As seen from Figure 1, there is an increasing trend insmartphone users ever since 2014.
As technology develops, smartphone isreplacing old devices such as record players, music systems etc. because just in one smartphone device, allthose features can be obtained anytime instantly. Smartphone comes in handy insituations whereby one of the many features can be used for daily activities.Due to the increasing trend of smartphone users, many music streaming companiesare designing music streaming services to attract people to use their servicesand capitalize on their business, Spotify is a music streaming service thatgives access to millions of songs. Spotify is the largest and most successfulbusiness operating in the music streaming industry.This extended essay covers the research question “to whatextent does social media marketing and targeting smartphone users helps Spotifyto stay competitive in the online music market in South East Asia?”. In theonline music streaming industry, it is hard to survive since providing musicstreaming services will usually result in free users unintending to upgrade topremium.
However, Spotify has managed to gain many premium users by offeringmillions of songs just by going premium at $9.90 a month. The premium accountalso offers better sound quality, downloading music and listening offline,permanent advertisement blocks. It is worth investigating on Spotify to find out howSpotify managed to out-compete iTunes, Play Music, Amazon Prime Music, andother online music streaming services since Spotify is currently offering thebest music streaming service. It is unusual for a business to be able to reachout to so many users since most users goes for free music. However, Spotifymanaged to overcome the problem of lack of premium users. Hence, I decided toresearch on this topic to find out how Spotify managed to overcome the problemand stay competitive in the online music streaming market.
I will be looking on the research question in the contextof social media marketing and use the business tools such as Ansoff Matrix,Force Field Analysis and the SWOT analysis from the Business and Managementsyllabus to analyse on Spotify. Spotify’sintegration with Facebook, the most used social media platform in the world;allows Spotify to consistently add new users rapidly by targeting users withFacebook accounts to register for a Spotify account. Since it is convenient tocreate a Spotify account by using a Facebook account, it will be convenient forthe Facebook users.
Spotify also streams with Twitter to communicates with theusers the same way many firms use social media to promote their products andgain feedback. By using social media marketing together with viral marketing,Spotify aims to reach a large of variety social media users. MethodologyTofind out the marketing strategies Spotify used to stay competitive in market, thetopic consists of secondary sources such as case studies, journals, articlesand publications. The information required was obtained from these sources isnecessary to further understand how Spotify utilizes social media to reach alarge group of customers. Statistics of Spotify’s and its competitors’ saleswere obtained from the internet to analyse on Spotify’s position in the market.
The information on the unique selling point of Spotify was also needed toidentify how Spotify stood out in the music streaming market. The sources thatI have found gave me the idea on howSpotify utilizes the advantages of social media platforms to promote theservices, attracting many customers at the same time by working with Facebook. g1 To find out how Spotify utilized social media to staycompetitive in the market, the topic was first researched from secondarysources such as journals, articles, publications, and previous case studies.Secondary sources are needed since it provides a variety of informationregarding social media marketing and the other competitors in the musicstreaming industry. TheoryUsedThe theories used in the essay are mainly business toolssuch as SWOT analysis, Marketing mix, and the PESTLE analysis. The SWOTanalysis will be used to evaluate how Spotify makes its decisions byidentifying its strengths, weaknesses, opportunities, and threats.
It will alsobe used to assess the current and future situation of the business. Whenreading up about Spotify, Spotify uses various types of marketing strategies tostay competitive in the market. Thus, the business tools will be used to aid inthe evaluation on how Spotify utilizes the marketing strategies. Since the SWOTanalysis does not include factors such as politics and economics the PESTLEanalysis will be used. The PESTLE Bodyg2 g3 Swot AnalysisSWOT analysis is a simple yet very useful decision-makingtool.
SWOT is an acronym for Strengths, Weakness, Opportunities and Threats. Thistool will be used to assess the current and futuresituation of Spotify. Strengths (Internal) – Spotify can be accessed easily – Available on most devices – Large variety of music available – Advertisements will earn the company some profits – Very easy to use – Sharing of playlists – Able to listen to downloaded music without internet – Integration with Facebook Weaknesses (Internal) – Internet access is needed to stream music from Spotify – There is a limit to free accounts – Not all songs can be found in Spotify – Repetitive advertisements – Free accounts cannot download music – Alienation of artists – Royalty pay-outs Opportunities (External) – New markets – Global markets – New acquisitions – New technologies – Modern trend – Creating phone app – Product diversification – Rise in smartphone users Threats (External) – Substitutes – Piracy – Competitors using same idea – Free music by other companies – Small advertising space – iTunes offer videos and movies – Brand loyalty towards iTunes Internal factors are factors that can be controlled bySpotify.
Internal factors include strength, and weaknesses. External factorsare factors that cannot be controlled by Spotify. External factors includeopportunity and threats. Weaknesses can be overcome by Spotify since it can becontrolled internally. While threats cannot be resolved but can be dealt with.StrengthsSpotify have been innovating to provide consumers withbetter quality of music. Spotify’s strengths revolve around its accessibility.
Spotify can be accessed from almost any device. Spotify can be accessed fromsmartphones, tablets, and computers with internet access. Spotify’s service canbe used by almost anyone since it is very simple to use. Music from Spotify canbe downloaded via the internet and can then be listened offline. This is anattractive feature of Spotify since many consumers do not intend to use mobiledata while listening to music. However, this feature can only be accessed by subscribedusers. The convenience of Spotify’s service allows easy access and this willattract many people to use Spotify’s service.
This is evident on why Spotifycurrently have over 150 million users and over 500,00 premium users signing up.Spotify’s service also includes paid advertising for the free users. Byallowing other businesses to advertise on their services, Spotify can gain somerevenue to invest on improving their own service. Spotify’s innovative idea tointroduce social music is one of its main features. By introducing sharing ofplaylists Spotify manage to distinguish itself from other competitors such asiTunes. Spotify users can create their own personalized playlists with theirchoice of music.
By enabling users to share their playlists, users can listento other’s playlist and gain interest in other’s music taste. This also expandsthe user’s variation of music. Users can freely explore new music withoutsearching for it. Spotify’s integration with Facebook is one of the key factorsthat leads to Spotify’s success.
To register for a free Spotify account,Facebook users can use their Facebook account to sign up for a Spotify accountimmediately. Facebook users need not undergo the process of creating a Spotifyaccount. This feature will attract many Facebook users to Spotify since theyonly need just a few clicks to gain access to a Spotify account.
Personal preferencesin music selection can be taken as suggestion or recommendations to friends,thus inadvertently inspiring more friends and the music listening habits. Userscan like their friends’ song and they can also listen to their friends’ songs fromFacebook. This is social music that Spotify implemented in their service.
WeaknessesHowever, Spotify’s strengths bring about limitations. If auser wants to stream music from Spotify, internet access is needed. Spotifyusers are not able to stream music without internet access. Users will preventusing Spotify if they do not have internet access. This will lead to lessviewers for paid advertisements thus reducing revenue gained fromadvertisements. Furthermore, free users are only allowed to stream music asthey are not given the access to download music to listen offline.
Downloadingmusic to listen offline requires a premium account which costs $9.90 per month.Most consumers are looking for free music streaming and are not willing tospend money on premium accounts. Also, free accounts come with repetitiveadvertisements.
When a free user is using Spotify, there will be anadvertisement every thirty minutes. Users will find it annoying since they mustwatch a full advertisement before they can go back to using the service. Spotifydoes not offer every song that can be found. Users who are looking for lessrecognized artist may not be able to find their songs. This will contradict thepurpose of Spotify providing a large variety of songs for users. If userscannot find the songs they want, they will be discouraged from using Spotify.
Spotify does not offer all songs because there are musicartists who are against music streaming. By offering music streaming, Spotifyis basically taking revenue from the artists. If a person wanted to listen to asong, they are required to buy the songs or to download it illegally.
Theartists will be paid with the number consumers who bought the artist’s songs.However, with Spotify and other music streaming services available in the musicindustry, there are lesser consumers purchasing songs from the artiststhemselves. This results in the artists making lesser profits if they sharetheir music to music streaming services such as Spotify. Spotify’s royaltypay-outs to the music artists are too little. Spotify pays $0.
00014213004 perstream to the music artists. Music artists would rather sell their own musicsince they can make more on their own rather than allowing their music to bestreamed. Therefore, Spotify risks alienation of artists and this will reducethe variety of songs that Spotify can offer.
Opportunities Spotify is currently available to 62countries worldwide. Ever since Spotify’s launch in 2008, Spotify has beenattracting many consumers due to its unique service. When Spotify was firstlaunched in Sweden, Spotify have many opportunities to expand to differentcountries. When Spotify was getting more reputable in 2009 when Spotifycapitalized on its popularity by raising a $50M. (https://techcrunch.
com/gallery/a-brief-history-of-spotify/)Spotify can further expand into many other countries such as Russia. Byexpanding to new countries, Spotify will expand their market and can attractmore consumers by using social media marketing. The rise in smartphone user dueto technological advancements is an opportunity for Spotify. By creating asmartphone app to access their service, Spotify allowed many users to accesstheir service since more and more people are using smartphones. Spotify is inacquisition with 11 different organizations. Spotify bought MightyTV, astart-up that revolves arounds using artificial intelligence and contentrecommendations by just swiping the screen.
This allows Spotify to refine theirad and marketing tech. Spotify can improve their internal strength by havingacquisitions. ThreatsMusic piracy is a major threat to themusic industry. People tend to download pirated music because they do not tendto spend any money on buying songs to download. There are options to downloadmusic for free however, legal options are very limited. Spotify also face manythreats from other competitors such as Apple and Amazon.
Apple offers iTunes, aservice that is similar to Spotify but also offers movies and books fordownload. Amazon offers prime music, which allows a Prime member to stream over2 million songs ad-free, and Prime Video, offers Amazon Originals as well aspopular movies and TV shows. Competitors such as Apple and Amazon are threatsto Spotify since their services are cheaper. Amazon Music offers a four-monthsubscription to its music streaming services for just $1. Amazon also reducedtheir monthly fee for Prime members from $9.99 to $7.99.
Compared to Spotify,it is $9.90 a month. Consumers will choose Amazon Music over Spotify since itis cheaper. Spotify will have trouble attracting the loyal customers of Appleand Amazon.
PESTLEg4 ANALYSISPESTLE analysis is a concept in marketing principles.Moreover, this concept is used as a tool by companies to track the environmentthey are operating in or are planning to launch a new project/product/serviceetc. PESTLE is a mnemonic which in its expanded form denotes P for Political, Efor Economic, S for Social, T for Technological, L for Legal and E forEnvironmental. By using this tool, this tool gives many different angles thatone can utilize to analyse the business. However, the simplicity of this toolis that it is a sample list which is not sufficient and comprehensive enough tofully analyse the business.
PESTLE analysis is only based on an assessment ofthe external environment so the analysis obtained from using this tool is notcomplete without considering the internal factors affecting the business.Therefore, this tool is used along with the SWOT analysis.Political:g5 g6 To prevent music piracy, governments implemented copyrightinfringement. When one Is found guilty of copyright infringement, he/she couldbe liable for civil and criminal sanctions depending on the nature of theoffending effects.
By implementing copyright infringements, the government canprevent people from downloading pirated music. Economic: Social:People listen to music to relieve stress. Music offerspositive externalities since one can reduce stress. However, due to culture,some people do not prefer specific music such as rap and metal. Shifting trendsin online habits will cause the music industry to be exposed to the phenomenonof “click fraud” with increasing threat over the coming years. “Bots” wouldimitate human online browsing by repeatedly clicking on a web.
Fraudsterstargets music streaming sites like Spotify since these sites pay out royaltiesto artists and song writers. Bots will fake as artists and create fake tracks,mimicking tunes from established artists and then repeatedly play the audiostreams to generate revenue. This causes Spotify to lose money since they arepaying royalties to bots.
1 Technological:Not everyone in Asia have internet access. Some may haveweak connections and will have trouble connecting to Spotify’s service. Legal: Environmental:Clinch, Matt. “How the Music Industry Is FightingOnline Fraud.
” CNBC, CNBC, 28 Dec. 2015,www.cnbc.
com/2015/12/28/how-the-music-industry-is-fighting-online-fraud.html. g1Morefocused, state more on why the area of study is important, refer to rq morethroughout the essay, explain more on why the methodology is used g2Moredata g3Providesuitable argument eg how far these tools are relevant or not relevant g4Addin advantages and disadvantages g5Cybersecurity law is not strongerTarget smartphone users, may not be safe to use Spotifyexposure to hackers since there is not cyber safety law g6