an entire city block. Blockbuster brands address pressing consumer needs so well that they often enjoy vertical sales lift-off. Think Viagra.
#&149; Scarcity. A blockbuster brand is often in such high demand that stock-outs and shortages occur in the market. Remember the consumer lines to buy the new i-Phone As imitation is the sincerest form of flattery, the speedy availability of counterfeits is another indicator of popularity.
#&149; Sustainability. A blockbuster brand is not a one hit wonder. It is a gift that keeps on giving. Remember Intel's Pentium chip. Or look at the seven Harry Potter books and the five companion movies. Adding DVD and merchandise sales, and theme parks etc., Advertising Age valued the Potter economy at $15 billion.
#&149; Sizzle. A blockbuster does not just address an important need. It does so in an exciting and accessible way. Pfizer's Lipitor was not the first cholesterol reducer and was no better than Merck's Zocor, but superior marketing and sales made Lipitor number one. And, in the movie world, remember the magical and memorable special effects in the Star Wars series.
Are there additional criteria that define a blockbuster in your mind?