NATIONAL MUSIC STUDIO

Mr. Paul Robson, manager of two Halifax-Dartmouth National Music Studio (NMS) branches was studying the demographic data before him. He was also studying marketing surveys which included information on consumer attitudes and consumer awareness. The owner of NMS, Mr. Peter MacDonald, was considering adding another branch in the metro area and the two men were to meet in two weeks time to discuss the matter.

Before the meeting, Mr. Robson needed to evaluate the available information and present his conclusions regarding location, market potential and possible marketing strategies for the proposed branch. It was already March, 1987, and Mr. Robson knew that they had to proceed quickly if they were to open the new branch in time for the peak demand period which began in August.

THE COMPANY

National Music Studio, a chain of music schools, was started by Mr. MacDonald in 1971 in Nova Scotia. The company had grown quickly, and by 1987 ten branches were spread throughout Nova Scotia; two were located in the Halifax-Dartmouth area. Paul Robson was in charge of both. The Dartmouth branch had been opened in 1975 and the Halifax branch in 1978.

Mr. MacDonald also owned a chain of retail outlets which sold musical instruments. The music stores and the music schools (NMS) were usually close together - often in the same building. However, each was operated as an independent organization. Students of NMS were not required to buy their instruments from these retail outlets although most did so because of the discounts available to them. In the case of the Halifax and Dartmouth NMS branches, Mr. Robson would also arrange low cost instrument rentals through the retail outlets when requested by his students. However, the music school managers, including Mr. Robson, had no role in managing the retail outlets.


This case was prepared by Professor Mallika Das at Mount Saint Vincent University for the Atlantic Entrepreneurial Institute as a basis for classroom discussion and is not meant to illustrate either effective or ineffective management.

Copyright 1990, the Atlantic Entrepreneurial Institute. Reproduction of this case is allowed without permission for educational purposes, but all such reproductions must acknowledge the copyright. This permission does not include publication.


Financially, the NMS outlets that Mr. Robson managed were sound. Both were now operating profitably but the branch in Dartmouth had experienced problems eight years ago. It had started losing students and its reputation had been affected by poor management. Teacher morale had been low. Mr. MacDonald had fired the manager and had hired Mr. Robson to replace him. During the four years prior to March, 1987, Mr. Robson had been able to turn the operation around to the extent that it was again profitable. But, in spite of its financial strength, Mr. Robson was aware that the company could not afford an expensive location for its new branch.

The twin city area of Halifax-Dartmouth was the major urban centre in Nova Scotia. In Dartmouth, the NMS school was located on a main street (actually a small highway) in a business district with a major shopping centre. It was situated near two large upper middle class residential areas and one elementary and one junior high school. Both the NMS school and the affiliated retail outlets were on the second floor of an old building that had been extensively renovated to improve the acoustics. Parking was a major problem and had been a frequent complaint of the clientele.

National Music Studio had opened its Halifax school in a central residential area. It was near a junior high school and a major supermarket outlet. The building was relatively new, and again, the music school was located on the second floor. In this instance, however, the affiliated instrument retail outlet was on the ground floor of the same building.

THE PRODUCT

In Mr. Robson's opinion, the service that NMS was offering (i.e., music instruction) was a difficult one to market. He felt that the personality of the instructors and their teaching methods had considerable impact on the students' perception of the quality of instruction. In fact, Mr. Robson was certain that these factors mattered more to students than did the technical skills and qualifications of their teachers. As personality of the instructors and teaching methods were intangible factors, it made the marketing of this service (in Mr. Robson's opinion) rather difficult. Over the years, NMS had gained a good reputation as a music school with high calibre instructors who provided individualized instruction. The teaching method used by the school was also considered unique and had led to good feedback from its students.

National Music Studio provided instruction in voice training and a variety of instruments as well as in various styles of music. While most of its students were interested in learning to play an instrument for their own pleasure, some were interested in more formalized instruction. NMS did train students for the Royal Conservatory of Music exams and its students who had taken these exams had been very successful. In general, NMS had a reputation as having a good program in modern music.

Recently, Mr. Robson had started a music awareness program for preschoolers. Several preschools in the twin city area had agreed to have a music instructor from NMS come to their school to conduct a program for preschool children. Mr. Robson hoped that many of these children would join NMS when they went on to elementary school.

Location of a music school, in Mr. Robson's opinion, was not the deciding factor which led people to choose one music school over another for either their children or themselves. He frequently stated,

We are a second storey business. Certainly location is important. It does help to have ample parking and other facilities like retail outlets close by so that parents can drop off their children and do some shopping. If I were starting all over again, I would choose a different location for the store in Dartmouth - parking has always been a problem there. But I still feel that location is secondary to quality of instruction. If our instruction is good, they'll come - even to a difficult location.

THE CUSTOMERS

Table 6 provides details of the age distribution and instruments preferred by the customers of NMS. Most students enrolled for an initial three month program but quite a few dropped out during this period. Those who stayed through the three month period were likely to remain in the school for a period of two to three years. Often, two children from the same family enrolled for music lessons.

Mr. Robson was not quite sure what the customers were looking for in a music school, or what made them choose one music school over another. Without this information, he felt that he could not formulate a marketing strategy for the NMS outlets he managed. Nor could he give advice to the owner on the market potential of the proposed new metro branch, and on the best location for it. This led him to approach a local university to ask students from a marketing research course to collect data on customer preferences and attitudes toward music schools. This information is provided in tables 7 to 10.

THE COMPETITION

In addition to NMS, there were twelve other music schools in the metropolitan area. Of these, one was in Bedford and two were in Sackville (see Exhibit 1). (Bedford and Sackville were widely regarded as "suburbs" of Halifax and Dartmouth. Bedford was a town, while Sackville was part of Halifax County.) Both music schools in Sackville were branches of larger local music schools with branches in the Halifax-Dartmouth area. These schools had very good reputations in Sackville. There were also several music teachers in the Bedford-Sackville area who gave private lessons to students in their homes, and neighbourhood public schools offered music instruction to their students.

Mr. Robson did not think that the public school programs were a real competition for his company. He had developed good relations with the music instructors in the public schools. In fact, many music instructors in the public schools recommended NMS to their students who were serious about music or had interests that the public school programs could not satisfy. This, combined with student exposure to NMS's successful preschool program, minimized the threat to NMS from the public school music programs.

PROMOTION

Compared to some of the national music school chains, NMS was a relatively small operation. Its total promotional budget had always been very limited. Before Mr. Robson began managing the Halifax and Dartmouth branches, the company had spent very little on promotions. For the Metro area branches, monthly advertisements in The Mail Star - a local newspaper - had been the only promotional tool used. The company had relied on word-of-mouth communication and the contacts that its instructors had established with music teachers in the public school system for stimulating demand for its services. When Mr.Robson took over as manager, he had increased the company's promotional expenditures.

In 1986, the company had conducted its first direct mail campaign in the twin city area. A small four page brochure had been printed and distributed in certain parts of the city. Mr. Robson had limited the distribution of the brochures to high income, upper middle and higher social class neighbourhoods in Halifax and Dartmouth as he believed that this was the prime market for music schools. The brochure had stressed the variety of programs offered at NMS and the preparation for the Royal Conservatory exams. In Mr. Robson's opinion, the response to the campaign had been very positive - after the campaign, the Halifax-Dartmouth branches had experienced a 30% increase in inquiries and a 20% increase in registrations. The total cost of the campaign had been $10,000 and Mr. Robson felt that Mr. MacDonald would not be willing to spend much more than $20,000 this year on special promotional campaigns for all three metro branches.

THE RESEARCH STUDY

To prepare for his meeting with Mr. MacDonald, Mr. Robson had asked marketing students from a local university to gather demographic information (Tables 1 to 4). He had also requested a survey of consumers in the suburbs of Bedford, Sackville and outlying areas to gain some insights into consumer attitudes towards music schools and music instruction. He felt that such data would enable him to develop marketing strategies for the proposed new branch. The results of the survey are given in Tables 7 to 10. Because he knew that parents often did shopping errands during their children's music lessons, Mr. Robson asked the students to include information on consumer shopping patterns in Halifax, Dartmouth, Bedford, Sackville and their outlying areas (Table 5). Table 6 gives a profile of the students currently enrolled at NMS.

The students had surveyed 180 residents drawn from Bedford, Sackville and outlying areas. The local telephone directory was used as the sampling frame. A random number between 1 and 20 was chosen, and beginning with that, every 40th residential listing in the telephone directory was contacted and the head of the household was contacted for an interview. The first question was intended to measure the level of awareness of NMS (as indicated by aided and unaided recall) among residents of Bedford, Sackville and neighbouring areas (Table 7). Only those families with at least one member currently taking (or planning to take) music lessons were asked to rate the attributes of a music school (Table 9).

MR. ROBSON'S DILEMMA

Mr. Robson was looking at the data that the students had gathered and was wondering how he could use it. He had to determine whether or not a market existed in these two suburbs for another music school. If there was, he knew that Mr. MacDonald would be asking about the best location for the new branch. He also knew that even if the operation was not profitable in the initial two or three years, Mr. MacDonald would be willing to open a new branch if there was sufficient long term potential in the suburbs. Mr. Robson also needed to formulate a marketing strategy for the new outlet.

The student survey seemed to indicate that awareness of NMS in the suburbs was rather low. Only 5 out of 180 (or less than 3%) respondents remembered its name in the unaided recall question. Even with prompting, only 68 of the respondents recognized the school. This worried Mr. Robson. Although he had complete control of the promotional budget, he would have too little money for a mass campaign. If a new branch was added in the suburbs, Mr. Robson would have to identify his potential customers and target them for his promotional campaign.

Table 1

Population Distribution in the Metro Area

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Source: Statistics Canada, 1981 Census.

* Sackville is part of Halifax County, and in Statistics Canada figures, is included in subdivision C of Halifax County in Statistics Canada figures. Subdivision C also includes Windsor Junction - the 1981 population of Sackville alone (according to the Sackville office of Halifax County) was around 19,000.

Table 2

Family Income - Metro Area

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Source: Statistics Canada, 1981 Census.

* Includes Windsor Junction. Total number of families in Sackville in 1981 is estimated to be around 4,500 (Source: Sackville office of Halifax County).

Table 3

Occupational Distribution - Metro Area

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Source: Statistics Canada, 1981 Census.

Table 4

School Population in Bedford and Sackville
(1986-87 School Year)

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Source: Statistics Canada, 1981 Census. Sackville figures include Windsor Junction.

Table 5

Retail Expenditures In Metro Area*

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* Indicates percentage of retail dollars spent in each location by residents of any one area. Figures are given for residents of 5 metro and surrounding areas. For example, people living in Halifax spent 81.97% of their retail dollars in Halifax itself, 2.90% in Dartmouth, 7.33% in Bedford, and so on. The last column indicates the percentage of retail expenditures spent in each of the specified areas. For example, the residents of all the areas combined spent 61% of their retail dollars in Halifax, 18.9% in Dartmouth, and so on.

Table 6

National Music Studio - Student Profile
Halifax - Dartmouth branches - 1986-87

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Table 7

Awareness of NMS and Competitors

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+ Branches of larger chains

* "Unaided recall" refers to the number of respondents who named a particular music school in response to the question "When you think of music schools, does any name come to your mind?"

** "Aided recall" refers to the number of respondents who, when asked if they had heard of a particular music school (by name) said "yes".

Totals do not add up to 180 because some respondents named or had heard of more than one school.

Table 8

Interest in Music Lessons*

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Table 9

Important Attributes for a Music School

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* Percentage of respondents giving a rating of 3 or 4 on a scale of 1 to 4 with 1 meaning "not at all important" and 4 meaning "very important". Only those families with someone currently enrolled in music lessons or planning to enroll were asked this question (n = 126).

** Respondents' rating of NMS on the same items. Only 73 respondents who were aware of NMS were asked to answer this question. A five point scale with "1=very poor", "3=neither good nor bad" and "5=very good" was used. Again, only the percentages of respondents giving ratings of 4 or 5 are shown.

Table 10

Characteristics of People
Interested in Music Lessons (n=180)

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Exhibit 1

Location of NMS and its Competitors

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