Market Segmentation of Spotify

The way people listen to music has changed dramatically over the last decade. The public’s focus has gradually shifted from tangible media to digital music collections. They are now more interested in digital files than CDs and DVDs. Spotify and other digital music libraries can help with this. Spotify is an international audio streaming firm based in Sweden. It has made significant improvements and has stayed competitive in this industry. In this blog, we will concentrate on the Market Segmentation of Spotify.

Let’s begin by looking at Spotify’s positioning approach.

To do so, we will look at one of Spotify’s commercials.

Humans appear to be musical by nature. It seems that the ability to comprehend and enjoy complicated melodic patterns is culturally ubiquitous. However, although speaking is undoubtedly vital for transmitting propositions or concepts, music’s real job is not to acquire such information. Music’s ability to express emotions, moods, and affective mental states, on the other hand, appears to be advantageous to our quality of life.

US market created this commercial. The base of the commercial is the observation – almost all users of Spotify listen to their playlists while they are in their cars or other vehicles. The goal of this commercial was to persuade Spotify customers to consider streaming while driving.

The brand’s in-house team devised a hilarious commercial that plays on a common habit: waiting until the finish of a song we enjoy before getting out of the car. Several humorous scenarios carry through, in which we see people enthusiastically singing along to Sia’s Elastic Heart until the song ends.

Based on the details we have highlighted in the previous two paragraphs, we can conclude that Spotify loves working with Floaters.

And here are the reasons why:

Who are the Floaters, and what makes them different?

Quote: Spend time with your family, look after yourself, and find peace here.

Goal: Maintain as much tranquillity as possible.

Lifestyle.

First and foremost, as previously said, Floaters are incredibly family-oriented. Men as breadwinners and women as stay-at-home parents is a conventional worldview that is highly respected. Because women in this demographic prefer to spend most of their time at home, in the kitchen, preparing delicious meals for their families.

Cleaning is yet another crucial task. It is more vital for Floaters to carry out their responsibilities than to engage in activities that may be more pleasurable. Even if the family budget is tight, floaters do whatever they can to provide for their families.

This group adores their residence. It is the centre of their universe, a secure haven and tranquil setting. After a long and exciting day, they return home satisfied. Floaters are unconcerned about themselves. They don’t go out of their way to get highly stylish and attractive clothing. A pair of comfy jeans and a t-shirt will suffice. They also don’t try to pass themselves off as someone they aren’t.

Shopping.

When it comes to spending money, floaters like to be frugal. Always remember to take advantage of discounts and special deals. Every cent counts. Hence, it simply adds that this is primarily a down-market brand buyer.

This group prioritizes quantity above quality. It is preferable to buy a few things for a lower price and have them be of mediocre or inferior quality than to buy one high-quality item. They prefer Croatian brands, for example, since they are pretty affordable. On the other hand, these brands’ products are frequently of inferior quality.

Some guidance about floaters.

They frequently watch television because it is their primary source of news.

Local newspapers are preferred by these individuals, although they do not purchase them often.

They are radio listeners who are below average.

They are more concerned with worldwide news than with their surroundings.

We’ll look at Spotify’s positioning strategy as well.

Despite its iconic prominence, Spotify is a very new company. It was formed in 2006 and first opened its doors in 2008. It made the list of the 100 most valuable global companies in its first ten years.

It became to millennials what MTV used to be too late, Generation X in the 1990s – the ultimate music destination, a place where everything revolves around the music. Spotify has expanded its business to include podcasts in recent years, and it is now one of the world’s most extensive podcasting services.

“Unlocking the power of human creativity – by offering a million creative artists the chance to live off their art and billions of fans the ability to appreciate and be inspired by it,” Spotify’s business purpose states.

The Swedish brand adopts a more light-hearted approach to customer marketing. Spotify portrays itself as a soundtrack to people’s lives, with millions of tracks and hundreds of thousands of podcasts, recognizing that music and podcasts accompany them everywhere they go and whatever they do. It promotes its offering as “the perfect song or podcast for any occasion.”

Now we’ll look at Spotify’s Marketing Mix from various perspectives.

Product:

Spotify’s main product is a subscription-based service that allows users to stream or download music for free or a fee (Spotify, 2017). Spotify began as a music streaming service but has expanded to include podcasts. It recognized the potential of digital value in the music industry, and instead of purchasing CDs from stores, users may now listen to music online.

You get access to their entire catalogue through the streaming service, making Spotify a market leader. It was one of the first firms to provide limitless music rather than pay per song, garnering them the majority of the market.

They have always had a competitive advantage over other competitors since they were the industry leader, and their name is synonymous with music streaming services in customers’ eyes.

Spotify also uses individualization and personalization in its offering; for example, it provides users with a weekly playlist called Discover Weekly Playlist, which allows them to create a playlist based on their particular music tastes.

Personalization can result in enhanced customer happiness and higher revenues owing to increased consumer spending (Arora et al. 2008), giving Spotify a competitive advantage. They also employ the notion of mass customization (Arora et al. 2008) within their playlist, which allows subscribers with similar interests to access playlists that they may enjoy.

Price:

Spotify offers a variety of pricing choices, including a free membership that restricts what users can do and includes adverts between songs or a monthly charge that allows you to use the service ad-free and have access to extra features like downloading and skipping infinite tracks (Spotify, 2017). Spotify employs a freemium pricing approach, which provides clients with a free trial (Liu et al. 2014).

However, unlike other companies that employ this technique, there is no limit to the free trial, and users can continue to use the service for as long as they like. Spotify uses this method to compete in the market because it recognizes that customers are unwilling to pay exorbitant fees; instead, it employs it to entice users to acquire a monthly membership to obtain access to additional services. This method may also persuade consumers who would not otherwise subscribe to a streaming service to do so.

Because Spotify was the first big streaming service, they could price their product wherever they wanted and have maintained the exact pricing since the beginning, forcing competitors to price their services around Spotify, providing them with a competitive advantage.

If rivals charge higher than Spotify, they will have to provide extra features to justify the higher price, and if they lower the cost, customers would believe the service is not as excellent.

Unlike other music services, Spotify charges a flat fee for access to their entire repertoire rather than per song or album, providing them with an advantage over competitors.

Promotion:

Spotify’s advertising initiatives are pretty restricted. Rather than investing enormous sums of money on massive campaigns, they rely primarily on word of mouth and co-marketing. Their general promotional goal is to raise awareness (Spotify, 2017). Spotify targets specific groups of people in their advertising activities, despite the company delivering a product for everyone.

Spotify has a connection with Facebook that allows users to share what music they are listening to and connect with friends on Facebook using Spotify. Moreover, it has resulted in word of mouth spreading across one of the most popular social media platforms.

Because the promotion comes from trustworthy sources (other friends), it is more remembered and trustworthy (QUOTE). Spotify began utilizing Twitter for a similar advertising purpose and to keep fans informed about new features and music on the platform.

Spotify also relies on celebrity endorsements for promotion, so if a new star publishes an album, it’ll likely be available on Spotify. When a celebrity or major record label, such as Universal or Warner Bros., promotes a new album on Spotify, the service is also encouraged by the artist’s fan base.

Spotify is primarily targeted at the general public, making promotional efforts more straightforward and less expensive. They may create a single campaign that will likely attract many people rather than many ads focused on particular target audiences.

For example, Spotify’s #thatsongwhen (Spotify, 2017) campaign depends on users to handle the majority of the advertising by sharing their experiences with music while also including Spotify.

Spotify also promotes its service by sponsoring events such as music festivals, which helps consumers identify Spotify with music and subsequently think about it when picking which music streaming service to utilize. Spotify has been able to compete in the market because it targets a particular market and allows non-users to use its service.

Place:

Spotify is available on practically all modern platforms, including laptops, tablets, and smartphones. It is mainly accessed over the internet, although premium customers may access it offline. All you need is the app to access the service, allowing Spotify to be available to customers 24 hours a day, seven days a week.

Spotify has a seller-controlled distribution method, which entails the supply firm creating a single website where they may offer their product or service (Berryman et al. 1998). This technique provides Spotify complete control over their service, giving them competitive advantage by allowing them to deliver it precisely how they want.

Spotify opted to cut out the middleman when purchasing music (retailers selling CDs) and instead distribute it straight to clients. Furthermore, it helps them save money and provide items at a lower price than rivals, providing them with a competitive advantage.

Music aids in discovering companionship, the enjoyment of isolation, and the sensation of happiness. These aren’t just “great to have if you can obtain them” feelings. They’re essential for living a happy existence.

As a result, music is more than just a technique to create ambience or pass the time, and Spotify is now there to help us with that. By analyzing the market segmentation of this massive music company, we learned the main aspects of their business plan and even the types of audience they like to work with.

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