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Executive Summary
Spotify, the ever growing popular outlet for music streaming, was founded in 2006 and
released to the United States in 2011. Since then, Spotify has become one of the biggest
streaming services in the world, with over 30 million users. However, with the rise of
competitors such as Apple Music, Pandora, and Tidal, Spotify needs to consider seeking to
expand their market and target a larger market than they currently do.
In order to gain a better understanding of our target markets behaviors and decide which
target market Spotify should focus on, our group analyzed the companys history, current
situation, demographics and psychographics of our target audiences, and market share.
We began by researching Spotifys company history and doing a SWOT analysis. We
were able to gather that Spotify has many strengths, such as, convenience, availability around the
world, availability of different languages, a bigger music selection than its competitors, and its
ability to tailor music based on what the customer wants.
Following up on our research, we also created a list of weaknesses and opportunities that
could be used to determine what Spotify should pursue in terms of improvements and what they
should do to not get lost in the mix when it comes to the rise of their competitors.
We decided to recommend that Spotify pursue the opportunity to reach out to adults
between the ages of 25-49 because this age group represents a huge percent of their market, but
have low indexes that can be improved with advertising directed towards them. But, Spotify
should not neglect the 18-24 age group because they have been avid customers since the start.
Spotify currently does not advertise on as many mediums as its competitors. According to
our research, we found that Spotify does not allocate any of its advertising budget to Network
and Cable TV. Their main focus has been advertising on the Internet only for the past couple of
years. However, even though they have focused most of their advertising on the Internet, they
still have the lowest share of voice in this category when compared to their competitors.
By looking at our competition and what they have spent on advertising, we have found
that Spotify spends considerably less than its competitors. In 2015, the company spent only
$243,900 on advertising, as compared to the millions its competitors spent on advertising. The
company has a low market share in all mediums due to this reason.
We concluded that Spotify should focus on gaining market share by modifying its
advertising budget to a competitive amount of $8,000,000. We plan to split up Spotifys media
mix in order to overcome the fierce competition that seems to only keep growing as more
companies enter the music streaming industry. By using the flighting method, we decided to
focus on the months of March, May, August, and December. Our proposed media mix focuses
on Cable TV, Digital, and Magazines. Our reach and frequency goals are low for the months of
March and August, medium for May, and high for December. With our advertising budget we set
a goal of reaching 1040 GRPS and plan to surpass this goal with 1148 GRPS. We believe that by
using the flighting pattern and concentration media mix, we will effectively reach our target
audience and stay under budget.
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Situation Analysis
1. Company Background
As technology advances and old ways of listening to music are dying out, Spotify
is becoming a more and more popular outlet for listening to music. Spotify has become
popular for allowing its users to access millions of songs, videos, and podcasts around the
world. Users have some free access and can pay for premium access, which is where the
company makes a majority of its money. Spotify was founded in April of 2006 in
Stockholm, Sweden. Spotifys founder and CEO, Daniel Ek, released access to the
company in the U.S. in 2011.
Spotify has over 1600 employees around the world. There are over 100 million
users of Spotify and it is also offered in over 50 languages. In late 2011, the Spotify app
was released which allowed use on all different devices. In March 2011, subscribers
across Europe had reached one million. This number reached four million in August the
following year. Spotify and Sony linked up in 2015 to create PlayStation Music for all
PlayStation users. By March 2016 Spotify had reached over 30 million paid subscribers.
2. SWOT Analysis
a. Strengths
i. As older forms of listening to music, such as CDs, iPods, and radios, are
becoming less prevalent, Spotify is bringing a convenient and easy way to
get access to millions of songs and videos. With the Spotify App users can
access the music on any of their devices. Spotifys online presence and
mobile feature align well with digital advertising.
ii. Spotify tailors to a users needs by allowing different subscription
packages depending on what the user wants. They have a free option,
which is very desirable for people on a budget, and they also have
premium, student, and family options which provide upgrades such as no
commercials.
iii. Spotify is available all around the world, so it can be accessed just about
anywhere. It is also offered in over 50 languages so it creates a larger user
base.
b. Weaknesses
i. Spotify does not allow users to filter explicit content. This will shy away
parents or guardians that are conscious of what their children are listening
to. It does not allow users to block anything they do not want to hear or
see.
ii. Spotify had an incident where a user was hacked and information was
taken. There were a number of users that ended their subscriptions because
they did not feel safe having their information in Spotifys possession.
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iii. Spotify has received feedback from some artists that they do not provide
substantial compensation for allowing access to their music. This would
lead to fewer popular artists songs being available to users through
Spotify.
iv. Advertising spending for Spotify is the lowest of its competitors. By
putting more money into their advertising, reaching more potential users
will bring more paying subscribers. Spotify has to promote more to ensure
they do not get bullied out by Pandora or Apple Music.
c. Opportunities
i. With Americans becoming more and more frugal, having more
subscription options could better increase paid subscribers. With the free
option not being enough for some, they could integrate another paid option
that is less expensive than the Premium subscription.
ii. Music now is mostly found through streaming. With cars even being
released without CD players, old ways of listening to music are on their
way out. With Spotify already having their foot in the door with this newer
way of listening to music, they can implement it into other mediums such
as cars, smart TVs, and other radio devices.
iii. Increasing network streaming access for consumers would allow users to
listen to their music in even more places. This would be a very important
benefit when choosing a music streaming service.
d. Threats
i. Spotifys competitors are very big companies with large customer bases.
With Apple Music being 4 years younger than Spotify and already
establishing itself as a worthy competitor, Spotify needs to ensure that it
does not fade away. Pandora is also a large competitor that greatly rivals
Spotifys service.
ii. Many popular artists refuse to have their music on Spotify. With Spotify
not being able to have access to some of the latest, and most popular
songs, customers will begin to look elsewhere because they cannot get it
with Spotify. Artists like Taylor Swift and Radiohead have too large of a
following to allow this to continue. If other big name artists begin to
follow suit, Spotify could easily fall off the map.
iii. Spotify needs to monitor subscription fees to make sure that other
companies do not start the same kind of service offered at a lower price
point. It is crucial that they prove it does not get any better than Spotify.
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3. Marketing Mix
Spotifys marketing efforts of place are found online. Spotify is a music, video, and
podcast streaming service. The service is accessible online and now on all mobile devices. This
makes it much easier for consumers to get the service if they are constantly on the go. With
monthly subscriptions, consumers can now have access to millions of songs, videos, and
podcasts. The service is available in over 50 languages and is accessible worldwide. This allows
everyone to use the service regardless of where they are from or where they are going. With
Pandora only serving the United States, New Zealand, and Australia, Spotify gives a much more
accessible service in many more countries.
As music is becoming more and more mobile, consumers are no longer buying CDs, and
iPod usage has decreased. A large majority of consumers are now using their mobile devices to
access their music. Since radio is not always available, Spotify gives consumers the ability to
access their favorite music anywhere and anytime. Unlike the radio, and competitors like
Pandora, Spotify allows consumers to go and select specific songs that they want to listen to.
Spotify is also a very easily accessible service. The Spotify App makes it very easy to access
music and videos on smartphones, tablets, and computers. This gives no restriction on the ability
to use the service. Pandora radio service is also available online and on mobile devices. Spotify
is different from Pandora in that Spotify allows users to select specific music that they want to
hear. Pandora only allows users to select channels based on the listener's interests.
Spotifys service is very easy to subscribe to. Simply go online or download the App and
sign up for the service. Consumers can then use it anytime they wish. Spotify offers several
different subscription options to tailor to all of its consumers needs. There is a free option that is
available to users that do not want to pay a monthly subscription fee. This service features
ad-supported streaming on computers and tablets. There is also shuffle-only access for all
compatible mobile devices. The premium subscription gets consumers more benefits. With the
premium subscription, consumers get unlimited streaming of all Spotifys music and videos, no
advertisements, no required internet connection, traveling abroad service, and consumers would
have the ability to connect the Spotify App with any devices such as portable speakers, cars,
TVs, etc. The family plan offers the same benefits as premium, but for the whole family. There is
even a student discount which includes 50% off of the premium subscription. Spotify makes sure
that there are options that can tailor to anyone's needs. Spotifys competitor Pandora offers only
two options for their service. The have a free option and a Plus option for $4.99 per month.
Pandoras radio model does not let consumers choose specific songs, only channels. The only
benefits that Pandora Plus offers is having no advertisements and more skips. With the Pandora
service, you can only skip a small number of songs before you are forced to listen to what the
station plays.
Spotify is promoting toward its younger target audience of 18-40 years of age. There was
much more use found in this age group compared to others. With Pandora already having a very
strong presence and Apple Music quickly on the rise, it is crucial that Spotify increases
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promotion across various platforms to increase subscriptions. Pandora and Apple Music are
getting very involved with their consumers and automobile manufacturers by implementing the
service or App compatibility within the vehicles stereo system. With that compatibility feature,
consumers may find those services to be more desirable. Spotify needs to follow suit to ensure
that it offers the same services as other providers and then some.
4. Uncontrollable Constraints
Apple Music is a newer competitor that is quickly on the rise. Being an Apple product, it
is implemented on all Apple devices which makes it easy for all Apple users to access the app.
Another restraint is the inability to get certain artists music available on Spotify. With less music
available to users, they may opt out of paid subscriptions to Spotify and seek other ways to
access the music. A technological restraint involves its competitors marketing plans
overpowering Spotify with their large resources. Pandora and Apple Music have large marketing
efforts that use technology to their advantage which could hurt Spotifys marketing efforts.
Competitive Analysis
1. Market Share
This chart from Statista helps us better visualize the music streaming industry and how
each of Spotifys competitors rank subscriber wise. If we were to use the number of subscribers
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as an indicator for market share, Spotify would have a market share of 51%. Apple Music, still
an emerging brand, would have about 26% of the music streaming market. Pandora would have
a market share of around 7% and Tidal would occupy 5% of the market. Although Spotify
currently has a majority market share, Apple Music is quickly catching up with only one year
since their launch.
2. Advertising Share
The pie chart above represents the advertising share of Spotifys three largest
competitors, Pandora, Tidal, and Apple Music in 2015. In total, these four companies spent
$31,534,400 on advertising. Apple Music, having just launched in 2015, spent $20,736,300 on
advertising giving them the largest piece of the pie. Pandora comes in second for highest
advertising costs with $6,646,800. Tidal also takes up a decent amount of the pie spending
$3,907,400 on advertising. Spotify, only 1% of the total advertising share, spent $243,900 in
2015, a considerable amount less than the other three companies.
3. Media Mix
The media mix helps us to better understand how each company is spending their money
on advertising. It identifies exactly how much of their budget is being allocated to various types
of advertising whether is be online, television, radio, magazine, and much more. First, we will
review which media Spotify has chosen to utilize between 2013-2015. We will do the same for
Pandora, thought to be Spotifys largest competitor. Tidal and Apple Music were launched only
recently, so we will focus on just their 2015 media mixes.
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This pie charts shows the breakdown of Spotifys
advertising expenditures for 2013. In 2013,
Spotify spent a total of $8,687,600 on advertising.
Most of this budget was spent on Internet
Display, costing them $5,321,100. The rest of the
money was mostly spent on television
advertising. While $2,328,500 was spent on
network TV advertising, $1,037,600 was spent on
cable TV. Only $300 was spent on spot radio
advertising.
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Switching to Pandoras media mix, the pie charts
for 2013 and 2014 are the same. Pandora chose to
spend their entire advertising budget on internet
display for these two years. In 2013, $87,600 was
spent on internet display. In 2014, the budget was
almost halved with $46,700.
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Moving on to Apple Music, they spent the
most in 2015 with the advertising expenditures
totaling $20,736,300. A majority, 72%, was
spent on network TV, which came to
$14,991,700. Cable TV also took up a chunk of
the pie costing $3,207,400. Syndication and
spot TV take up 11% of the pie costing
$1,153,700 and $946,600 respectively. Apple
Music chose to spend $431,400 on internet
display and only $5,500 on spot radio.
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4. Share of Voice
While looking through the media mixes of Spotifys three largest competitors, it became
most apparent that they were investing a majority of their money into three media. These three
media are cable TV, network TV, and internet display. The following pie charts detail the share
of voice that each company has for the three media.
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Finally, we end with the share of voice for
internet display in 2015. Tidal takes up most
of the pie spending $752,200, accounting for
19% of their media mix. Apple Music only
allocated 2% of their media mix to internet
display costing them $431,400. Pandora
followed closely spending $410,200, making
up 6% of their media mix. Spotify spent the
least on internet display with $238,900, but
this accounted for 98% of their media mix.
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c. Pandoras popularity can be traced to no cost. More than a quarter of its users say
a free subscription was the primary factor in making their decision
(ReportLinker). With this knowledge, it would be beneficial to offer more
subscription plans that might appeal to users who are unsatisfied with the free
version of Spotify, but who dont want to pay the full subscription cost.
Target Audience
Key Points
18-44 year olds are the biggest users of Spotify, with the median age being 32.6
According to our Simmons findings, women make up 55.1% of the market, while men
make up 44.9%.
Whites (62.6% of the market) and African Americans (20.8% of the market) are the
largest users of Spotify.
Those with higher education levels, such as graduating college or attending graduate
school are more likely to use Spotify
About 32% of Spotify users earn an income over $100,000 or more and 28% earn
between $75,000 and $99,000.
18-24 year olds are 116% more likely to have a paid subscription to Spotify
18-24 year olds are 54% more likely to listen to music on their smartphone
The highest users of the internet (Quintile 1) are 134% more likely to use Spotify than the
national average
Readers of Game Informer were 498% more likely than the national average to use
Spotify, and readers of Wired were 527% more likely than the national average to use
Spotify.
Radio listeners during midnight to 6am are 170% more likely to use Spotify than the
national average
67.7% of adults who use Spotify access social media upwards of three times a day
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28% of Spotify users visit websites on the computer while they watch TV. The second
largest group of Spotify users, 23%, text on a mobile phone while watching TV
The majority of Spotify users, 388 adults, claimed they accessed internet the most at
school.
Target Consumer
Our target market includes men and women between the ages of 18 and 49. These men
and women are full time students or professionals working in various fields, including
technology, education, medical, sales, and much more. They are all well-educated individuals
who have at least a Bachelors degree in their field or are currently working towards a degree.
Our target market consists of two major groups: college students and upper middle-class
families, with incomes of approximately around $82K per year. In our advertising, we want to
keep the attention of 18-24 year olds, who make up the highest percentage of our market, while
getting the word out about Spotify to the working class adults between the ages of 25-49. Below
we have two examples of how we imagine our typical consumer to be. We included one example
of a college aged student and one example of a working professional adult with a family.
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both have Bachelors degrees. She describes herself as a hip and cool mom who is always up
on the latest trends. She is an avid user of social media and is known to post up to a hundred
photos of her children a week on Facebook. Every morning she gets up to make her kids
breakfast, gets them ready, and drives them to school in her minivan. Family is her main priority
and she enjoys traveling in her free time. Shes always planning her next family vacation. Most
people describe her as a soccer mom, but she says: Im not a soccer mom, Im a cool mom!
Simmons Analysis
Gender
Pandora received very similar results in that women are 8% more likely to be users of Pandora
and men are 9% less likely. Also, the Vertical %s for Spotify and Pandora regarding gender
were almost identical.
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Age
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Education
Pandora users are most likely to be college graduates. Specifically, college graduates are 50%
more likely than the national average to be Pandora users. Those who attended graduate school
are also 9% more likely to be Pandora users, meaning those with higher education levels are
more likely to be users. High school and college graduates make up about 47% of their market.
This is similar to the findings for Spotify.
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Race
Surprisingly for Pandora, Black or African American and Some Other Race were the only
categories to have indexes above 100. While African Americans are 18% more likely to be
Pandora users, they only make up 14.3% of Pandoras market. Whites are 3% less likely to be
Pandora users, but make up 72.1% of Pandoras market. White consumers make up the majority
of users and they should not be neglected.
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Demographics
The target audience for Spotify is users aged 18-44, predominately on the higher side of
that range. This is where the largest amount of users are found. There were over 20 million paid
subscribers as of 2015. There are over 11 million daily users as well. The median age of Spotify
users was 32.6 with a median income of $81,684. The focus should remain on that group of users
aged 18-44. This group accounts for almost 85% of Spotify users. The numbers start to fall very
quickly as the age of the user gets higher. Ages 45-65 are not very involved in using Spotify and
there should be less focus on them. The index for the older ages is very low and marketing
efforts should not be wasted. The index for the younger group is above average and should
remain there with the current marketing efforts.
There were slightly more women that use Spotify over men. Women users are
approximately 6% more likely to use Spotify than the national average, while men are about 7%
less likely than the national average. With that difference, Spotify should still continue to target
both genders. Male index was just slightly below average and should be looked at to be
increased.
Racial groups were very different in the users of Spotify as well. Whites accounted for
nearly 63%. African Americans were the next highest users at 21%. There is a larger drop after
that with Asians and other races. Education levels had a pattern in that the higher the education,
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the higher the percentage of users. Those that graduated college or higher accounted for 40% of
users.
Most Spotify users have higher incomes. Users with an income of $100,000 or more
accounted for 32% of Spotify users. Those with an income range of $75,000-99,000 make up
28% of Spotify users. Those earning $50,000-74,000 account for 24% of Spotify users. Clearly,
a majority of Spotify users make more than $50,000 annually.
Psychographics
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2. In the last 12 months, how many songs have you downloaded, if any?
Since 18-24 year olds are the biggest users of online streaming services, we felt it was
important to research where they are buying their music. According to Simmons, 18-24 year
olds are 53% more likely to buy music online compared to the national average. High indexes
were also found for Variety Stores and Record or CD Clubs. When asked how many songs
have you downloaded in the past 12 months, 18-24 year olds were reported to be 124% more
likely to have downloaded 20+ songs than the national average.
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3. Which music service have you or currently paid for a subscription to use?
One of the most important questions in our research asks what music service have you or
do you currently pay a subscription fee for? The Simmons data found that 18-24 year olds are
116% more likely to have a paid subscription to Spotify. This is compared to the fact that 18-24
year olds are only 96% more likely to have a paid Pandora account. This may be due to the fact
that Pandora does have a higher likelihood to be used by older generations than Spotify. We can
verify this conclusion in looking at the 50+ category in which consumers over the age of 50 are
74% less likely to use Spotify, but only 57% less likely to use Pandora.
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4. Which platform (cell phone, mp3 player, laptop, etc.) do you use the most to listen to music?
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It is also vital for us to understand what devices are being used to listen to music. Spotify
can be listened to on the computer and on your mobile app on your phone or tablet. The
Simmons data states that 18-24 year olds are 40% more likely to listen to music on their laptop
computer. They are also 54% more likely to listen to music on their smartphone and 8% more
likely to listen to music on their tablet than the national average. High indexes were also found
for listening to music on gaming consoles and handheld devices, as well as MP3 players.
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Media Quintile
As an online music streaming service, we felt it was essential to research how ones
internet usage affects the likelihood of them using Spotify. According to Simmons, the highest
users of the internet (Quintile 1) are 134% more likely to use Spotify than the national average.
The index for Quintile 2 is also quite high reporting that they are 42% more likely than the
national average to use Spotify. The second lowest users of the internet (Quintile 4) are actually
36% less likely to use Spotify compared to the national average. This data is extremely
significant and proves that targeting high internet users on the web is crucial to Spotifys
business.
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Simmons data regarding Pandora yielded similar results. Quintile 1 and 2, the highest
internet users, were 57% and 50% more likely to use Pandora respectively. These heavy internet
users also make up about 50% of Pandora users according to the vertical percent. Quintile 3 also
had an index slightly above 100 for Pandora, while Spotify did not.
Unsurprisingly, our Simmons data found that the highest users of the radio are less likely
to use Spotify than the national average. Specifically, Quintile 1 and 2 are 21% and 17% less
likely to use Spotify compared to the national average, respectively. Quintile 4 and 5, or the
lowest listeners of the radio, are actually 10% and 8% more likely to use Spotify. This data is
still helpful in determining which mediums we should not be targeting.
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While Spotify is a music streaming service, Pandora is an internet radio service. Quintile
2 and 3 both have indexes of above 100, meaning that the second heaviest radio listeners and the
middle-range listeners are most likely to use Pandora. This is not very surprising as Pandora is an
internet radio medium and it would seem obvious that heavier radio listeners would be more
likely to use their services. Quintile 3 alone accounts for 24% of their consumers.
In analyzing the media quintiles for television, it was a bit of a toss up. Quintile 2, the
second highest watchers of television, are reported to be 45% more likely to use Spotify than the
national average. Quintile 5, the lowest watchers of television, are 23% more likely to use
Spotify compared to the national average. The indexes found in Quintile 1, 3, and 4 were below
100, meaning they are less likely to use Spotify. With these results, it is difficult to say whether
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Spotify should be targeting TV watchers and if they should advertise on the television. It may be
best to research further into what channels Spotify users are watching specifically.
In looking at Pandoras results as well, Quintiles 2 through 5 have indexes above 100,
with Quintile 5 have the highest index at 108. This means that the lowest watchers of TV are 8%
more likely to use Pandora. Also, 22% of Pandora users fall within the Quintile 5. This data is a
bit easier to interpret than Spotifys in that it is clear that the less TV a consumer watches, the
more likely it is that they would be a user of Pandora.
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Spotify than the national average. These findings are inconclusive, but it may be best to use
outdoor sparingly and to allocate the advertising budget to more promising mediums.
Pandora found quite opposite results from Spotify in that Quintile 1 and 2 produced the
highest indexes for outdoor media. Quintile 2 had the highest index of 118 meaning that outdoor
users are 18% more likely to use Pandora. This could be because radio streaming users are more
likely to be exposed to outdoor media as radio is often listened to while driving.
Media Vehicle
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Interestingly, when evaluating these
magazines in regard to Pandora,
most of them received indexes of
over 100. Wired and Game
Informer had indexes of 131 and
166 respectively, but magazines
such as Cosmopolitan and In Touch
Weekly had the highest indexes.
Simmons reports that Cosmopolitan
readers are 86% more likely to be Pandora users and those that read In Touch Weekly are 101%
more likely. Cosmo even has a vertical percent of 17.8% meaning 17.8% of Pandora users read
Cosmopolitan magazine. These results were surprising as it contradicted much of what was
found for Spotify. The lowest index in our magazine report was for Architectural Digest with an
index of 61.
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In analyzing the dayparts for radio, it was a bit of a mix. Radio listeners during midnight
to 6am are 170% more likely to use Spotify than the national average. The rest of the results of
radio dayparts was a mixture of high and low indexes. There were no indexes that were
extremely high or extremely low. This makes it a bit difficult to conclude if Spotify should target
radio listeners.
For Pandora, the highest indexes for dayparts in radio were often late at night. The
highest index of 139 was reported for Saturday through Sunday from 7PM-Midnight. Simmons
also found that those who listen to radio Monday through Sunday from 7PM-Midnight are 30%
more likely to be Pandora users. Monday through Sunday from 3PM-7PM reported a very high
vertical percent of 58.6%, meaning 58.6% of Pandora users listen to radio at this time.
The last media vehicle we used to draw our results from was TV dayparts. Most of the
TV dayparts show viewers to be below the national average when it comes to being users of
Spotify. The worst time being Monday-Friday 10AM-1PM, where users are an alarming 95%
less likely than the national average to use Spotify. Confusingly, watchers of Monday- Friday
9AM-10AM accounts for 35.2% of their market. The highest vertical percentage was found for
those who watch TV from 8PM-11PM on Mondays through Fridays. They account for 89.3% of
Spotifys market. People who watch TV from 2AM-5AM on Mondays through Fridays are also
77% more likely to be Spotify users. As we said in our findings from media quintiles, it may be
best for us to research further into which channels Spotify users are watching specifically in
order to draw more conclusive results.
For Pandora, the highest indexes for TV were found during TV Prime Time, 102, and TV
Late Fringe, 104. TV Prime Time reports a very high vertical percent of 77.6% meaning 77.6%
of Pandora users watch TV during prime time. Quite similar to radio, those who watch TV at
night seem more likely to be Pandora users. It would make most sense for Pandora to raise
awareness of their brand among daytime TV watchers.
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Quick Reports
Data from the quick reports show that in relation to social media activity, 67.7% of adults
who use Spotify access social media upwards of three times a day. Reports showed 58% of
people agree with the statement, I talk about things I see on social sharing/network websites in
face-to-face conversations. While 56% attested to the fact that they often accessed social
sharing/networking websites from different devices. Lastly, 51% agreed they often click on
links or items posted by other people on social sharing/networking websites.
According to Simmons Quick Reports, 51.3% of Pandora users visits social media
websites more than three times a day. Also, 47% agreed with the statement, I would rather read
other peoples comments on social sharing/networking websites than post my own. This would
lead us to believe that Pandora users are a little more moderate in their social media use than
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Spotify users, which aligns with the fact that Pandora does have more consumers over the age of
50.
Simultaneous usage while watching TV was another quick report from the Simmons data.
From that information, we gleaned that most Spotify users, 28%, visit websites on the computer
while they watch TV. The second largest group of Spotify users, 23%, text on a mobile phone
while watching TV. Similarly, 22% claim they visit websites on their mobile phones while they
watch TV. The last significant group of Spotify users make up 20% of the sample, and choose to
email on the computer while watching TV. Categories with less than 10% of Spotify users
include those who IM/chat on the computer, listen to radio, play games, read magazines or
comics, or watch videos on the computer while watching TV.
Similar results were found in Pandoras simultaneous usage quick report. The three
highest percentages for Spotify were the same for Pandora, but were ranked slightly differently.
It was found that 26% of Pandora users text on their mobile devices while watching TV. While
23% of Pandora users visited websites on their mobile phones, 22% visited websites on their
computer.
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Though media vehicles are discussed earlier in the Target Market section of this report,
supplementary data was gathered from the quick reports that continues to contribute to our
understanding of the target market. When asked at which location they accessed the internet
most, the majority of Spotify users, 388 adults, claimed they accessed internet the most at school.
The second largest group of Spotify users, 359 adults, came in at a close second claiming they
accessed the internet most at the airport. On the topic of internet usage at home, surprisingly
most people said they used TV in the last 30 days to access the internet, rather than using their
computer or a mobile device. Most Spotify users, 32.5%, are categorized as Mobile
Professionals.
In contrast to Spotify, 224 Pandora users claim they access the internet most at
restaurants, with hotels and airports coming in second and third place. Pandora users also say
they access the internet most at home through their television. Most Pandora users, 27.5%, are
placed under the Social Connectors category, with Mobirati coming in second with 26.4%.
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Some final information about the target market found in the quick reports is about their
food lifestyle segmentation. Most Spotify users were put in the category Variety on a Budget.
People in this category are described as very busy and frequently eats on the run, eats frozen
food because its a convenient alternative to preparing meals with fresh ingredients; rarely plan
ahead for their meals; expresses interest in gourmet food as long as it fits in their budget.
A majority of Pandora users, 27.7%, consider themselves to be True Foodies, who are
people that are passionate about food, buy organic foods, love experimenting with different
cuisines, and have adopted a healthy eating lifestyle.
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Media Objectives
Goals
Quarter 1- March Quarter 3- August
Reach: 60 Reach: 60
Frequency: 3 Frequency: 3
Scheduling/Budget
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For our media plan we have chosen to utilize a flighting pattern, which alternates times of
no advertising with times of advertising activity. This scheduling technique works best for
Spotify because of our small advertising budget, comparatively to companies such as Apple
Music. In the past, Spotify has spent more than $8,000,000 on advertising, but in recent years has
chosen to minimize the budget. With Apple Music on the rise, quickly taking would-be
subscribers, we believe it would be wise to raise the budget again to $8,000,000. Apple Music
spent more than $20,000,000 on advertising in 2015, and while $8,000,000 is only a fraction of
that amount, this boost in advertising expenditure should keep Spotify at the top of the music
streaming business.
To allocate our $8,000,000 budget wisely, we decided to split the year into quarters. This
allows Spotify to advertise more evenly throughout the year. For the first quarter, we chose to
advertising during the month of March. As our target audience is quite young, with 18-25 year
olds being our most frequent users, we felt it made sense to align our advertising schedule with a
college students schedule. Most college students will be enjoying a week off of school for
spring break during March. Whether they are traveling to the beach with friends or just going
home to visit family, college students will likely be listening to music. Reminding students of
our music streaming subscription service right before, or even during, their spring break may
finally motivate them to make that purchase. We decided to keep the advertising level at low for
March because although we want reach our consumers during this time, there are other months
we wish to focus on more, such as during the holidays.
For the second quarter, we plan to advertising during May. May falls in the middle of the
Spring season when new music is emerging in time for Summer. This burst of new music has
consumers reaching for their smartphones to create their Summer playlist. In regards to students,
May means graduation to college seniors and the beginning of summer break to younger
students. With more time on their hands, students will be listening to music with their friends and
family. As May is a prime time for music, we have chosen to advertise at a medium level.
For the third quarter, we think it would be smart to advertise during the month of August.
Many college students will be returning to school in August and reuniting with friends they have
not seen in three months. Happy times often call for music. Music is also often associated with
Summer, as many people like to pick their Summer anthem. To working individuals, Summer
also mean travel, as some choose to take their vacation days during August. People enjoy
listening to music while lying on the beach or hanging by the pool. Similarly to March, we have
chosen to have a low level of advertising during August as holiday season is approaching
quickly, where much of our budget is allocated.
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For the fourth quarter, we chose the month of December as it is the highlight of the
holiday season. Again, college students return home for winter break to spend time with family.
They often spend their time at home listening to new music released in the Fall and classic
holiday tunes. What could be better than the gift of music? Parents and relatives can purchase
their son or nephew a Spotify subscription, costing about $10/month. With the season of giving
in full flux, we wanted to invest a large portion of our budget in December. The advertising level
is considered high for this month.
Media Mix
Our proposed media mix for Spotify in 2017 would use a concentration approach,
focusing on Cable TV, Digital, and Magazine. In the past few years, Spotify invested most
heavily in Internet Display. While we agree that it is wise to use digital methods of advertising,
we wanted to return to using Cable TV as well, which Spotify did not use in 2015. Of the
$8,000,000 budget, $4,846,700 will be used on Cable TV advertising. Using Cable TV over
Network TV will allow us to utilize channels that target specific consumers based on interests. In
finding cable channels that align with Spotify users interests, we can reach our desired audience.
Spotify users are huge internet users and they are not to be neglected. In 2015 Spotify only
invested $243,900 in Digital, but in 2017 we hope to allocate $2,689,900 to online forms of
advertising. Finally, we also hope to utilize magazines, which Spotify has not used in the past
three years. We would only allocate 5% of our budget, or $350,400, to magazine to test the
waters first. If magazine proves to be successful, we can invest more heavily in it in the future.
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With this media plan, we set a goal of reaching 1040 GRPS and should surpass this goal with
1148 GRPS.
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August Media Mix
40
Media Strategy & Tactics
As described above, we plan to utilize cable TV, digital, and magazine in the upcoming
year for Spotify. Our hope is that these media with more narrow audiences will cater to Spotifys
niche market, and therefore create more actual conversions than a generalized campaign. With a
budget of only $8,000,000, we had to choose media in which we could stretch our dollars, yet
still target our audience precisely.
While our media quintile data for TV was inconclusive, we still feel it is extremely
important to advertise on TV to compete against rising music streaming services that advertise
highly on TV. Since TV is a very visually stimulating media, combining bold colors and fresh
music will be sure to capture viewers attention. As stated previously, Quintile 2, the second
highest watchers of television, are reported to be 45% more likely to use Spotify than the
national average. We also found that 28% of Spotify users visit websites on the computer while
they watch TV, potentially gaining impressions on the internet and television simultaneously.
Advertising online is most obvious as the highest users of the internet (Quintile 1) are 134%
more likely to use Spotify than the national average. There are many different models and forms
when it comes to online advertising allowing us to decide what is best for our budget.
Pay-per-click and banner ads may make most sense for Spotify with their lower costs. As most
other music streaming services are not utilizing magazines, except for Tidal, we feel it makes
sense to test this media. We have chosen to place ads in magazines during our low reach months,
March and August, as it will be easier to tell if we are gaining any new subscribers. We are
hopeful that capitalizing on this unexplored media will be fruitful for Spotify, especially since
magazine allows us to reach very specific audiences.
Cable television is a good media to target Spotify subscribers because it is more effective
at reaching our desired target audience than broadcast television, and is much less expensive.
With Apple Music heavily using Network TV for advertising, we feel it is best to invest more in
cable. Cable television channels that would be high priority for Spotify would be music channels
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like MTV, CMT, and VH1-- channels that highlight music videos, and the entertainment
industry. People who watch MTV are 70% more likely to be Spotify users, and those who watch
VH1 are 93% more likely. Both these channels also have vertical percents over 10, meaning they
capture a good portion of the Spotify market. It would also be smart to advertise on channels that
hit our largest market, 18-44 year olds, including channels like E! News, ESPN, FX, and HBO.
HBO has a high vertical percent of 21.9%, as well as ESPN with 22%. These last few channels
would hit a younger market that would appeal to both genders through sports, news, and movies.
In referring back to our media mixes per month, we chose to invest so highly in Cable TV during
primetime and late fringe because those who watch TV from 8PM-11PM on Mondays through
Fridays account for 89.3% of Spotifys market. People who watch TV from 2AM-5AM on
Mondays through Fridays are also 77% more likely to be Spotify users.
Our final goal is to advertise through digital avenues. Since our target audience is
younger, it is important that we use media that is more popular among younger generations, such
as Instagram, Snapchat, and YouTube. Social media is such a large part of our advertising
campaign because 67.7% of adults who use Spotify access social media upwards of three times a
day. Snapchat has become widely popular in the advertising world for their stories feature.
Between the stories are advertisements that are relatively cheap compared to television
advertising. The type of ads Spotify would have to use to appeal to millennials would be pithy
and sarcastic, in line with relevant news media like Buzzfeed. In December, over a million
dollars is allocated to video publisher sites, such as YouTube. In using this money, we would
create a video campaign for the holidays, potentially highlighting festive music. During months
like May, when tons of new music is coming out, Spotify could advertise that artists new album
and promote their own listening services through images on Instagram and Facebook. In an
effort to listen to this new music, viewers would be enticed to try Spotifys free music listening
service, which would then lead to paid subscribers who want to avoid commercials. In
advertising more generally on the web, banner ads and pay-per-click would be the most cost
effective. We could advertise on news websites for our adult market and more humorous sites,
like Buzzfeed for younger subscribers. It may also be wise to place ads on search engines like
Google and Bing.
Creative Brief
Communication Objectives
The communication objectives of Spotifys advertising campaign are to have more paid
subscriptions from their younger target market (18-24), increase promotion across various
platforms in order to increase subscriptions, and for Spotify to increase brand loyalty in white
and African American men and women ages 25-49.
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Creative Strategy
Advertising spending for Spotify is the lowest of its competitors in all categories. By
putting more money into their advertising, reaching more potential users will bring more paying
subscribers. Spotify has to promote more, especially on cable TV and Internet display categories,
in order to stand out against its main competitors: Apple Music and Pandora.
Spotify Premium costs $9.99 per month, while the paid version of Apple Music costs
$9.99 per month and Pandora costs $4.99 per month. However, Spotify also has a student
discount version for half of the premium price, cutting the price down to just $4.99 per month. If
Spotify focused on making this student discount better known to their younger target market
consisting of men and women ages 18-24, they would greatly benefit by having more paid
subscribers.
Since a large chunk of Spotifys target market is students, having TV commercials and
internet banner ads focusing on this student discount premium subscription would spread the
word fast about how affordable Spotify Premium can be for men and women ages 18-24 who
more than likely have a low disposable income.
For Spotifys adult target market, TV commercials focusing on how Spotify isnt just for
the younger generation would be the best way to increase brand awareness. Commercials can
focus on adults listening to their Spotify playlists while doing everyday tasks, such as, taking
their children to school, listening to Spotify while walking to a meeting or commuting to work.
Video streaming sites, such as Netflix and Hulu, have also gained a lot of attention over
the past couple years. These sites have a set monthly subscription fee, very similar to Spotify. If
Spotify and Netflix were able to team up to create a bundled deal, students and adults
everywhere would rejoice. This special deal could be offered during the holiday season.
Promise
Spotifys promise to its customers is the feeling of satisfaction customers get when they
are able to easily create playlists that go with their mood and get recommendations for new
music to add to their growing music library. Spotify can be listened to anywhere on the go.
Whether it be during long commutes, road trips, studying, at the gym, or during a walk/run,
Spotify is available for you wherever life takes you.
Tone
Relaxing, pumped up, comforting, down to earth, and fun.
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Tag Line
Soundtrack your life.
Quarter 1- March
National
Total GRPS: 203
Total Cost: $1,338,882
Network Cable- Prime, :15 sec, 70 GRPS = $694,680
Network Cable- L Fringe, :15 sec, 85 GRPS = $329,545
Magazines- General Interest, HPG B&W, 30 GRPS = $194,670
Digital- General Sites, 40,000,000 IMPS, 18 GRPS = $119,986
Quarter 2- May
National
Total GRPS: 298
Total Cost: $2,119,005
Network Cable- Daytime, :15 sec, 50 GRPS = $98,150
Network Cable- Prime, :15 sec, 90 GRPS = $893,160
Network Cable- L Fringe, :15 sec, 100 GRPS = $387,700
Digital- General Sites, 40,000,000 IMPS, 18 GRPS = $120,000
Digital- Social, 40,000,000 IMPS, 23 GRPS = $320,000
Digital- Mobile, 30,000,000 IMPS, 17 GRPS = $300,000
Quarter 3- August
National
Total GRPS: 201
Total Cost: $1,378,871
Network Cable-Prime, :15 sec, 60 GRPS = $595,440
Network Cable- L Fringe, :15 sec, 100 GRPS = $387,700
Magazines- General Interest, HPG B&W, 24 GRPS = $155,736
Digital- Social, 30,000,000 IMPS, 17 GRPS = $239,994
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Quarter 4- December
National
Total GRPS: 446
Total Cost: $3,050,377
Network Cable- Daytime, :15 sec, 120 GRPS = $235,560
Network Cable- E Fringe, :15 sec, 110 GRPS = $440,220
Network Cable- Prime, :15 sec, 40 GRPS = $396,960
Network Cable- L Fringe, :15 sec, 100 GRPS = $387,700
Digital- General Sites, 30,000,000 IMPS, 13 GRPS = $90,000
Digital- Publisher Video Sites, 50,000,000 IMPS, 34 GRPS = $1,100,000
Digital- Social, 50,000,000 IMPS, 29 GRPS = $400,000
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Appendix 3: Flowchart
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Resources
http://www.reportlinker.com/insight/music-streaming-services-move-up.html
https://www.statista.com/topics/2075/spotify/
https://www.statista.com/study/13806/pandora-statista-dossier/
https://www.statista.com/chart/5866/online-music-listening-platforms/
https://www.statista.com/chart/5152/music-streaming-subscribers/
https://www.statista.com/statistics/537170/music-streaming-revenue-type/
https://help.pandora.com/customer/portal/articles/84834-information-about-pandora-one
https://support.spotify.com/us/?utm_source=www.spotify.com&utm_medium=www_header
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Appendix
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50
51
52
1. Where do you buy music?
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2. In the last 12 months, how many songs have you downloaded, if any?
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3. Which music service have you or currently paid for a subscription to use?
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4. Which genre of music do you prefer to listen to?
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58
59
60
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5. Which platform (cell phone, mp3 player, laptop, etc.) do you use the most to listen to music?
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63
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Radio All Day:
65
TV All Day:
66
Outdoor:
67
Cable TV:
68
69
70
71
Magazines:
72
73
74
75
Newspapers:
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Radio Dayparts:
77
78
79
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TV Dayparts:
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