MDIA 2006 ‘Client’ Scenarios: T1 2021

Preamble

In Week 4, individually, you must officially and finally choose ONE of the following four client scenarios—and this
must remain your focus scenario for Assessments 2 and 3. You cannot change scenarios. While the scenarios
themselves are reasonably detailed, you must imagine that this is all the information to be gleaned via a client
briefing. For Assessment 2, you will need to conduct some research apropos the commercial environment in
which your chosen client operates—and this is how you will fully assess the background: i.e. a combination of the
client briefing and primary and secondary (desktop) research. Regardless of the scenario you choose, you
should ignore COVID-19 as a factor in play. Assume that the 2021/2022 trading year (and the years beyond) will
be largely unaffected. In fact, you might assume that the next few years will be bumper ones in terms of general
economic growth. The 2020 calendar year wasn’t great, and you might safety assume that there is a fair bit of
pent-up consumer demand.

SCENARIO 1: THE AFTERSHAVE CREW (MAN-O-MAN)

Karl, Jim, and Jemma are final year UNSW chemistry students. Together, they have developed an aftershave
that's proving pretty popular. The team is producing their product in a lab in the basement of Jemma’s parents’
house in Balmain, Sydney. They pay no rent. While they own all of the manufacturing equipment outright, there is
currently no room to expand operations. But no one in the neighbourhood has complained about the business
being conducted out of the residential address and the group wonders if they should simply pay to have the
basement extended. Surprisingly, for Balmain, there is plenty of room to do so. If they extend, they can
comfortably double the scale of their operation.

Reaction to the aftershave among family, friends, and acquaintances is very favourable indeed. With current
resources, the group is able to produce around 100 x 100ml bottles of aftershave per week. Despite a simple
brand name—'Man-o-Man’—and quite plain packaging, these have been selling (very steadily) to acquaintances
and referrals for $75 a bottle. Quite a number of buyers (both male and female) have told the team they'd happily
pay up to $100 per bottle for the Man-o-Man concoction, but they’ve also indicated that they’d hope for slicker
packaging. The crew is surprised that there seems to be no objection to the Man-o-Man brand name. Anyway,
the success has very much surprised the young entrepreneurs, especially because (all things considered) the
cost of producing each bottle is just $10!

So far, sales (evenly divided between male and female purchasers) have been achieved online via word-of-
mouth. The group runs a (very rudimentary) website. It seems fairly male-focussed, and Jemma is uneasy about
this. Anyway, interested parties have to email orders through and make direct deposits to the group's bank
account. Every now and then, the group splits proceeds three ways and pay their own taxes. No official company
has been formed, and the group has no licences whatsoever. They are simply close friends cooperating in a
venture that started as a hobby. As clunky as their approach is, it has been working, and the flow of orders is
surprisingly steady.

Now that the group is making around $320,000 gross profit per annum (sustained for the last two years) they are
looking to scale up and wholesale their product to mainstream retail outlets (especially retail chains) in Sydney
and perhaps Melbourne. They also want to do better online. In order to penetrate the difficult-to-crack retail chain
channel the group knows that it must come to those vendors with a compelling sales and marketing strategy. The
group members realise that communication will be absolutely pivotal and so, without much progress, they have
been discussing the right conceptual and tactical approaches.

SCENARIO 2: THE AUDIO MEN

A UNSW second-year student, James is also a hi-fi enthusiast and member of a large and respected Sydney-
side audio club: see this page He has developed a niche business sourcing high-quality ‘golden age' (80’s and
90’s) analogue audio gear for discerning buyers who come to him via word of mouth. Since he was sixteen,
James has built up a deep reservoir of expertise. He really knows his stuff and, despite his youth, is respected for
it. He had the advantage of knowing the late (and legendary) Josef Riediger, founder of Audio Connection. To
some limited extent, he models his approach to business on Josef’s example. He senses, though, that there are
many broader lessons to be drawn from the Josef Riediger story. He’s the first to acknowledge that he hasn’t
really thought deeply enough about this, though.

In essence, James has been cashing in on a renaissance: the re-emergence of golden age audio equipment—
including the sustained renaissance of the vinyl medium, which means he’s sold a fair few turntables. Lately, he’s
noticed that cassette decks are becoming popular as well. And, since the (cult) film Pulp Fiction was released in
1994, reel-to-reel decks have also enjoyed a steady—if now unspectacular following; this after a significant spike
of interest in the mid to late 90s. As is the case for turntables, there’s a romance about reel-to-reel decks and he
wonders if he might further cash in on this…

Since he was eighteen, James has been buying faulty golden-age audio equipment online (largely through eBay)
and even at garage sales. Calling his nascent business ‘HiFi House’, he restores these units, and on-sells at a
significant profit. He works with Eric, a fellow student and electronics engineer, who acts as the repair man.
There is no formal agreement between the two, but they get on very well. Typically, James buys a piece of
equipment (say, an amplifier) for $1,000 and sells for up to $2,500. The average cost of renovation/repair runs to
about $500 per unit—most of which goes to Eric. Over the last year or so, though, Eric’s profit margin has been
significantly squeezed by price increases in the parts he requires. Of the $500, he pockets a bit over half. James’
profit margins, however, have remained just excellent.

While James does pretty well out of the ‘mid-fi’ gear noted above, he makes far more serious money from the
purchase, renovation, and sale of high-end (top-shelf hi-fi) turntables such as those manufactured by Linn,
Oracle, SOTA, Pink Triangle, Michell, and Goldmund through the 1980s. Here, on average, he buys the decks for
$2,000 to $3,000 and sells (via eBay, and to audio club members and their friends) for around $7,500.
Repairs/Improvements average $1,200 per unit. Eric gets roughly half this amount, since he must spend the rest
on parts. Last year, James sourced and sold 35 high-end turntables. Of late, though, he’s been facing supply
issues and really needs to establish some sort of marketplace wherein people will sell or trade in such
equipment. Still, things have been good for James. Over the last two years, not only has he managed to pay all
of his university fees (he has no HECS debt), but has saved $100,000. Eric makes a lot less and, lately—whilst
acknowledging that James is clearly the force behind the operation—has been wondering why he’s making his
friend rich!

The two work out of James’ parents’ basement in Vaucluse, but James’ father is getting frustrated since he now
has to park his new BMW M5 outside! This, he says, may only be tolerated for a month or two more. While the
friends are determined to complete their degrees, James argues that it’s also time to formalise things. He
proposes to Eric that they form a partnership in substantially unequal shares, find appropriate premises, and
develop a credible brand. Eric seems uneasy about the substantially unequal shares proposition, but agrees that
they should look into this.

SCENARIO 3: THE BAND (URBAN RHYTHMS)

Derek, Emma, Jane, Sam, and George are a group of five UNSW SAM music students that formed a neo-soul
and jazz outfit (‘Urban Rhythms’) in their first year of university. The band is a classic five-piece set: lead singer
(Derek), lead guitar (Emma), bass guitar (Jane), drummer (Sam), and keyboard (George). While only Derek can
sing, the other members are quite versatile musicians—each able to play several instruments. George and Jane
are both also talented at writing their own original material, although their current repertoire consists primarily of
covers. Now in their honours year, and strictly through word of mouth, they have become well-known as a
reliable ensemble suitable for pubs, wine bars, and corporate events. Apropos, they perform three evening gigs a
week (Wednesday, Friday, and Saturday nights) and now command $3,000 a night. In the last Christmas holiday
period they raked in a very pleasing $120,000—this over and above the $9,000 they pull in every week for 40
weeks of the year. All income is earned in Sydney.

A couple of years ago, Urban Rhythms got a tremendously lucky break in that, through one of George’s many
connections, they were mentored for two weeks in New York City by none other than Steven Van Zandt—a key
member of Bruce Springsteen’s E Street band. This mentorship encouraged George and Jane to pursue their
passion for writing their own original material. While they sometimes collaborate on song writing, they are both
capable of writing and arranging their own music.

The group, which has not even trade-marked their name and has no website, has no company structure and
operates a bank account signed by founding members Derek and Emma. The level of trust between the band
members is very high, and all income is periodically split five ways. Given that they will finish their studies at the
end of this year, the members of Urban Rhythms have recently decided that they should look to somehow scale
up. There seem to be several opinions. Derek is keen on touring. Emma, however, says that the answer lies in
doing more of what they have been doing. Jane and Sam say that a traditional record deal is what is needed.
George, however, thinks there are other ways to grow market share and increase profits. Whilst there’s little
doubt that Van Zandt’s influence accelerated the band’s penetration of the Sydney scene, George, at least, feels
that their mentor’s less-than-encouraging assessment of the mainstream music business is correct. Concerned
about the cost of touring, troubled by the time commitment required to further penetrate the Sydney scene,
worried about the traditional recording business, he is thinking about alternative options. He has followed, with
some interest, the fortunes of some bands that are leveraging platforms such as bandcamp and Spotify.
Anyway, there is no consensus as to how to forge ahead. In recent months, this has caused some heated
arguments and now the band has approached you to help them decide on a growth strategy. Happy to gently
grow its profile over the balance of 202—one way or another, the band aims to ramp things up in 2022.

SCENARIO 4: THE DEEJAY (SLEDGEHAMMER PROMOTIONS)

Aged twenty-four, Emerson and Brooklyn are two graduates of UNSW. Since their teenage years, they have
regularly attended parties, festivals, and other events related to hardcore dance music. A particularly memorable
experience for them was the Masters of Hardcore event in 2013. This event was seminal for deepening their
appreciation of hardcore, and for large scale events. Around five years ago, Brooklyn began to deejay at parties,
and this led to Emerson and Brooklyn deciding to form their own event management company: Sledgehammer
Promotions. Since 2016, this company has intermittently organised parties. While this has helped to build
Brooklyn’s deejay profile, Sledgehammer Promotions has been unable to develop in a way that affords them the
opportunity to put on parties of a similar scale to the Masters of Hardcore event that they so fondly remember.

Sledgehammer Promotions hosts parties approximately every two months, although this is subject to seasonal
variation. The parties they organise tend to be of two discernible varieties: outdoor parties, held in remote
locations outside the Sydney metropolitan area; and indoor parties; held within an hour of the Sydney CBD.

The outdoor parties often take place quite far from the CBD, with venues selected as to avoid noise complaints
from residents in the local area. Venue details are not released until the night of the event, to mitigate threats
from rival promoters and other forces that might wish to stunt the vibe. These parties run all night and afford
patrons a high level of privacy, but their remote location makes them relatively inaccessible to a broad audience.
While these events attract a consistent core audience, there are never more than a couple of hundred people
that attend. These events are relatively cheap to organise, and their ticket price is similarly inexpensive.

Their indoor events, within the Sydney metropolitan area, require a higher degree of organisation as
Sledgehammer Promotions is tasked with the responsibility of securing a venue; seeking council approval; hiring
security, paramedics etc. Furthermore, the police routinely visit these events, running the sniffer dogs past the
patrons waiting to get inside the venue. This sometimes results in arrests for minor drug offences, and the police
presence ferments vibes of fear, suspicion, and hostility. While some of these events have been quite successful
(filling a venue for 1500 to capacity), the degree of success of these events seems quite difficult to predict and
Sledgehammer Promotions has also sustained some losses from parties that suffer from lower-than-expected
turnout. These events have attracted as few as 450 people and as many as 1500 but they typically sell
approximately 900 tickets (with 750 ticket sales required to break even).

Throughout mid-2019 and early 2020, Emerson and Brooklyn travelled around Europe and the UK. While on this
trip, they attended several large events, such as Dominator 2019; Thunderdome 2019; and Bang Face 2020. At a
party, they met Patrick van Kerckhoven (DJ Ruffneck), who expressed interest in playing some parties in
Australia, after hearing positive things from his label-mates, Endymion and Ophidian. Sledgehammer Promotions
are excited by the prospect of bringing international guests to Australia but are concerned that larger parties bring
larger risks, and while the potential for fame and fortune is there, so is the potential for financial ruin.

Although Emerson and Brooklyn are pleased with the level of success obtained with Sledgehammer Promotions,
their dream of organising a party large enough to book DJ Ruffneck remains unrealised. They have a Facebook
page and an Instagram account, tagging event photos with hashtag #sledgehammered, and while these pages
each have approximately 1500 followers, there is not much engagement and fan activity on these pages stalled
throughout their absence in 2019-2020.