Hi! Thanks for your very interesting question.
In order to fully understand the marketing strategy used by Bloomberg
to achieve such tremendous growth we must first look into its
corporate history.
The present mayor of New York City, Michael Bloomberg was then a
partner in Salomon Brothers in 1973. At this time he had an idea of
investing money on information systems of Salomon Bros. since he
perceived that computers will play a critical role in trading and
market analysis. But even before he could get his idea going, Salomon
Brothers was merged with Philbro Corporation. Bloomberg was fired but
received $10 million in return. With this money he started his company
called Innovative Market Systems. The product was an information
terminal for financial institutions.
In order to be highly marketable it would have to be a tool that would
be used by the big guns of Wall Street but it will be affordable for
smaller firms as well.
The principle behind this could be traced from the theory of franchise
value. In the article, “Economics of Franchise Value", it mentions
Bloomberg as having made this practice. According to the article, the
theory of franchise value comprises of three components: revenue, cost
and barriers to entry. So in a marketing standpoint, Bloomberg did not
compete through price alone but on the basis of the value it gives to
its customers.
“A valuable franchise must have a sizable revenue base. This could
come from selling something in low volume at a high price. Bloomberg
terminals are an example. Bloomberg leases proprietary computer
terminals with information that is important to financial market
participants, particularly bond traders. These users have large
budgets and a strong need for the service, so that even though it is
not a mass market, Bloomberg can charge high prices and earn
tremendous revenue.”
“The Economics of Franchise Value”
http://arnoldkling.com/~arnoldsk/aimst2/aimst210.html
In the About.com website, it has this commentary on franchise value.
“You may wonder why the owners of companies with high franchise value
are generally better off financially. The reason is simple: if a
product has strong consumer demand, the company that manufactures that
product can raise prices to offset increased labor, production,
inflation, and other costs. The company that does not have franchise
value is forced to compete on a price basis, constantly having to
undersell its competitors. In an industry with high fixed costs, this
is a recipe for disaster [look at the major airlines!] Companies
lacking franchise value are commonly referred to as "commodity type"
businesses.”
"Profiting from Franchise Value"
http://beginnersinvest.about.com/library/weekly/aa111102a.htm
Bloomberg had Merrill Lynch as its own exclusive customer, deterring
the company from engaging business with other Wall Street firms. At
first this was ok since the regular business from Merrill Lynch
provided stability and cash flow for the company. But as years went by
it became a burden for further growth. When it was freed from the
exclusivity clause in 1998 it engaged in an aggressive selling
campaign.
“By 1988, the Merrill Lynch exclusivity clause had become a serious
obstacle to the new company's sales effort. It took Bloomberg a year
to reach agreement with Merrill Lynch's president to start selling to
other large investment banks and negotiate a deal to buy back a $200mn
chunk of the company. Free to target the whole of Wall Street, the
firm needed a great many more sales staff, a scarce commodity. The
company began recruiting, widening the net to include eager young
college graduates. These were trained up at the newly created analytic
desk, a customer training and support function based at Princeton, so
that the New York office could concentrate on sales. The strategy paid
off and in just a year the number of installed terminals was 10,000;
double the 1988 figure. Over the next five years growth was even more
dramatic. By 1995 they'd installed 50,000 terminals and had over 2,000
employees worldwide, of whom 450 were in sales.”
But the best marketing strategy developed by the company was providing
the Bloomberg experience through the use of different media like
print, TV, radio and the World Wide Web. Make no mistake about it
however that terminals still make up the greater part of the business
and contribute 98% to its total revenues and these other services are
mainly promotional vehicle for the capabilities of the terminal
services.
“Today the name Bloomberg is synonymous with breaking news as much as
financial information and terminals. In the early 1990s Bloomberg and
his team decided TV business news was the natural complement to the
real-time information already available on the terminal.”
“But employees working on the company Website and newsroom realize
they're only there for one reason – selling Bloomberg terminals. In
spite of diversification Bloomberg remains, in many ways, a one-trick
pony. Their first product, the financial information terminal, is the
heart and soul of the company. A percentage of all employees' pay is
tied to the net number of terminals installed from year to year, a
scheme that the company calls its “certificate system.” Terminal sales
still generate about 98% of Bloomberg's revenue.”
You could read the whole Bloomberg history and commentary through the
following link:
“Bloomberg classic start-up; sales is what makes money”
http://www.expressexec.wiley.com/ee/ee02.01.07/sect0.html
The next links meanwhile provide evidence to the last statement made
about using the mass media as a marketing tool to sell Bloomberg
terminals.
“Bloomberg to do interactive TV”
http://news.com.com/2100-1033-207161.html?legacy=cnet
“Bloomberg to Expand Its Web Presence”
http://www.wired.com/news/business/0,1367,1051,00.html
Search terms used:
Bloomberg terminals marketing history
“franchise value”
I hope these links would help you in your research. Before rating this
answer, please ask for a clarification if you have a question or if
you would need further information.
Thanks for visiting us.
Regards,
Easterangel-ga
Google Answers Researcher |
Clarification of Answer by
easterangel-ga
on
17 Jan 2003 16:39 PST
Hi again! I have here some more articles about Bloomberg and its
marketing strategies. To save you time, I shall provide small snippets
but I it would be helpful to your paper if you could read them in
their entirety.
“By shifting its focus upstream from purchasers to users, Bloomberg
created a value c w e that was radically different from anything the
industry had ever seen. The traders and analysts wielded their power
within their firms to force IT managers to purchase Bloomberg
terminals. Bloomberg did not simply win customers away from
competitors – it grew the market. “We are in a business that need not
be either-or,” explains founder Mike Bloomberg. ‘Our customers can
afford to have two products. Many of them take other financial news
services and us because we offer uncommon value.’”
”Creating a New Market Space” (Page 6)
http://www.odu.edu/dl/navycollege/603.CreatingNewMarketSpace.pdf
“Take Bloomberg L.P. While Reuters and Dow Jones's Telerate were
competing on offering price information to traders and analysts,
Bloomberg redefined the industry's boundaries. Good-bye calculators
and No.2 pencils; Bloomberg terminals leapfrogged the competition by
providing users with built-in analytics that guaranteed speed,
simplicity and fewer errors in trading and investment decisions.”
“As Michael Bloomberg, the founder and president, said: ‘We never
look at our competitors' products. Why should we assume they know
what they are doing?’”
“A Corporate Future Built With New Blocks”
http://www.insead.fr/mauborgne/Nyt2900398.htm
“As a business model, it's terrific: Bloomberg rents the terminals for
thousands of dollars a month. For a while it looked like Net-based
financial information services, which can provide most of what
Bloomberg does for a fraction of the price, might pose a serious
threat. But that danger has receded with the dot-com tide.”
“A New York Entrepreneur”
http://www.thestandard.com/article/0,1902,27179,00.html
“The 160,000 terminals in 100 countries bring in $2.4bn a year to the
privately-held firm.”
“Mr Bloomberg also has a multi-lingual television news service in the
United States and Europe, a radio news service and an internet-based
news service at Bloomberg.com accessed 175 million times monthly.”
“Billionaire eyes Big Apple”
http://news.bbc.co.uk/1/hi/world/americas/1372277.stm
“The heart of the Bloomberg empire remains Bloomberg Financial Markets
- a "real time" financial information service that provides
market-moving information to securities traders and other
moneywatchers. Fans of the Bloomberg terminals - including traders and
business editors and reporters - find them an unparalleled research
tool. They find them not only easy to use, but crammed with a wealth
of information, ranging from historical data on all sorts of bonds,
stock offerings, commodities and publicly traded companies to timely
sports scores and weather forecasts. The machines can also easily and
quickly offer users information in easy to read charts or bar graphs -
a feature that business editors regularly use to illustrate stories.”
“Bloomberg's Developing 'Baby' Experiences Some Growing Pains”
http://www.tjfr.com/secure/archive1994/0594growing612.htm
“Bloomberg has faced down threats before. Web sites offering free
financial data were supposed to lead to the company's early demise.
But no Net startup could match Bloomberg's mastery at
information-gathering and number-crunching. And after the recent
dot-bomb explosions, Bloomberg looks more credible than ever. Now,
though, it has to contend with a rival that has a made a name for
itself in Europe and is growing fast in the U.S. Bloomberg has
captured 36% of the $7 billion global market for real-time data.”
“The Bloomberg Machine”
http://www.businessweek.com/magazine/content/01_17/b3729001.htm
In this article, Reuters is being accused of even stealing information
from the Bloomberg files.
“Competition over financial data spills over into criminal
investigation”
http://www.onlineathens.com/1998/013198/0131.a3reuters.html
“The company is actually breaking from tradition by adopting a
strategy of partnering with third-party solution providers. The
initiative appears to be an attempt to keep users on the Bloomberg—and
off other systems. Through its partnerships, Bloomberg is now
beginning to offer pre-integrated applications over the Bloomberg
terminal in a sort of one-stop-shopping approach, says Gail Doolin,
who is on Bloomberg’s buy-side business development team.”
“Bloomberg Moves to Tighten Its Grip”
http://www.algorithmics.com/aboutalgo/news/waters_bloombergalgo.pdf
Other articles you could use for your project are found below.
“Bloomberg Aims To Simplify Straight-Through Processing”
http://www.informationweek.com/817/bloomberg.htm
“As of September 2002 it had annual revenues of around US$2.8 billion
and had leased an estimated 170,000 terminals. 93% of revenue was
attributable to terminal leases. The number of Bloomberg terminals
grew by 21% in 1998, 17% in 1999 and 9.5% in 2001; forecast growth for
2002 is about 6%.”
”The founder owns 72% of the group.”
“AP, UP, UPI, Bloomberg and AAP”
http://www.ketupa.net/newsservices.htm
I hope these articles could be of help to your paper. In case you
would need more information, please just ask for another
clarification.
Best Regards,
Easterangel-ga
|
