As out how Spotify managed to overcome the problem

As seen from Figure 1, there is an increasing trend in
smartphone users ever since 2014. As technology develops, smartphone is
replacing old devices such as record players, music systems etc.  because just in one smartphone device, all
those features can be obtained anytime instantly. Smartphone comes in handy in
situations whereby one of the many features can be used for daily activities.
Due to the increasing trend of smartphone users, many music streaming companies
are designing music streaming services to attract people to use their services
and capitalize on their business, Spotify is a music streaming service that
gives access to millions of songs. Spotify is the largest and most successful
business operating in the music streaming industry.

This extended essay covers the research question “to what
extent does social media marketing and targeting smartphone users helps Spotify
to stay competitive in the online music market in South East Asia?”. In the
online music streaming industry, it is hard to survive since providing music
streaming services will usually result in free users unintending to upgrade to
premium. However, Spotify has managed to gain many premium users by offering
millions of songs just by going premium at $9.90 a month. The premium account
also offers better sound quality, downloading music and listening offline,
permanent advertisement blocks.

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It is worth investigating on Spotify to find out how
Spotify managed to out-compete iTunes, Play Music, Amazon Prime Music, and
other online music streaming services since Spotify is currently offering the
best music streaming service. It is unusual for a business to be able to reach
out to so many users since most users goes for free music. However, Spotify
managed to overcome the problem of lack of premium users. Hence, I decided to
research on this topic to find out how Spotify managed to overcome the problem
and stay competitive in the online music streaming market.

I will be looking on the research question in the context
of social media marketing and use the business tools such as Ansoff Matrix,
Force Field Analysis and the SWOT analysis from the Business and Management
syllabus to analyse on Spotify. Spotify’s
integration with Facebook, the most used social media platform in the world;
allows Spotify to consistently add new users rapidly by targeting users with
Facebook accounts to register for a Spotify account. Since it is convenient to
create a Spotify account by using a Facebook account, it will be convenient for
the Facebook users. Spotify also streams with Twitter to communicates with the
users the same way many firms use social media to promote their products and
gain feedback. By using social media marketing together with viral marketing,
Spotify aims to reach a large of variety social media users.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Methodology

To
find out the marketing strategies Spotify used to stay competitive in market, the
topic consists of secondary sources such as case studies, journals, articles
and publications. The information required was obtained from these sources is
necessary to further understand how Spotify utilizes social media to reach a
large group of customers. Statistics of Spotify’s and its competitors’ sales
were 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 to
identify how Spotify stood out in the music streaming market. The sources that
I have found gave     me the idea on how
Spotify utilizes the advantages of social media platforms to promote the
services, attracting many customers at the same time by working with Facebook. g1 

To find out how Spotify utilized social media to stay
competitive in the market, the topic was first researched from secondary
sources such as journals, articles, publications, and previous case studies.
Secondary sources are needed since it provides a variety of information
regarding social media marketing and the other competitors in the music
streaming industry.

 

 

 

 

 

 

 

Theory
Used

The theories used in the essay are mainly business tools
such as SWOT analysis, Marketing mix, and the PESTLE analysis. The SWOT
analysis will be used to evaluate how Spotify makes its decisions by
identifying its strengths, weaknesses, opportunities, and threats. It will also
be used to assess the current and future situation of the business. When
reading up about Spotify, Spotify uses various types of marketing strategies to
stay competitive in the market. Thus, the business tools will be used to aid in
the evaluation on how Spotify utilizes the marketing strategies. Since the SWOT
analysis does not include factors such as politics and economics the PESTLE
analysis will be used. The PESTLE

 

 

 

 

 

 

 

 

 

 

 

 

Bodyg2 g3 

Swot Analysis

SWOT analysis is a simple yet very useful decision-making
tool. SWOT is an acronym for Strengths, Weakness, Opportunities and Threats. This
tool will be used to assess the current and future
situation 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 by
Spotify. Internal factors include strength, and weaknesses. External factors
are factors that cannot be controlled by Spotify. External factors include
opportunity and threats. Weaknesses can be overcome by Spotify since it can be
controlled internally. While threats cannot be resolved but can be dealt with.

Strengths

Spotify have been innovating to provide consumers with
better quality of music. Spotify’s strengths revolve around its accessibility.
Spotify can be accessed from almost any device. Spotify can be accessed from
smartphones, tablets, and computers with internet access. Spotify’s service can
be used by almost anyone since it is very simple to use. Music from Spotify can
be downloaded via the internet and can then be listened offline. This is an
attractive feature of Spotify since many consumers do not intend to use mobile
data while listening to music. However, this feature can only be accessed by subscribed
users. The convenience of Spotify’s service allows easy access and this will
attract many people to use Spotify’s service. This is evident on why Spotify
currently have over 150 million users and over 500,00 premium users signing up.
Spotify’s service also includes paid advertising for the free users. By
allowing other businesses to advertise on their services, Spotify can gain some
revenue to invest on improving their own service. Spotify’s innovative idea to
introduce social music is one of its main features. By introducing sharing of
playlists Spotify manage to distinguish itself from other competitors such as
iTunes. Spotify users can create their own personalized playlists with their
choice of music. By enabling users to share their playlists, users can listen
to other’s playlist and gain interest in other’s music taste. This also expands
the user’s variation of music. Users can freely explore new music without
searching for it. Spotify’s integration with Facebook is one of the key factors
that 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 account
immediately. Facebook users need not undergo the process of creating a Spotify
account. This feature will attract many Facebook users to Spotify since they
only need just a few clicks to gain access to a Spotify account.

 Personal preferences
in music selection can be taken as suggestion or recommendations to friends,
thus inadvertently inspiring more friends and the music listening habits. Users
can like their friends’ song and they can also listen to their friends’ songs from
Facebook. This is social music that Spotify implemented in their service.

Weaknesses

However, Spotify’s strengths bring about limitations. If a
user wants to stream music from Spotify, internet access is needed. Spotify
users are not able to stream music without internet access. Users will prevent
using Spotify if they do not have internet access. This will lead to less
viewers for paid advertisements thus reducing revenue gained from
advertisements. Furthermore, free users are only allowed to stream music as
they are not given the access to download music to listen offline. Downloading
music 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 to
spend money on premium accounts. Also, free accounts come with repetitive
advertisements. When a free user is using Spotify, there will be an
advertisement every thirty minutes. Users will find it annoying since they must
watch a full advertisement before they can go back to using the service. Spotify
does not offer every song that can be found. Users who are looking for less
recognized artist may not be able to find their songs. This will contradict the
purpose of Spotify providing a large variety of songs for users. If users
cannot find the songs they want, they will be discouraged from using Spotify.

Spotify does not offer all songs because there are music
artists who are against music streaming. By offering music streaming, Spotify
is basically taking revenue from the artists. If a person wanted to listen to a
song, they are required to buy the songs or to download it illegally. The
artists will be paid with the number consumers who bought the artist’s songs.
However, with Spotify and other music streaming services available in the music
industry, there are lesser consumers purchasing songs from the artists
themselves. This results in the artists making lesser profits if they share
their music to music streaming services such as Spotify. Spotify’s royalty
pay-outs to the music artists are too little. Spotify pays $0.00014213004 per
stream to the music artists. Music artists would rather sell their own music
since they can make more on their own rather than allowing their music to be
streamed. Therefore, Spotify risks alienation of artists and this will reduce
the variety of songs that Spotify can offer.

Opportunities                               

Spotify is currently available to 62
countries worldwide. Ever since Spotify’s launch in 2008, Spotify has been
attracting many consumers due to its unique service. When Spotify was first
launched in Sweden, Spotify have many opportunities to expand to different
countries. When Spotify was getting more reputable in 2009 when Spotify
capitalized 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. By
expanding to new countries, Spotify will expand their market and can attract
more consumers by using social media marketing. The rise in smartphone user due
to technological advancements is an opportunity for Spotify. By creating a
smartphone app to access their service, Spotify allowed many users to access
their service since more and more people are using smartphones. Spotify is in
acquisition with 11 different organizations. Spotify bought MightyTV, a
start-up that revolves arounds using artificial intelligence and content
recommendations by just swiping the screen. This allows Spotify to refine their
ad and marketing tech. Spotify can improve their internal strength by having
acquisitions.

Threats

Music piracy is a major threat to the
music industry. People tend to download pirated music because they do not tend
to spend any money on buying songs to download. There are options to download
music for free however, legal options are very limited. Spotify also face many
threats from other competitors such as Apple and Amazon. Apple offers iTunes, a
service that is similar to Spotify but also offers movies and books for
download. Amazon offers prime music, which allows a Prime member to stream over
2 million songs ad-free, and Prime Video, offers Amazon Originals as well as
popular movies and TV shows. Competitors such as Apple and Amazon are threats
to Spotify since their services are cheaper. Amazon Music offers a four-month
subscription to its music streaming services for just $1. Amazon also reduced
their 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 it
is cheaper. Spotify will have trouble attracting the loyal customers of Apple
and Amazon.

 

 

 

 

PESTLEg4 
ANALYSIS

PESTLE analysis is a concept in marketing principles.
Moreover, this concept is used as a tool by companies to track the environment
they are operating in or are planning to launch a new project/product/service
etc. PESTLE is a mnemonic which in its expanded form denotes P for Political, E
for Economic, S for Social, T for Technological, L for Legal and E for
Environmental. By using this tool, this tool gives many different angles that
one can utilize to analyse the business. However, the simplicity of this tool
is that it is a sample list which is not sufficient and comprehensive enough to
fully analyse the business. PESTLE analysis is only based on an assessment of
the external environment so the analysis obtained from using this tool is not
complete 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 copyright
infringement. When one Is found guilty of copyright infringement, he/she could
be liable for civil and criminal sanctions depending on the nature of the
offending effects. By implementing copyright infringements, the government can
prevent people from downloading pirated music.

Economic:

 

 

 

 

 

Social:

People listen to music to relieve stress. Music offers
positive externalities since one can reduce stress. However, due to culture,
some people do not prefer specific music such as rap and metal. Shifting trends
in online habits will cause the music industry to be exposed to the phenomenon
of “click fraud” with increasing threat over the coming years. “Bots” would
imitate human online browsing by repeatedly clicking on a web. Fraudsters
targets music streaming sites like Spotify since these sites pay out royalties
to artists and song writers. Bots will fake as artists and create fake tracks,
mimicking tunes from established artists and then repeatedly play the audio
streams to generate revenue. This causes Spotify to lose money since they are
paying royalties to bots.1

 

Technological:

Not everyone in Asia have internet access. Some may have
weak connections and will have trouble connecting to Spotify’s service.

 

Legal:

 

Environmental:

Clinch, Matt. “How the Music Industry Is Fighting
Online Fraud.” CNBC, CNBC, 28 Dec. 2015,
www.cnbc.com/2015/12/28/how-the-music-industry-is-fighting-online-fraud.html.

 g1More
focused, state more on why the area of study is important, refer to rq more
throughout the essay, explain more on why the methodology is used

 g2More
data

 

 g3Provide
suitable argument eg how far these tools are relevant or not relevant

 g4Add
in advantages and disadvantages

 

 g5Cyber
security law is not stronger

Target smartphone users, may not be safe to use Spotify
exposure to hackers since there is not cyber safety law

 g6