Spotify: A Case Study in Marketing & Pricing Strategy

Department of Applied Business Management

Extended Education

University of Manitoba

August, 2021
 Name

Case Title:
Key Person (decision maker):
Case Summary (10%)
Who is the case about?
The case is about Spotify and Apple, the two largest music streaming service providers.
Spotify: The leading provider who essentially created the market and is owning millions of global
users.
Apple Music: The competitor of Spotify and is currently catching up with its good integration for IOS
ecosystem.
What is the current situation?
1. Spotify is the world’s most popular music streaming service provider with 245 million users
internationally and led the charts in the first quarter of 2020, owning 30% market share, which
also has stayed from 32% to 24% since 2016.
2. Apple music is the second most successful music streaming brand with 25% revenue share
and 21% subscription in market share.
3. There is an intense competition between these two major business providers with Spotify
currently leading the industry while Apple Music could catch him up at any time.

Why is the current situation happening?

1. The strong performance of Spotify in Asia Pacific regions and Latin America has driven its
growth. Especially the substantial reduction of membership fees in Indian market has attracted
more subscriptions as well as Spotify Kids has also turned parents with kids to be its users.
2. Apple Music’s business has reached 52 new countries with 6-month free subscription and
continuous new features added to its platform.
3. To compete with Spotify, a free 90-day lossless music streaming service was provided by
Apple Music in Q1 of 2020, closing the difference in market shares between the two business.

When will a solution need to be completed?

For Spotify, it needs to conduct efficient solutions as soon as possible to follow the trends under the
rapid revolution of music consumption market as the main target groups of Spotify and Apple Music
are young people who have increasingly changing favor for fashion and music tastes.

Analysis, Interpretation & Recommendations (60%)

Identify the target markets for three of the company’s products.

‘According to A group of people who have similar wants and needs and can be expected to show
interest in the same products.’ (Ebert, Griffin, Dracopoulos and Starke, 2013). With various kinds of
music that Spotify provides, it can be considered that its target market is tremendous and diverse.
Based on the three main subscription plans it currently provides, the target groups of each are
analyzed as below:

1. Spotify Premium: this plan charges $9.99 per month for streaming with ads free, which targets
to anyone who lives independently and considering that most subscribers are millennials, this
plan is also best for college students who lives alone.
2. Sportify Premium Duo Mix: for this plan, two subscribers can share $12.99 of monthly fee to
 have a playlist with music they both enjoy. Therefore, couples with no children and two shared
roommates are the main target markets for it.
3. Spotify Premium Family with Spotify Kids: this plan supports maximum of six family members
for $15.99 monthly subscription charge so apparently, the biggest target market of it is big
family with a few children and small business owners with partners.

What key marketing strategies would connect with the target markets?
According to Ebert, Griffin, Dracopoulos and Starke (2013), all the marketing programs and activities
that will be used to achieve the marketing goals. The following marketing strategies are used by
Spotify to target to different markets.

Meme Marketing
The target users of this strategy are millennials including college students as Spotify knows that
meme can make this group of people laugh and sell the brand. Spotify combines traditional media
with untraditional marketing communication, for example, it mixes billboards, an unconventional media
with memes to catch customers’ eyes.

Social Media Marketing

This marketing engages with millennials, couples and business owners through social medias such as
twitter to handle @SpotifyCares. In this case, it can listen to their voice including use experiences,
complaints about technical issues so they are allowed to always keep in touch with the service
provider to get the most responsive solution and improvements.

Current Trends Marketing

Through this strategy, all the target markets could be connected with. For example, through a
promotional event that celebrated ‘Game of Thrones’ return to HBO, Sportify created a customized
playlist covering music selection that matches all 15 characters, so fans of this TV series just could
not resist this genius arrangement by Spotify (Ascension Strategy, 2021).

What are the pricing options (including price points) the company could use for these three
products?
1. Freemium Pricing Model
This pricing option provides essential functions free of charge but charges product specific
benefits. As a result, subscribers can choose different versions of their streaming experiences
at different prices, convincing 1% of customers to switch to free services. The remaining 99%
of the cost is negligible.
2. Differentiated Pricing
To keep more consumers on its platform, Spotify uses this strategy to offer trial periods and
discounts to them. This strategy also fluctuates between various countries and consumer types
around the world.
3. Labour Exchange
This pricing strategy allows users to share their music playlists with others, benefiting both
consumers and businesses. Spotify can also benefit from its social aspect. When members
swipe Facebook while they listen to music, Spotify posts corresponding one. This is essentially
a free Spotify ad.
What needs to be done from a strategic marketing and pricing perspective to increase the
company’s sales and market share?
Spotify lost two points of market share due to its growth rate underperformed its major competitors,
even though it still maintains its global leading position in 2021. Therefore, some actions are there for
Spotify to take.

1. Spotify needs to target Ads for free subscription users as they are a group of people for Spotify
to take advantage of. There is a high success rate for the company to convert these
subscribers into their consuming group because these subscribers can be attracted through
rumors and digital advertisements to download it.

2. Spotify should work on its website and APP design to catch more potential customers’ eyes.
The current website and APP can be more simple and neat for users to navigate. As millennials
are the biggest target group of it, vibrant colors can be used to catch their attentions.

3. Promotional campaigns with pop culture elements could be introduced and customized playlists
could be provided for present users during festivals or birthdays to make them feel more
valued.

What approach would you take to implementing your recommendations?

1. Create a community for people attending concerts so that music lovers could gather to
communicate and thus increase the brand’s visibility.
2. Enlarge international music options. With its commitment to let all enjoy music, Spotify could
engage more with regional users to develop more potential of music lovers in other areas
rather than North America.
3. Separate playlists of domestic and international music on the website or APP page. In this
case, users can have an easy access to music according to different languages.
4. Develop its own cloud storage service. Currently Spotify only allows to play songs downloaded
on the devices unlike Apple Music, who offers convenient icloud storage service for its
subscribers.
5. Add lossless audio streaming. If users play music on internet through Spotify, the music file
quality drops to 256kbps and 128 kbps on free streaming media. This fact turns down a plenty
of hi-fi music pursuits.

Missing Information (10%)

Even though there are increasing groups of artists who are able to live off the streaming profit, many
other artists are still struggling for the survival of their streaming royalties. Therefore, in order to
provide a more fair environment and encourage better music composing motivation, a better system
could be adopt to pay all artists. For example, if 80% of streams goes to one artist, even though he is
quite new for the industry, he deserves 80% of the income going to his account.

Assumptions (10%)
For this case study, Spotify and Apple Music are the only two music streaming providers in the
industry for assumption. However, there are other competitive service provider doing better job in
some aspects. Even though their market share seems not as good as these two, they still have hugh
potential and unique selling points to compete with Spotify and Apple Music.

In this case, it is crucial for Spotify to continue with perfect its service and products to maintain its
leading position in the market.
References

Ascension Strategy (2021). Spotify Reaching the Millennial Market. Retrieved July 31, 2021 from
https://ascensionstrategy.com/spotify-reaching-the-millennial-market/

Ebert, Ronald J. and Ricky W. Griffin, 2013, Business Essentials, Ninth edition, Pearson Education

Limited.