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MS4105 – Marketing Plan

Emily Kupiec: s1600935

Tonicha John: s1603785

Jake Worthington: s1606512

Natasja Ackroyd: s1601063

Word count: 2,179

“To help people listen to whatever music they want, whenever they want, wherever they want”

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Executive Summary of the Plan

Spotify is a music streaming service, offering millions of songs of any genre to its users. Spotify

users can listen to their favourite artists, albums, and songs, and discover new music. Spotify

produces revenue through two different tiers: advertisements and the Premium subscription

(Spotify, 2016a). Advertisers pay Spotify for exposure to users on its free tier and in turn fund

the royalties that Spotify pays artists. Spotify’s Premium tier, costing £9.99 per month, gives

users unlimited music across all devices. Users can download the songs to all their devices as

well as play music at the highest quality and are never shown advertisements.

Spotify wants to increase revenue in the music industry, which has recently decreased due to

YouTube, music streaming and piracy (Reynolds, 2013). YouTube is used by 74% of young

people (Coughlan, 2016). We believe that by creating a new initiative called “Spotify Live”,

Spotify will be able to increase market share. This huge growth in this industry is a major

opportunity for Spotify. Throughout this marketing plan we will justify this recommenda tion

by using the marketing mix, SWOT and PEST analysis. We will also conduct our own market

research findings, to discover whether Spotify is really the leader in the market. Other

recommendations include increasing premium subscribers which we believe will occur due to

increased marketing of online video streaming.

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PART 1. Current Situation

Brand Profile

Spotify offers a service rather than a tangible product, although this service has been varied

into different sectors for example, “Spotify premium” allows users to stream music online and

offline, without advertisement in exchange for £9.99 per month. Spotify also offers a free

service which includes the same music and artists for free although does include advertisements

and is unavailable offline, another thing that is limited is if a user is listening to music on their

mobile they can only listen to playlists on shuffle and only get 5 skips at a time. Another offer

that Spotify includes is “Spotify student” this includes everything that “Spotify Premium” has

but at a lower cost of £4.99 if the user is a student which has to be accessed via “unidays”.

Spotify includes another service which is “Spotify Family” this includes 6 members for only

£14.99 but all users must have the same address to assure it is for a family (Spotify, 2016b).

Spotify competes within the online streaming market with other brands such as Apple music,

Tidal and Google play, this market is always growing and introducing new businesses to the

competition, so Spotify must be up to date and current in order to be better than the other

companies. According to the IFPI’s Recording Industry in Numbers (RIN) 2016 edition record

label streaming revenue grew by 45% in 2015 reaching $2.9 billion, up from $1.9 billion in

2014 (Music Industry Blog 2016a). This illustrates how fast the online streaming market is

growing around the globe.

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Spotify’s share of the global music subscriber total was 35% in 2014 and 37% in 2015 (Music

Industry Blog 2016a). As well as this, they brought in $2.18bn (€1.95bn) in revenues in 2015,

growing its income by 80% in the year (Ingham 2016). Spotify also has over 40 million

subscribers as of September 2016, proving that they are one the key competitors in the market

(Spotify, 2016a). Spotify accounts for 44% of subscribers globally, as well as accounting for

40% of Label Revenue shares across the globe (Appendix A, Music Business Worldwide,

2016). Spotify’s momentum has accelerated rather than declined since the emergence of Apple

Music (Music Industry Blog 2016b).

The marketing mix refers to the set of actions, or tactics, that an organisation uses to promote

its brand or product in the market. The 4 Ps make up a typical marketing mix - price, product,

promotion and place (The Economic Times, 2016, “Definition of Marketing Mix” 13 January).

Product: The largest music streaming service, access to over 20 million songs ad-free, sync

music to your device for offline use, create and share endless playlists

Price: Three main packages for customers to choose from, ranging from approximately £3.99-

£14.99

Place: Online

Promotion: 71% on TV, 15% on printed billboards, 9% at concerts, 6% on digital media

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Brand “Image”

Positioning has been defined as the place a product occupies in each market, as perceived by

the relevant group of customers; that group of customers is known as the target segment of the

market (Wind, 1984). Usually positioning refers to the place the product occupies in the

consumer’s perceptual map of the market (Blythe and Martin, 2016).

We chose to position Spotify of a high quality at a reasonably high price. This is because we

believe that at roughly £9.99 per month, Spotify offers a great value for money. Spotify’s USP

is that they can attract both customers as well as investors and advertisers. As well as this,

Spotify has easy accessibility on multiple platforms, phones and stereo systems (Wilce, 2015).

In comparison to the other brands, we believe that Spotify is also more aesthetica lly pleasing

than the others.

We conducted marketing research to discover how people really feel about Spotify and the

services it provides. Research showed that out of 100 people, 85% said that they are in the age

group of 18-24 (Appendix B, Survey Monkey, 2016). This supports Spotify’s young target

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market. We also discovered that 81% of people use Spotify, which demonstrates that Spotify

is one of the main market leaders. 56.25% of responses rated the services of Spotify as “Good”

and 33.33% rated them as “Excellent” (Appendix C, Survey Monkey, 2016).

Spotify’s unique selling point (USP) is that consumers can enjoy music in a safe and legal way.

Secondly, they have a database of 12 million songs at the disposal of the customer and this

database is still being expanded every day (Baere et al., 2016).

Target Customer Profile

Spotify uses content targeting to reach users with habits, mindsets, and tastes that align with

their persona (Spotify, 2016c). Spotify’s target audience falls into the category of generation

Y (or the Millennials, born 1979-1994). Young people today are generally living at home with

their parents and siblings, and are somewhat dependant on their parents for financial support.

Regarding purchasing decisions for teens’ personal use, the teenager tends to be the influencer

in the decision-making process. Music is an important and popular aspect of today’s teen

culture; therefore, Spotify targets a highly sustainable market.

Competitor Profile

Apple Music

Apple’s streaming revenue has risen 45.2% to £2 billion, which is 20% of their total revenue.

It also has 15 million paid subscribers. In February 2016, Apple Music had 11 million paid

subscribers and then had a rise of another 2 million by April (Music Industry Blog 2016b). This

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means they are acquiring subscribers at a quicker rate than Spotify. They’re going to add song

lyrics and a playlist feature called ‘Discovery Mix’ which is like Spotify’s ‘Discovery Weekly’

(Perez, 2016).

Apple Music Marketing Mix:

Product: A music streamer that offers music online and offline to paying subscribers and are

now able to share their music with others

Price: Individual Subscription (£9.99), Family Subscription (£14.99) and Student

Subscription (£4.99)

Place: Online only

Promotion: Apple advertise mostly online by paying other companies to advertise their

business

SoundCloud

Currently has 175 million users, which can be a threat to Spotify as they are in the same

competitive market (Moazed, 2016). SoundCloud and Spotify are very similar but offer

different options for their customers, unknown artists can upload their own music to

SoundCloud and create a platform for themselves for people to hear. Spotify doesn’t give such

freedom and sticks to big record labels and artists. Both sites require the internet while using

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the service although SoundCloud doesn’t allow customers to download music from the site for

offline use whereas Spotify does.

SoundCloud Marketing Mix:

Product: A music sharing platform where well known record labels and unknown artists share

music

Price: SoundCloud Free, SoundCloud Pro $7, SoundCloud Pro Unlimited $15

Place: Online only

Promotion: Billboards, but most commonly used online via social media and word of mouth

Porter’s Five Forces Analysis

Michael Porter’s five forces framework is an in-depth assessment of competition and

profitability in an industry (Dobbs, 2012).

Buying

Power

Consumers are given an opportunity to choose multiple services

Spotify could lose essential market share

Pricing between competitors is similar

Increase of illegal downloads

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Supplier

Power

Threat of artists such as Taylor Swift and Adele leaving Spotify

Artists are not receiving their royalties

Threat of

Substitution

Large competitors such as Apple and Amazon offering similar services

Difficult for new competitors to enter as Spotify have maintained a

reputable brand

Threat of

New Entry

Spotify must increase their reputation of their brand

Apple music is a high competitor as they are involving features that

Spotify have

Competitive

Rivalry

Spotify operates within a highly competitive market

SoundCloud and Apple Music are increasing market share

Spotify is the leader offering more than any other competitors

Summary of PEST Analysis

Political Spotify have been sued in the past by artists for distributing their music

without the artist's permission - there is an ongoing debate on whether

royalty payments should increase as this will make subscriptions more

expensive as Spotify would have to pay more to their artists

Copyright restriction claims that it is imposed by record companies to

which country or region the product can be published or sold by the

online music store, which means not every product can be produced in

every country - therefore limiting Spotify’s market share

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Economic Total value of the digitally distributed music market, iTunes, was $2.3

billion

In 2015, Spotify surpassed a billion in 2015, a 23% increase from 2014

Social The world is now moving more towards music streaming with monthly

charges and away from CD’s and accessing music digitally which can

cost twice as much as music streaming

Technological The need for sharing and purchasing music has led to the need in faster

internet speed. There is also a demand to have your favourite music in

handheld devices such as iPhone and Samsung

Summary of SWOT Analysis

Strengths Free music

Fully customizable playlists

Discover weekly tool

Weaknesses Limited services for non-paying members

Adverts between songs

Opportunities Continuous rise in customers

Selling artist merchandise

Threats Pay-out 70% of total revenue to music labels

Other brands offering more than just music to customers

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PART 2. Your Recommendations

Objectives:

Introduce “Spotify Live” to the online streaming market by 2017.

At least a 5% increase of market share and revenues by the end of 2017.

3% increase of premium subscribers by the end of 2017.

“Spotify Live” is a new platform for Spotify to entice more customers to subscribe to

premium membership, by live streaming big festival events.

Watching individual artists perform at various festivals throughout the year

Non- paying members: £7.99 per artist to watch them live online

Premium members: £3.99 per artist to watch them live online

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Strategies & Tactics (“The Marketing Mix”)

(a) Product Summary

The core benefits of Spotify’s brand are to deliver quality music to all members (inner circle).

Spotify’s additional benefits include offline access of songs if you download them, as well as

a professional and aesthetically

appealing service. In the final

circle is where a potential

product situates. “Spotify Live”

is what the company

potentially can be in the next

12 months. Another potential

product for Spotify is the

aspect of virtual reality being

incorporated within the

“Spotify Live” initiative. Only premium members will have access to the virtual reality

platform, allowing them to view festivals, gigs and concerts in 360 degrees HD.

(b) Summary of Price Strategy

With Premium subscriptions already at £9.99, “Spotify Live” will cost premium members an

additional £3.99 per artist whilst free users of Spotify must pay £7.99 per artist for the usage

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of “Spotify Live”. The reason behind this psychological pricing technique is because we want

free users to look at the Premium membership with “Spotify Live” and be encouraged to invest

into it but to also give them a chance to watch their favourite artists live for a lower price via

their Laptop, Tablet or Mobile phones.

(c) Summary of Place Strategy

All of Spotify users will be able to see when their artists are going to be on “Spotify Live" and

will then have the option to pay to see them or not. There will be an additional heading in

Spotify where you will be able to access all the live events going on through Spotify and which

ones are coming up. As well as this, an app will be created so users can download it on their

mobile devices, and watch their favourite artists live on the go.

(d) Summary of Promotion Mix

By 6 months we would have a trial run of “Spotify Live” to all members, to see if there is great

demand. We would send emails to current members to increase awareness. As well as this, we

would get in touch with social media platforms such as Facebook. Also, “Spotify Live” would

be promoted on TV in the evening. Research has shown that most people watch TV in the

evenings, therefore we would be able to target more people. E-marketing would be a huge

factor when promoting “Spotify Live” as our target audience is young people between 18-24.

(e) Summary of People

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There would be many people involved in the running of Spotify Live such as the camera and

sound staff that would have to be at the live event running everything before, during and after

the event. The marketers reaching the right target market for the certain events going on

throughout the year.

(f) Summary of Process

To carry the process of providing the Spotify Live to the consumer is that we would have to

set up multiple cameras at the live events which will provide the best sound and visual quality

for the consumer that’s watching at the time. Multiple cameras would give the consumer

different angles at the concert that they might not have got if they were there.

(g) Summary of Physical Evidence

Due to the consumer having to make an additional payment for the “Spotify Live” service,

every time they want to use it they’ll be provided with a PDF receipt for their purchase via

email as well as receiving a reminder an hour prior to the event going live.

Evaluation

We’ll be able to measure Spotify Live’s success or failure by simply viewing how many people

are buying into it. We would also identify how many people are upgrading to a premium

subscription and if it were to get more and more popular in certain months, then we could look

to provide deals such as watching three acts for the price of one when you upgrade. As well as

all these, we will hope to get feedback from all users after they’ve finished watching so that we

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can keep improving the service we provide as well as any suggestions from users. We’ll also

be able to see at what months and which acts/festivals are more popular, so that in later years

we can provide more of consumer favourites.

Implementation & Control

Issues that arise from the marketing mix would be the potential risk of customers not willing

to pay for the increase in price. Spotify can sometimes be expensive, therefore present

consumers may not want to pay more for the service. As well as this, the price of promotion

will be significantly high. We would have to consider a strict budget for the new launch, for it

to be successful. The main operational issue would be getting advertising rights to promote on

Facebook, TV and billboards. This will be highly costly; therefore, forecasts must be made for

“Spotify Live” to be a success.

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References

Baere, B., Groote, D. and Szeridi, P. (2016) Unique Selling

Propositions. Available: https://spotifycase.wordpress.com/unique-selling-

propositions/ . Last accessed 13th November 2016.

Blythe, J. and Martin, J. (2016) Essentials of Marketing. 6th ed. Prentice Hall:

Financial Times. 93.

Coughlan, S. (2016) Time spent online 'overtakes TV' among

youngsters. Available: http://www.bbc.co.uk/news/education-35399658. Last

accessed 13th November 2016.

Dobbs, M. (2012) Porter's Five Forces in Practice: Templates for Firm and Case

Analysis. Competition Forum. 10 (1), pp. 22.

Ingham, T. (2016) Spotify revenues topped $2bn last year as losses hit

$194m. Available: http://www.musicbusinessworldwide.com/spotify-revenues-

topped-2bn-last-year-as-losses-hit-194m/. Last accessed 13th Jan 2017.

McAlone, N. (2016) Services like Netflix and Hulu are growing much faster than

cable. Available: http://uk.businessinsider.com/growth-of-streaming-services-outpacing-

traditional-cable-2016-4?r=US&IR=T. Last accessed 13th November 2016.

Moazed, A. (2016) Why SoundCloud Will Be Worth More Than Spotify. Available:

https://techcrunch.com/2016/01/24/why-soundcloud-will-be-worth-more-than-spotify/. Last

accessed 2 December 2016.

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Music Industry Blog. (2016a) Just How Well Is Streaming Really Doing?. Available:

https://musicindustryblog.wordpress.com/2016/08/31/just-how-well- is-streaming-really-

doing/. Last accessed 12th November 2016.

Music Industry Blog. (2016b) Have Spotify and Apple Music Just Won The Streaming

Wars?. Available: https://musicindustryblog.wordpress.com/2016/09/16/have-spotify-and-

apple-music-just-won-the-streaming-wars/. Last accessed 15th November 2016.

Perez, S. (2016) Apple rolls out its new, personalized playlists to Apple Music subscribers on

iOS, macOS betas. Available: https://techcrunch.com/2016/09/05/apple-rolls-out- its-new-

personalized-playlists-to-apple-music-subscribers-on-ios-macos-betas/. Last accessed 14th

Jan 2017.

Reynolds, O. (2013) Spotify's Struggle. Available: http://themarketmogul.com/spotifys-

struggle/. Last accessed 12th November 2016.

Spotify. (2016a) About us. Available: https://press.spotify.com/us/about/. Last accessed 12th

November 2016.

Spotify. (2016b) Premium for Family. Available:

https://www.spotify.com/is/family/?utm_source=google&utm_medium=cpc&utm_campaign

=360ispotify%7Cen%7Cbrand-

text%7Call%7Cgoogle%7Csem%7Cfamily%7Cexact&utm_content=growth_paid&utm_ter

m=43700014444688250_. Last accessed 15th November 2016.

Spotify. (2016c) Targeting. Available: https://spotifyforbrands.com/us/targeting/. Last

accessed 15th November 2016.

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The Economic Times. (2016). Definition of Marketing Mix. Available:

http://economictimes.indiatimes.com/definition/marketing-mix. Last accessed 12th

November 2016.

Wilce, S. (2015) Apple Music, Tidal, Spotify and more. Available:

http://www.hifiandmusicsource.com/2015/06/apple-music-tidal-spotify-and-more/. Last

accessed 15th November 2016.

Wind, Y. (1984) Going to market: new twists for some old tricks. Wharton Magazine. pp. 93.

7. Appendix

Appendix A

Ingham, T. (2016). Spotify revenues topped $2bn last year as losses hit

$194m. Available: http://www.musicbusinessworldwide.com/spotify-

revenues-topped-2bn-last-year-as-losses-hit-194m/. Last accessed 13th Jan

2017.

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Appendix B

https://www.surveymonkey.com/

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Appendix C

https://www.surveymonkey.com/