Competition is rife in the music streaming industry. While Spotify, which launched in 2008, is perhaps the most established service, newer players such as Apple Music pose a significant threat.
To help fight off competition Spotify secured $1bn in debt financing last week. The audio-streaming market is showing no sign of slowing down. Streaming surged in volume by 82% last year in the UK, according to music body BPI’s figures, based on Official Charts Company data. Digital formats now account for 54% of all UK music consumption.
Spotify is growing at a rapid pace too, having just reached 30 million subscribers – up 50% in less than a year. But its growth has not been without a few set-backs. Artists including Taylor Swift and Jay-Z – who co-owns another streaming challenger, Tidal – pulled their albums from the service in a row over royalties. With rival services now securing and releasing a wave of exclusive content, competition is stepping up another gear.
However, senior director of international marketing at Spotify Nikki Lambert believes that rather than focusing on exclusives, using data to pave the way for personalised content and discovery of new music and artists will set it apart.
Speaking to Marketing Week ahead of a panel debate on producing extraordinary creative from data at Marketing Week Live on 27 April, Lambert says: “As a brand and as a company, Spotify doesn’t really believe in exclusives. We would like to see a world without them because we don’t think they’re great for the user.”
Spotify, which has 100 million active users worldwide, “thinks differently” in terms of exclusivity. It champions functions, such as its ‘Discover Weekly’ tool – a tailored “mix-tape” that is delivered to the user every Monday and which combines what they listen to and what fans with similar music tastes are enjoying.
“We’re more excited about the exclusivity of something like Discover Weekly, which is exclusive to you. I’m a runner and the other thing I love are our ‘Running Originals’, which are pieces of music that adapt their pace based on the speed at which you run. That’s a much more interesting conversation to have.”
Although artists choosing to release new albums on other platforms is “a reality of [the] world” that Spotify plays in, it is not the “be all and end all”. Lambert says the brand’s marketing focuses on a mix of content and context to cater for the way people listen to music, and more specifically, the way they use Spotify.
“It’s a well known fact that small budgets foster greater focus and more creativity, so the challenge is to maintain both“
Driven by users
The brand continues to tap into the Spotify community, which is what makes the offering “unique”, according to Lambert, who says digging into this data can often surface interesting user behaviour.
“The way people listen to music on Spotify is endlessly fascinating and makes for real human interest stories,” she says. “Every time we go digging around a theme we uncover gems. A couple of weeks back it was the ultimate birthing playlist; it’s apparently very common to prepare a playlist specifically for the birthing day.”
The data also powers other features of the service, such as Spotify’s ‘Year in Music’, which has been going for three years and tells users which artists they have listened to most over the past 12 months. Customer listening data is shared with artists, managers and labels to help them build campaigns to engage with fans. For brands, Spotify shares anonymised user data to help them accurately target different types of music fans.
Lambert uses the data to help identify what music fans enjoy listening to and which artists and activities on Spotify they engage with most to help build marketing campaigns.
She says: “We generated fantastic local stories by digging into unexpected data points. One of the best was uncovering that the most popular song in New York’s super-hip neighbourhood Williamsburg was by Justin Bieber.”
Spotify’s ‘Found them first’ campaign was also based on listening history, as the service told users which artists they had started listening to before they ‘made it big’. Lambert adds: “There was a correlation between people who liked that experience and those who had found lots of artists ‘first’, and therefore enjoyed the bragging rights.”
Global segmentation tool
Although marketing has always been “critical” to Spotify, in four and a half years at the brand Lambert has been witness to a dramatic shift in strategy, from engaging the “leading edge” early adopters of streaming to reaching a mass audience.
In a bid to avoid generalisation, Spotify tries to avoid thinking about its target audience as ‘everyone who loves music’ and instead matches a worldwide appeal with tailored marketing.
Lambert believes marketers should keep a “laser-sharp focus on the motivations of the consumer [they are] trying to engage with” as everything else will then “fall into place”.
With this in mind, Spotify has a global segmentation tool to guide the brand. It was built by carrying out “a huge amount” of customer research, says Lambert. The tool identifies different customer types based on the length of time the customer has used the service, the type of music fan they are, their behaviours, age, gender, and media consumption patterns.
Armed with that knowledge, the brand then uses data modelling to identify which users it wants to target in each market or region.
The revenue model for Spotify means that “marketing budgets are quite lean”, according to Lambert, so getting the marketing right first time and being targeted through this data is vital.
Of the revenue that comes into Spotify, whether it is from subscription fees or from the free to-listen platform that is monetised by advertising, approximately 70% goes back to music rights holders – the labels, publishers, and distributors, explains Lambert.
“It’s a well known fact that small budgets foster greater focus and more creativity, so the challenge is to maintain both,” she adds. “We also need to be good at scaling things that work.”
She adds: “Operating as a lean marketing organisation covering 58 markets [means that] the biggest waste of our time, resource and money is doing the same things multiple times.”
Consumer behaviour continues to evolve in the streaming market but with data “in the very DNA” of Spotify, keeping up and expanding with these changes will help it to continue to grow.
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