Assignment 4: Individual Assignment – the STP Essay
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Table of Contents
Target market and segmentation variables. 4
Introduction
The essay will be written by considering basic marketing principles and ways in which a company uses the principles in order to sell its product. The chosen company is Spotify, that operates in the digital music streaming market. The Premium Family plan has been chosen as the focal product for the essay. The targeting strategy used by the company for selling the focal product shall be discussed in the essay. Thereafter, the specific market that has been targeted by Spotify in Australia shall be discussed as well. Moreover, the segmentation variables would be identified, and the basis of the positioning strategy of Premium Family plan of Spotify shall be outlined as well. Lastly, a perceptual map will be created by considering two other competitors of Spotify.
The company was founded in 2008, and its headquarters are in Sweden. The founders are Martin Lorentzon and Daniel Ek. The subsidiaries of the organisation are Spotify USA, Spotify Sweden AB, Spotify India Private Limited and Soundtrap AB. The company, since its inception, has focussed on creating the right music or in other words, a podcast for the tablet, computer or phone. Spotify stores millions of episodes and tracks (Spotify.com, 2020). The tracks are relaxing, and it ensures that the right podcast or music is available at the fingertips. The Premium Family plan is the focal product in this essay. The focal point of the product is to encourage listening together and enjoy podcasts and music in an unlimited way. With Spotify Family Premium plan, songs have been personalised for family, and they can get together during dinner time or during the weekend. The product offers options such as anyone can listen to the songs offline and anywhere. Moreover, there are no ad interruptions, and music can be enjoyed non-stop. With 1 plan, 6 accounts can be created.
Targeting strategy
Targeting strategy can be classified into three types- undifferentiated, concentrated and differentiated. Undifferentiated strategy is practiced by companies that are not oriented towards marketing. This happens because there are no unique differences between the characteristics of the customers. Contrarily, the differentiated targeting strategy is adopted by companies when there are potential target segments. The target segments are profitable, and a specific marketing mix is designed for every segment. Lastly, concentrated strategy is adopted by companies when it is willing to meet a narrowly defined segment. The narrow segment is profitable because focus is given on meeting the needs of exclusive customers only.
Spotify uses a differentiated targeting strategy in the digital music market. When firms adopt a differentiated and low-cost strategy, it leads to enhanced performance (Zahay & Griffin, 2010). Therefore, in order to ensure business growth, Spotify has adopted this strategy. Differentiation strategy enhances the operational efficiency of an organisation, and therefore, it is comparatively easier to meet the customer demands. The Premium Family plan is the outcome of a differentiation strategy. The company depends on the subscribers of the premium plan so that it can ensure profits and growth. Moreover, the product has been designed in a way that consumers can use any free account and it prevents commercials. The users have access to all kinds of music and the format is easy-to-understand. People can also customise their playlists based on their musical preferences. Overall, the listening experience of users is enhanced. Moreover, the overall marketing strategy in case of every business is always influenced by the degree of demand of the consumers (Varadarajan, 2010). The company operates in the music streaming industry, and the industry is likely to grow because the promising artists and coming up and they are receiving state-of-the-art facilities and it is in sync with new tastes of people in music (Performancemagazine.org, 2019). The music itself has diversified over the years, and therefore, it was necessary for the company to use the differentiation strategy.
Target market and segmentation variables
Specific target market- A target market can be defined by demographics or psychographics and it is necessary to evaluate each of these dimensions so that a business can identify the needs of the customers accurately (Curtis & Allen, 2018). In case of demographic profiles, gender, age and education levels, income, marital status and children are considered. While in case of psychographic profile, the customer’s personal interests and desires or hobbies are considered as these tend to influence their overall choices. Since, Spotify operates in the music streaming industry, and it seems necessary to understand the psychographic profile. Their personal taste in music will surely influence their choice of music. Hence, the promotional methods have been designed in way that is interest-specific. The specific market of Spotify Premium Family is any average family, who loves spending dinner time or weekends while listening to music or rather diverse music. It also includes the millennial in the age group 22-26. The plan also offers Family Mix that includes personalised songs that everyone in the family would love to hear. The songs are also updated regularly. The idea was to bring the family members together with the help of diversified music. Premium offers the scope to invite family members so that all of them can listen to the music together.
Market segment profile of the target market- A market segment profile refers to a comprehensive description of a market segment and the purpose is to have a clear understanding of needs of the target market. Moreover, the segment profile helps in outlining consumer behaviour, specific needs, brand preferences as well as the level of product usage. It is easier to understand both psychographic and demographic description of the chosen segment.
In Australian music streaming market, a range of services are available. Spotify competes with Pandora, Rara, Rdio, Grooveshark, Deezer, Sony Music Unlimited, Vevo, Xbox Music and Songl. Therefore, the level of competition is high. Taking into consideration the needs of the Australian music lovers, the company has created the Premium Family. One of the most noteworthy features is the Family Mix. It includes all kinds of songs so that family members can enjoy them together. Since, family members wish to play and listen to songs together, it is evident that Spotify focussed on customer behaviour as the main market segment profile. Moreover, Australian customers prefer affordable streaming services. Therefore, while designing the family plan, the company focussed on creating a monthly subscription plan that costs around AUD 11.99 (pcworld.idg.com.au, 2020).
Segmentation variables used for segmenting the market
The four types of segmentation variables used for segmenting any market are geographic, demographic, behavioural and psychographic variables. Spotify has used psychographic and behavioural variables in order to segment the Australian market. Pyschographic segmentation is vital and helps in identifying the consumer’s wants and needs that are likely to change based on certain socio-economic factors or trending technologies (Sarli & Tat, 2011). Lifestyle and personality or values are considered in this type of segmentation variable. Similarly, behavioural segmentation is used and the market is segmented based on user status and purchase occasion (Goyat, 2011). Spotify has managed to create a milestone in the music streaming industry by capturing around 15 million users. Moreover, music of Taylor Swift hits the chart every time and these stars possess the potential to create a huge fan base. Considering this taste of customers, Spotify offers its music playlists.
Product positioning
The purpose of any product positioning strategy is to develop similarity perceptions with similar other products available in the market (Fuchs & Diamantopoulos, 2012). Usually positioning is done based on product feature, product user, product class, competition, application or use and lastly the quality of the product. Spotify has focussed on product feature and product application and considered both as the bases of its positioning strategy. In case of Premium Family plan, the service was subscription-based. Later, the feature has been changed and now it is offered as a free service as well. Hence, the goal has always been on the streaming music service.
Perceptual mapping
In order to draw the perceptual map, feature and reliability has been chosen as the two main criteria. Feature has been chosen because the company operates in the music streaming industry and customers are likely to consider components and capability of the service. Similarly, reliability shows that the service and product is functioning at its optimum level and customers are likely to trust the service if it performs its function effectively. Pandora, Vevo and Nokia Music+ has been chosen as other three brands and a perceptual map has been drawn below-
Pandora and Nokia Music+ are available on a range of platforms while Vevo is offered in one platform only. Pandora and Vevo offer ad-supported free service while Nokia+ is purely subscription-based. Spotify is also available across a lot of platforms and Premium users are offered a 30-day trial for free.
The perceptual map tells that Spotify offers the best free service while ease-of-use is ensured by Pandora. While Vevo and Nokia Music+ offers limited services.
Conclusion
The report is based on one of the leading products of Spotify, Premium Family plan. A marketing analysis has been done based on theoretical findings. At first, a brief introduction of the company has been outlined and following that the focal product has been discussed. Spotify uses differentiated targeted strategy and the target market in Australian context is the average family. The company used behavioural and psychographic segmentation for selling the service. The bases for product positioning are product application and product feature. Lastly, a perceptual map has been created by considering other music streaming services such as Vevo, Pandora and Nokia Music+. Justification has been outlined as well.
References
Australia, A. (2020). A Guide To Every Music Streaming Service in Australia. PC World. Retrieved 16 May 2020, from https://www.pcworld.idg.com.au/article/670937/music-streaming-australia-compared-spotify-apple-amazon-tidal/
Curtis, K. R., & Allen, S. (2018). Target Market Identification and Data Collection Methods.
Fuchs, C., & Diamantopoulos, A. (2012). Positioning Bases’ Influence on Product Similarity Perceptions. In Quantitative Marketing and Marketing Management (pp. 325-351). Gabler Verlag, Wiesbaden.
Goyat, S. (2011). The basis of market segmentation: a critical review of literature. European Journal of Business and Management, 3(9), 45-54.
How did Spotify become the number one music streaming provider?. (2019). Performancemagazine.org. Retrieved 16 May 2020, from https://www.performancemagazine.org/spotify-number-one-music-provider/
Music for everyone.. (2020). Spotify.com. Retrieved 16 May 2020, from https://www.spotify.com/au/
Sarli, A., & Tat, H. H. (2011). Attracting consumers by finding out their psychographic traits. Interntaional Journal Of Fundamental Psychology And Social Sciences, 1(1), 6-10.
Varadarajan, R. (2010). Strategic marketing and marketing strategy: domain, definition, fundamental issues and foundational premises. Journal of the Academy of Marketing Science, 38(2), 119-140.
Zahay, D., & Griffin, A. (2010). Marketing strategy selection, marketing metrics, and firm performance. Journal of Business & Industrial Marketing.