In this episode, Josh speaks with David Meerman Scott, author of "New Rules of Marketing & PR". They talk about some of the marketing lessons companies should learn from how the Grateful Dead and the jam band community treat their customers.

David-Meerman-Scott-SQUAREDavid Meerman Scott spotted the real-time marketing revolution in its infancy and wrote ve books about it including The New Rules of Marketing and PR, now in a 7th edition, with more than 400,000 copies sold in English and available in 29 languages from Albanian to Vietnamese.

Now David says the pendulum has swung too far in the direction of superficial online communications. Tech-weary and bot-wary people are hungry for true human connection. Organizations have learned to win by developing what David calls a “Fanocracy” - (the subject of his Wall Street Journal bestseller) -tapping into the mindset that relationships with customers are more important than the products they sell to them.

He is a massive live music fan, having been to 804 live shows since he was 15 years old, is passionate about the Apollo lunar program, and he loves to surf but isn't very good at it.

In today's episode you will learn about:

  • Marketing Lessons from the Grateful Dead

  • What Every Business Can Learn from the Most Iconic Band in History

  • Fanocracy: Turning Fans into Customers and Customers into Fans

Transcript

Narrator:        Welcome to Cracking the Cash Flow Code where you'll learn what it takes to create enough cash to fill the four buckets of profit. You'll learn what it takes to have enough cash for a great lifestyle, have enough cash for when emergency strikes, fully fund a growth program, and fund your retirement program. When you do this, you will have a sale‑ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want, in the way you want.

In Cracking the Cash Flow Code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he's learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.

Josh Patrick:   Hey, how are you today? This is Josh Patrick and you're at Cracking the Cash Flow Code. And, today, I am really excited. I don't know if you're really excited but I'm really excited. We have David Meerman Scott with us. I first ran across David when he wrote his book New Rules of Marketing and PR, which is a bunch of years ago. And, from there, being a inveterate Grateful Dead‑head-- I have seen every keyword for the Grateful Dead so, I guess, that makes me official. His newest book is Fanocracy which he wrote with his daughter, something pretty fun to do.

David:             It was.

Josh:                But we're going to talk about the Grateful Dead, and marketing, and business practices that people really need to learn from the jam gang community. And for those who don't know what the jam gang community is, it’s bands who play with lots of improvisation and the songs go for a long time.

So, let's bring David on. Hey, David. How are you today?

David:             I'm doing great, Josh. It's so great to be here. Thanks for having me on.

Josh:                My pleasure. And I really appreciate you being here.

So, you and Brian Halligan decided to sit down and write a book about the Grateful Dead, and not the usual book about Grateful Dead, about the business practices of the Grateful Dead, specifically the marketing practices of the Grateful Dead. And I think the first thing I ran across from the Grateful Dead, which I thought was really interesting marketing was when I was in college, which was on the second live Dead Out. And they had this little thing in the back that said, “Deadheads unite! Send us your address and we'll keep in touch.” And they did that because it got into a big, big-- I was going to say something different, argument with Ticketmaster. They decided to start selling their own tickets.

They were so far ahead of the rest of the world with that. What do you think brought that about? And what effect did that have on the general world of music and marketing?

David:             Well, there are a couple of really important pioneering issues, actually. The first thing is that the vast majority of bands, especially the bigger bands, didn't know who their customers were because, if somebody bought an album, they weren't buying them from the band, they were buying the album from the record store. And if someone was buying a ticket, they weren't buying a ticket from the band, they were buying a ticket from the venue or the electronic ticketing agency. At that point, it was Ticketron.

And so, the Grateful Dead were super clever in that they said, “Hey, we want to know who these people are. Why don't we just stick a little notice on the album, as you said, and see if anybody reaches out and gives us their mailing address?” That was kind of an experiment. They didn't know what was going to happen. And a whole bunch of people wanted to be on the mailing list. And all of a sudden, now, they know who their better customers are. They know who the customers are that are big enough fan to write a letter and say, “Please add me to the mailing list.”

And then, from there, they had an opportunity to create little, I think you would call them as zeen that they would send out. And then, also, soon after, they created a hotline for when the shows are that you could call an 800‑number and listen to a recorded hotline. And then, they started to sell their own tickets which was super pioneering because no other big band was selling their own tickets.

And what they could do with selling their own tickets was figure out who is going to get the best seats in the house. And those were the people who bought the tickets directly from the band. And so, it was a really great way to build fans because most bands, it'd be either random who got the best seats or the scalpers who would get the first seats and the true fans had trouble getting the good seats. But with the Grateful Dead, if you're on the mailing list, you had a great shot at getting the best seats in the house. So, it’s all really, really, really good marketing.

Josh:                Yeah. I think it really comes from the Dead’s respect for their audience.

David:             Yes. I would agree with that.

Josh:                I think they were the first band to allow people to take freedom to their shows. They didn't care if you brought in recording equipment. In fact, if you've been to a Grateful Dead show, there was a taper section which eventually appeared. But you would often see people all over the audience in the early 70’s with great big booms up with microphones and reel‑to‑reel players that they dragged in with them. And they let people trade tapes as long as they didn’t charge for them.

David:             Right. And as long as you didn't sell the recording, they were totally cool with you doing it. And it was such a contrast with every other band because on the ticket of every other band, you know, in the early era, maybe it was the Rolling Stones, or Pink Floyd, or Who, or whatever it is, it would say, “No recording allowed. No photography allowed. No taping allowed.” It would say so on the ticket and they have signs on the door.

And the Grateful Dead were, “Sure, why not?” Not only was it okay, but they gave the people who wanted to tape, a special section which was right behind the mixing board, which was a great spot for sound and not such a great spot to see because you're on the floor, you're looking over the heads of lots and lots of different people but a great place for good sound. And that was essentially viral marketing before Mark Zuckerberg was even born because once people started to record the concerts, and initially it was cassette tapes and, later on, it became mp3 files. When people had those concert recordings, I remember distinctly my friends and I would play it in dorm rooms, in college, or in cars - in high school and college. And that was how we exposed the music to other people.

And then, I would be playing the music and my cassette tape. And I had a really good stereo. I had one of the best stereos of anyone around my dorm. So, people would come into my room, they’ll listen to the Dead. And then, they would want to go see a show. So, it was viral marketing to get people to buy tickets to go see the shows. And they made most of their money from their live shows. So, it was-- and I've had a chance to speak with Bobby Weir about it. He said, “It wasn't for marketing purposes. It was because we just wanted to do the right thing by the fans. If they wanted to tape, we were cool with that. But it turned out to be amazing marketing.”

Josh:                Well, again, it goes back to respect for your customer.

David:             Yes, I think you're right.

I'll give you another example of that respect to your fans or your customers. So, pretty soon, after they formed, there was a whole tribe of people that built up around the band. And a lot of people would actually follow them from one city to another city over the course of a summer and see multiple shows. Many of those people were sort of vagabonds. I never did that. I would go to multiple shows, but I was never part of that caravan.

But there were quite a few people, several hundred people, that did the whole tour and, multiple years, did that whole tour. And they had to support themselves. They were not independently wealthy. And so, a lot of them ended up specializing in something and selling it at the venue. Some people made grilled cheese sandwiches, some people did beer.

And many people did logo merchandise. They would sell t‑shirts with a Grateful Dead logo on it or they would sell other things with Grateful Dead logo on it. And in the beginning, the band said, “That's okay. They're fans. They're small‑time operators selling a couple of dozen t‑shirts a night. We’ll just let it ride.”

But then they started to see that there were some pretty big operators that started to get into it. And that's when they cracked down, but they cracked down in a way that was super fan‑friendly. They didn't say, “You can't sell t‑shirts outside the venue because we’re selling t‑shirts inside the venue.” That's what all the other bands did. The Grateful Dead said, “Okay, if you want to sell t‑shirts outside, as an independent business, we're cool with that. We just want you to sign a licensing deal. You'll be able to license the logo and you pay us a small fee for every t‑shirt you sell. And everybody's happy.”

And that was a great way to do it. It was a very fan‑friendly way to do it because then, all of a sudden, you had all these very clever people who were doing really interesting things with the logo - putting them on baby clothes, putting them on blankets, the logo just went into some-- I've got actually a logo on my coffee cup right here. And I didn't buy that at a show but it's more recent. I bought it online. But those people who used those logos just paid a small fee. And that was a really great way, I think, to build fans. It brought in a little bit of money to the band, but it was more about having a lot of people with Grateful Dead logo merchandise out there.

Josh:                That's the thing that you really want people to do. The truth is, if someone's walking around with a Grateful Dead t‑shirt-- now, some of these Grateful Dead t‑shirts are just really interesting. It's marketing.

David:             Yeah. Oh, totally. Oh, it's fascinating, yeah.

Josh:                So, this is the band who didn't have a hit until sometime in the ‘80s. when Touch of Grey came out. I remember seeing them in 1972, at the Boston Garden, with 19,000 people, with a band who really didn't get much play on radio because their songs were too long and they sold out two nights. I mean, Phish is doing the same thing today. They sold 13 shows out at Madison Square Garden two years ago. What band can do that besides the Rolling Stones?

David:             Yeah, it’s truly remarkable. And it's because they chose a different business model. The normal business model at the time was you recorded the album, you made most of your money on album sales. And the tour was to support the album. It was to get people in certain cities excited. “Oh, the band is here. I should check out their album before I go to the show.”

The Grateful Dead were kind of the opposite. Their business was focused on touring. And, yes, they had albums, but they never made that much money on the albums. Most of the money they made from tour revenue. So, a lot of the things that they did to optimize tour revenue were built around generating interest among the fans so that they would want to go to multiple shows throughout the year and throughout their life.

I'm at 75 shows. I don't know how many you've got, Josh, but--

Josh:                Well, it depends on if we're counting Dead shows or Dead shows.

David:             I'm including the post‑Jerry bands that have at least one Grateful Dead member as member.

Josh:                I call it remnants of the Dead. I'm a little bit over a hundred with both of those combined. Huge Phil Lesh and Friends fan. And I would go see them six, seven times a year when Joan Osborne was playing with them, so.

David:             Oh, yeah. Yeah, yeah. I've seen them.

Josh:                Those were just ridiculous shows.

David:             Yeah, those were great. I agree. Those were great shows. And Dead & Company now is actually a fabulous band.

Josh:                So was Joe Russo's Almost Dead which doesn't have any dead members but they’re--

David:             Yep. Yeah.

Josh:                The jam band world has followed the Grateful Dead’s lead. I mean, String Cheese has since followed their playbook. Phish has definitely followed their playbook.

David:             Yeah.

Josh:                There's a new band in Vermont, Twiddle, which is following the playbook. And it's only that small community of the music business that has followed the playbook. Why hasn't the rest of the industry said, “This works. We should be doing this”?

David:             Well, I think, part of it you actually hit on in your introduction. Part of it is that the music of a jam band is conducive to people wanting to go to multiple shows. If you go to a Rolling Stones show tonight, and another Rolling Stones show a couple of days from tonight, the shows are going to be almost identical. There might be a couple of different songs but, for the most part, 80% of the set list is going to be identical. If you go to two different jam band shows, either the Grateful Dead, or Phish, or Twiddle, or any of the other ones and you go once tonight and you go again two or three nights from now, it's highly unlikely that you will hear the same song twice.

And so, what's different is that you never know what they're going to play. You never know how they're going to play it. You never know whether the song you've heard before is going to be five minutes and done or go 20 minutes. The whole idea of a jam band is you just never know. And that's actually one of the cool and exciting parts of it. People are always trying to predict what's the opener going to be tonight? What are they going to do for the encore tonight?

And people who get really geeky about it - I'm not in that category, I don't get too geeky about it. But people who do, it's a remarkable thing. And that's why people have-- in the early days, it was cassette tapes, why they collected multiple cassette tapes of shows because each one was different. And now-- and this is another part of their marketing, which is really interesting, the Grateful Dead recorded most of their shows. Those recordings have been in the vault and, I don't know how many times six or eight times a year, they actually release one of the recordings as an official recording on CD or mp3 files. Members of the Grateful Dead's fan base eagerly buy them up. Even though they've heard the songs many times, in many different formats, they want to have that version. And even though that particular show is probably available for free on the internet, people are still going to pay because it's slightly better quality and it's got packaging, CD, and whatnot. So, I think that the jam band world is uniquely positioned based on the type of music they have for this kind of approach to music.

Josh:                You know, it seemed to me, I remember I went to see Chick Corea play out in San Diego several years ago. And I happened to be staying at the place they were playing, so I went out my balcony with my camera and started taking pictures of the soundcheck and their manager came running up to me and screamed at me to stop taking pictures.

David:             Oh, wow.

Josh:                As I'm seeing this, I'm saying to myself, “The only that's going to happen with these pictures. They might end up on Facebook and maybe somebody might come and watch the as a result of that.”

David:             Right, which is a good thing.

Josh:                So, I don't get that.

David:             Yeah. It's just a different way of looking at it. Some people go to incredible extremes.

I'm a big Jack White fan. I really love Jack White's music. I've seen Jack White a dozen times. The last Jack White show I went to, which would’ve been about two years ago, was the House of Blues, in Boston, they actually had a special pouch. And, when you arrived at the venue, you have to put your mobile phone into the special pouch. And the pouch is sealed. And you get a claim check for it. And then, the pouch goes into storage for the entire show. And when the show is over, you come back, give your claim check, you get the pouch, you pull out your mobile phone, give the pouch back. Jack White goes so far into the no pictures thing that you literally have to give up your mobile phone when you walk into the show.

And so, I don't know that that's necessarily bad because it's creating a different experience because people at a Jack White show are only into the music. They're not into trying to capture the images or even the video, and they're not constantly looking down at their phones, they’re focused on the stage. And I think that's one of the reasons that Jack White does that.

But I certainly agree with you that a photograph from your balcony of sound check is something they ought to love. They ought to love that as a way to generate interest in the band.

I want to tell you a taper story. So, you probably know what a Betty Board is, right? Betty Cantor is the Grateful Dead’s long‑time recording, she recorded the show. She was the sound woman, many of the Grateful Dead live shows. And she would be the person who would make the recordings of the live shows.

I had a speaking engagement in San Francisco, about 10 years ago, 500 people in the room, and I was presenting. I was about halfway through my presentation. And then, I had a riff at that time where I talked about the Grateful Dead and I talked about marketing lessons from the Grateful Dead. So, I held up my copy. “This is my marketing lessons from the Grateful Dead.” And I did a riff about how Grateful Dead allowed fans to record their concerts. And it was like a five‑minute riff and a one‑hour speech. And at the end of my speech, I finished up and jumped off the stage.

What I usually do, after I present in an event like that is I'll thank the people who were backstage‑type people. So, in this case, the mixing board is front of house. So, it's in the front part of the stage. People had left and I was gathering my belongings. And I went back to the back, and I went to the mixing board, I said, “Thank you very much lighting guys.” I said, “Thank you very much to the video person, nice.” The woman was doing soundboard. And I said, “Thank you very much.” She goes, “David, that was great. I'm Betty Cantor.”

Josh:                [laughs].

David:             Nice. So, I am, “Lord! That's ridiculous. I'm so glad you didn't tell me that before and I’ll be too nervous to get on stage” that the famous Betty Cantor of the Grateful Dead is still running mixing boards in San Francisco but for corporate events now.

Josh:                That’s a great thing.

So, David, we only have a couple minutes left and I'm kind of curious, if I'm a Main Street business, what lessons would you say you could get from the Dead that would be useful for you today?

David:             So, there's a few things and you don't have to know anything about the Grateful Dead. And the first one is that do it for the fans. Run your business for your fans. Or, if you want to call them customers, that's fine. Focus on your customers.

I always believe and I-- the newest book I wrote called Fanocracy, that you mentioned at the top of the show, we dug into the idea of how and why people become fans of a product, or service, or an idea. It turns out that the more you give to the universe, the more you give to your customers, the more generous you are, the more that comes back to you and your business and the more money you make. That's a general rule of thumb that seems to work.

Josh, why are you doing this podcast? I would argue you're doing it to give to the universe, to provide something valuable, and perhaps you love doing it but also you expect maybe, at some point, something will come back to me with value. And it's exactly the same reason I'm here being a guest on your show.

I think if you go into your business with the idea that you want to be helpful to people, that you want to be generous to people, that you want to give to people, like the Grateful Dead allowing people to record concerts or allowing them to make t‑shirts as long as they give a small royalty for the use of a logo, those things then come back to you in the form of generating more customers for your business.

Josh:                That's a great lesson.

So, David, unfortunately, we are out of time.

David:             Bummer.

Josh:                We could go on--- I mean, I could do this Grateful Dead geek out stuff over business practices for days. How would people find you? And say a word or two about Fanocracy.

David:             So, I was talking to my daughter Reiko - she's now 28, about five years ago, and I said, “Hey, I'm just such a massive fan of live music in general, Grateful Dead in particular.” She started to talk about how huge a fan she is of Japanese, K-Pop, and also Harry Potter. So, we just talked about what it's like to be a fan of the things we love. And, over the course of several car rides, where I was in the car with her, we just chatted about these things over dinner. And we chatted about these things. And then, all of a sudden, I said, “You know what? I think there's a book here. Would you like to co‑write with me?” And she was like, “What? What are you talking about? Are you nuts?” And when she thought about it, she said, “Yeah, I do want to write a book with you.”

So, I'm a late middle‑aged white man and my daughter, Reiko, is a young millennial mixed race woman. She's just graduated from medical school. She's now an emergency room doctor at Boston Medical Center doing her residency. And we're very, very different people. We love different things. One’s a man, one’s a woman. One’s young and one’s not young. And it was a great collaboration because we both have the same idea of fandom yet we're coming at it from utterly different perspectives. So, it’s super cool to write with her. She's a wonderful writer. She has some great stories in the book. And everyone who's read it comes back to us and says that the partnership of the two of us writing is great.

And if anyone's a Tony Robbins fan, Tony Robbins wrote the foreword to that book, Fanocracy.

Josh:                I was actually at the seminar Tony was discovered which is a different story.

David:             Oh, wow.

Josh:                Unfortunately, we don't have time to go over that but-- David, how does somebody find you?

David:             So, my full name David Meerman Scott. I'm the only one in the world. So, if you google me, you will find me or you could Google Fanocracy and you'll find us and the book that way. On the social networks, I am dmscott, D-M-S-C-O-T-T.

Josh:                Cool.

And I have two things I'd like you to do. First, and this is really important. Please, please, please, please, please, please, please, please, please, please - you get the idea. Please go to wherever you're listening to this podcast and give us an honest rating and review. If you love the show, say you love it. If you hate it, which I hope you don't do, you can say you hate it too.

And the second thing is, I like kind of doing, you know, strange little various experiments every once in a while. And about 20 years ago, I was talking to a friend of mine who put together this thing called the periodic table of estate planning elements which is all the things you could do with estate planning - not very exciting. I work with blue‑collar businesses. Blue‑collar businesses need lots of tactics and strategies to be successful. So, I stole the idea and I built my own periodic table of business elements. Really easy to get, you just go to www.stage2planning.com/periodic and you'll get your own copy of our periodic table of business elements. And you too can see all the fun things you can do with your business.

So, this is Josh Patrick. We're with David Meerman Scott. You're at the Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.

 

Narrator:        You've been listening to Cracking the Cash Flow Code where we ask the question, “What would it take for your business to still be around 100 years from now?”

If you've liked what you've heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102, or visit us on our website at www.sustainablebusiness.co, or you can send Josh an email at jpatrick@stage2solution.com.

Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.

Topics: Sustainable Business, customers, marketing, converting fans to customers, Marketing Lessons

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