Spotify Pro Marketing: Boosting Satisfaction & Market Share, Study Guides, Projects, Research of Calculus

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Spotify Pro

Marketing Plan

Term Project

Executive Summary

As the online music streaming industry faces increased competition due to entry of several streaming service companies, Spotify’s marketing strategies should be reshaped to maintain its market position and increase market share by offering high value services and improving customer satisfaction in comparison to its competitors. In this marketing plan, we will be introducing Spotify Pro: a third tier to the current Spotify tier offers. Spotify Pro is a tier above the current Spotify Premium offer; it will offer features only available to those who pay the monthly fee. It will specialize in direct artist to fan engagement, with additional exclusive products such as merchandise and live shows/livestreams. Spotify will increase its promotional strategies through fan base and user rewards in order to increase its market positioning as well as market share. This marketing plan will also show how Spotify aims to maintain sustainable growth through innovative service delivery. Increasing artist-fan base interaction will enhance the emotional connection of the users to the services, and thus increase brand strength as well as customer loyalty.

Situation Analysis

Company Overview

Spotify has a large team of employees who help make the music streaming app innovative, creative, and fun. The company’s executive team consists of CEO Daniel Ek, VP of Business and Legal Affairs Horacio Gutierrez, and CFO Paul Vogel. Besides those three, the team includes a Chief Content Officer, a Chief R&D Officer, Chief HR Officer, and Chief of Freemium Business. Under those seven chiefs are several Marketing and Financial leaders who provide innovation and leadership. Altogether, Spotify’s entire team consists of 5,000 - 10, hardworking employees. This company is a successful $46 billion business that continues to change the way people listen to music. In 2006, Spotify first launched its mission in hopes of standing out amongst other music streaming apps, such as Napster and the iTunes store. It was not until 2012 that Spotify came out of the woodwork and capitalized on music streaming, which had taken over the world of music by that time. Spotify sets themselves apart by offering their niche - playlists for all occasions. With the advanced use of AI and ML, Spotify technology is able to handcraft suggested songs and playlists to users. The company claims to veer towards the “audio business” as opposed to the “music business”, as the app features several podcasts users can tune into. Spotify aims to provide a truly unforgettable listening experience for users, and has profited millions from doing so.

Environmental & Customer Analysis

Spotify leans towards a target market of music listeners who enjoy streaming services and advertisers themselves. Typically, the general audience of Spotify listeners consists of working adults and young students, which makes up about 61% of Spotify’s user base. This market segment of music enthusiasts tends to listen to music or other content for 30+ minutes a day. Spotify also caters to another market segment of marketers who wish to use Spotify to advertise. This is beneficial for advertisers who wish to target a younger audience, as Spotify is the app they will most likely be using.

Although Spotify offers a complimentary version of the app, subscription services are available for those who wish to listen uninterrupted by ads. As of 2016, there are over 30 million paying subscribers out of 70 million users total, which makes Spotify the highest-subscribed business on the planet. Listeners tend to be attracted to Spotify’s “freemium” business model, which allows users to still use the app for free and can pay to unlock premium features, such as unlimited skipping of songs and music downloading options. Looking ahead at 2020, statistics show that a staggering 345 million users were accounted for at the end of Q4. Most of Spotify’s users are in Europe (121 million), with users in the United States ranking second (83 million), Latin America in third (76 million), and the rest of the world consists of 66 million other Spotify users. The most played song around the world is “Shape of You” by Ed Sheeran and Drake holds the title of “Most Streamed Artist”.

Competitive Market Analysis

Spotify’s competitors include Apple Music, Amazon Music, Tencent Music, and Youtube Music with the highest competitor being Apple Music. Spotify has the lead with a staggering 345 million users by Q4 of 2020 and they are leading with the highest amount of paying subscribers in the market at 155 million users. Spotify currently holds a market share of 32% with the next highest competitor, Apple at 21% of market share. Utilizing Porter’s 5 forces, we can analyze the forces that shape competition within the industry:

1. Competition from Existing Rivals - High a. Spotify faces very high competition in the music streaming industry due to many other streaming services like Apple Music, Amazon Music, Tencent Music, YouTube. This makes switching costs low between the streaming services and gives the consumer power to choose between several streaming services.
2. Competition from Substitutes - High

decision-making in a company in order to identify and venture into potential market opportunities as well as support risk management strategies (Jones, 2020). Hence, the purpose of this market research is to systematically gather and assess marketing-related data associated with customers, competitors, and the overall online streaming services market with the aim of improving our marketing decisions. Generally, the market research will enable the company to determine effective marketing strategies that will enhance customer satisfaction, loyalty, and subscription for online audio streaming services offered by Spotify. As well, the marketing strategies will mainly leverage Spotify’s innovative live artist interaction channel and fan-base reward features to achieve the identified marketing goals and objectives. Contextually, a number of research methods were used to gather market-related data during the market research. This involved the use of focus groups and indirect interviews on the current users, online streaming application developers, as well as Spotify’s marketing staff. Moreover, literature reviews were carried out to determine potential marketing opportunities that the firm may gain through its marketing strategies. Consequently, the research offered extensive insight on the customer profiles as well as enhanced decision making on the suitable marketing strategies. Furthermore, the study enabled us to identify customer segments with regard to their demographic attributes as well as customer behavior and preferences in relation to online streaming services. In particular, consumer loyalty and satisfaction was measured with the use of structural equation modeling (SEM). Danckwerts & Kenning (2018) assert that SEM is a crucial tool for determining customer acceptance of digital products as well as identify consumer preferences on subscribing to online streaming services. In addition, conjoint analysis was used to assess the collected data in order to identify consumer behavior in relation to various marketing strategies. Ultimately, the market research enabled us to understand our target market segment; how to effectively reach the current as well as potential customer base, customer preferences and behavior, and how they perceive value from online streaming services.

Market Research Insights

Based on the market research, we determined that customers with ages ranging between 16 years and 40 years made up about 80 percent of the platform’s customer base. This involved

tech-savvy individuals with access to stable internet connections as well as owning at least a smartphone, a laptop, a smart television, or tablet. Moreover, a large percentage of the customer base considered online music streaming platforms as convenient ways to access on-demand music. As well, most of the respondents asserted that online music streaming platforms offered users the ability to creatively express their musical tastes through the creation of personalized playlists (Lozic, 2020). Hence, these findings showed that enhanced artist-user interaction in the platform would increase customer satisfaction as well as loyalty, which translates to increased customer subscription and revenue to the company’s services. As well, rewarding fans is shown as an ideal way for enhancing users’ perception as well as preference towards the platform, where it makes them feel compensated for engaging with the service as well as for supplying the platform with their engagement data. Additionally, the customers for online music streaming services were identified as tech-savvy as well as active internet users who will make choices are mainly influenced by online reviews as well as trends.

Marketing Goals and Objectives

Based on the identified market research insights, the marketing goals and objectives of the online music streaming services aimed at enabling Spotify to maintain its market position as the most popular online music-streaming platform (Speetjens & Neele, 2020). Hence, the overall goal was categorized as short-term and long-term goals with objectives as follows:

Short-term goals and objectives

● To enhance customer subscription rate of the premium subscription model ● To increase customer satisfaction by increasing interaction between artists and listeners ● Increase artist visibility to their customers ● To improve artist remuneration mechanisms over the platform ● To enhance the platform’s rebate program to premium- and free-subscribers

accounts, particularly for live channel interaction streams of the programs. Additionally, the additional payout will act as a donation to supporting the initiative’s future programs. Furthermore, users, mainly artists, intending to use the live stream feature will be allowed to create and publish such events on the platform, which will appear as notifications to users who have allowed live channel notifications. This will enhance customer satisfaction as well as user acceptance of the feature to the customers. Moreover, artists will be allowed to offer rewards directly to their customer base on the platform during the live interactive sessions. Premium users will also be allowed to access exclusive music concerts on the streaming platform, which is aimed at improving the asset specificity of the platform to users as well as artists.

Market Segmentation

We have segmented our market into (#) Spotify has a rich library of data from its years of operating that we have pulled from to identify these segments. In addition to that data, we have also pulled these segments from the market research that we conducted specifically for this marketing plan.

● Superfans: The first market segment that we have identified is “superfans.” Superfans are exceedingly dedicated fans of, in this case, a music artist. They are loyal to particular artists(s) and can be relied on to consistently stream, purchase merchandise, attend shows, and more for the artist(s). Because of this, the value of a superfan is unmatched. They will be especially valuable to Spotify Pro. Superfans are not only highly likely to purchase it, but will also be some of the most engaged users. ● Advocate fans: Advocate fans are similar to superfans, but are not as dedicated. This group of fans is generally larger in size than superfans. Similar to superfans, they have a high dedication to artist(s) but are not as guaranteed to consistently purchase products from the artist(s). Advocate fans, however, are highly likely to participate in word-of-mouth behavior which will be great for our product. ● Pre-existing Spotify users: “Pre-existing Spotify users “are those who already use the Spotify platform - whether they use the free version or premium version. These users already like the features that Spotify offers. The challenge for Spotify Premium users will be to give them enough incentive to pay slightly more each month for Spotify Pro. The challenge for Spotify Free Version users will be convincing them that Spotify is worth paying for at all — and that our Spotify Pro is more worth paying for than Spotify Premium. ● Music curators: The last target market that we have identified are “music curators.” Music curators are music enthusiasts who pride themselves in keeping up with the newest music, and also finding new artists to promote. Some music curators work professionally within the industry, while it is simply a hobby for others. By identifying these market segments, we will be able to target current users and future customers with stronger, relevant messages, while also increasing brand loyalty. This will lead to higher use and click-through, drive growth, and enhance profits. Each of these market segments can be targeted strategically to achieve this.

focus on rising artists and using data that only Spotify has access to in order to predict trends — this will be especially valuable to music curators.

Positioning

Spotify has been impressive in how they have positioned themselves in the streaming and music industry. For the majority of consumers, Spotify is still synonymous with music streaming. As mentioned in the Competitive Market Analysis, Spotify holds 34% of the market share, higher than any of its competitors such as the next highest being Apple at 21%. Spotify’s positioning strategy will be to maintain and grow their leadership by introducing new services such as “Spotify Pro” which has not been done by other streaming platforms while maintaining reasonable prices for their users. Spotify will continue with their Integrated Cost Leadership/Differentiation Strategy.

Marketing Mix (The Four P’s)

Through the marketing mix, Spotify can clearly identify and manage our general goals for this product implementation and marketing plan. It will be organized through “The Four P’s”: product, place, price, promotion.

Place

We will be offering our “Spotify Pro” service within our normal distribution channels. It will be available in the Spotify mobile application, desktop application, and web-based version. Current users will not need to delete and re-install these applications as the “Pro” version will automatically apply to their current account when they upgrade. “Spotify Pro” will be released first for the United States based subscribers before expanding to other countries and globally.

Product

Products can be either tangible or intangible within the marketing mix; this means it can be a good or a service. With “Spotify Pro” we will be offering both a service and products. Our

main offering will be the service itself. It will include the live stream/digital concerts and exclusive artist interactions/content, as well as a Fan Rewards service. We will also be offering exclusive merchandise for our “Pro” users to buy or receive as giveaways or rewards in our Fan Rewards program.

Price

The price of the service establishes the amount of money that users are willing to pay on a monthly basis for a service subscription on the streaming platform. According to the market research, most of the popular online audio streaming service platforms have similar pricing models, whereby Spotify’s pricing strategy entails a freemium model made up of free subscription accounts, which has advertisements; a $4.99 premium account for students, $9. for individual subscribers, $12.99 for Duo premium subscribers, and $15.99 for families. Given that these prices are also implemented by most of the other popular music streaming platforms, it is important to note that a reduction of the prices will lower customer’s perception of Spotify’s brand strength whereas a significant increase of subscription prices will largely influence customers to downgrade their subscription category (Noble, 2020). Spotify Pro will cost users $17.99/month. There will also be a student discount for Spotify Pro at $12.99/month — which can be used for up to 4 years by college students. Below, see a chart of all of Spotify’s plan offerings.

○ Celebrities can endorse this new live feature with the use of 15-30 second commercials via Spotify.

Implementation

Programs/Action Plans

● Pull data of the Spotify artists with the most loyal fanbases and highest streams ● Reach out to partner with those researched artists that will be most beneficial to increasing Spotify Pro users ○ It will be beneficial to the artists as well as they will get more streams to their accounts ● Solidify first set of Artists for the first week’s campaign launches and subsequent weeks ● Start hinting at a new feature during the week before product launch with subliminal graphics and visuals and build anticipation ○ On social media (both Spotify and partnered Artists) ○ Website ○ Within the mobile app, desktop app, and web version ● Announce full details on Launch Day by: ○ Posting and going live on social media with the partnered artists and also within the Spotify channels (to give all users a quick glimpse into the feature as an incentive to upgrade). ○ Make advertisements about the service that the free Spotify users listen to during the ad breaks between songs. ● Continue to heavily promote and advertise for three months while adding new artists to the mix.

Forecast and Budgets

Development Plan 9 months (6-month development, 3-month full advertising) ● Marketing team ○ $400, ● User interface development

● Additional specialists (graphic design, video, freelance support) ○ $200, Total: $900, Advertising Plan 3 months Budget: $800, ● Celebrity/influencer endorsements and ambassadors (45%) ○ $360, ● Content marketing (25%) ○ $200, ● Display and social media ads (20%) ○ $160, ● Email marketing (5%) ○ $40, ● Traditional marketing (5%) ○ $40,

Metrics

To determine the success of this new product and marketing plan, we will conduct regular surveys. These will be done within the Spotify app as pop-ups that appear when a user is using the app. The first people that we will be asking to take this survey are those who have already signed up for Spotify Pro, measuring their satisfaction. We will also have in-app pop-ups for users who have not made the switch to Spotify Pro. This survey will initially ask whether the user wants to switch to Spotify Pro. If they answer “no,” they will then be asked why; with some pre-written answers such as “too expensive” “not enough content” “I’m satisfied with Spotify Premium,” and a box to fill out a comment if none of the above match the customer’s reasoning.

Value Proposition

The value proposition of our additions to Spotify is adding features to our existing platform that increases engagements between fans and artists, and amongst the users/fans themselves.

satisfaction on the services. Moreover, this will largely affect customer preferences and perception of the quality of services offered by the platform. In this case, increased advertising and promotional activities will be carried out in order to increase customer awareness of the service offerings. As well, flexible marketing budgets will be invested on the marketing plan in order to ensure that the marketing strategies are successfully implemented. As well, the marketing plan will be monitored and evaluated in a periodic manner in order to measure the performance of the marketing strategies. This will entail sensitivity analyses of the various marketing to determine the most effective marketing approaches to tackle unforeseen marketing challenges.

Best-case Scenario

The best-case scenario involves successfully implementing the marketing strategies as well as attaining optimal results at lower costs than expected. The outcomes will be measured with regard to positive customer reviews, increased subscription, and increasing company revenue. In this light, the marketing plan will be further reviewed and readjusted to meet future market trends that influence the company’s market position in the online music streaming market sector. The contingency plan will feature continually assessing the marketing plan to meet future market challenges as well as support sustainable company growth.

Expected Scenario

The expected scenario involves the successful implementation of the marketing plan with the allocated marketing budget. As well, the marketing plan is expected to increase the brand’s position as well as brand strength in the long-run. In response, the marketing will be implemented to its entirety, whereby the strategies will be reviewed and improved in order to support the company’s future growth.

Final Summary

Spotify Pro will be a valuable and profitable venture for Spotify. This new subscription tier along with its new features will completely differentiate Spotify in the competitive music streaming industry.

This will largely benefit music rights holders (artists, songwriters and others), the company, and the music industry in general through increased income. In this light, this marketing plan aims to improve Spotify’s market share and brand strength by increasing its premium subscription customer base through introduction of new features that increase customer satisfaction as well as customer loyalty. This marketing plan showed that the company is committed to improve its brand strength, the current level of customer satisfaction, and customer loyalty by continually offering innovative features that generally enhance the quality of online audio streaming services. The marketing strategy that will be implemented will involve changes to the product, price, and promotion for the target customer segment. Furthermore, increased interaction between artists and their listeners as well as rewarding users is seen as an ideal strategy for enhancing customer satisfaction as well as loyalty to the service. Since Spotify’s prices are similar to that of its competitors, introducing features such as live interaction channels for artists as well as rewarding users will enhance the quality of service provided to its customers and thus increase customer satisfaction, customer loyalty, as well as its brand strength.