A Project Report on

Marketing Analysis of Spotify

In partial fulfilment of the requirements of the award for the degree of

Master of Business Administration GLS University

Submitted by
Pallavi Nanda- 202100620010038

Muskan Meghani- 202100620010031

Submitted to
Dr. Dhruv Brahmabhatt

MBA semester III

Batch 2021-2023
 PREFACE

As a part of Masters of Business Administration curriculum and in order to

gain knowledge in the field of Marketing Analysis we have prepared a project
on marketing analysis on ola. Being MBA students, our aim should not be just
to acquire theoretical knowledge but also to learn how this theoretical
knowledge is applied successfully in the real corporate world.

In this project, we have showed how nestle captures market with the help of
traditional as well as social media marketing.

Besides this, the project also taught us about the various aspects of working in a
team. All the members got knowledge about how this companies carry out the
strategies and acquire the customers. Also, pros and cons of working in a group
and furthermore had the chance to enhance the skills.
 ACKNOWLEDGMENT

We are pleased to get this opportunity to give special thanks to the persons
whose ideas, views and support have provide a fluency to prepare this report.
First and Fore most, we would like to thank entire faculty members of GLS
UNIVERSITY for providing us such a nice platform to learn.

The success and final observation gained from this project requires a lot of
guidance and assistance and we have got it all during the project reporting
period. The project report is an outcome of overall supervision and co-
operation received from project guide and group members.

We are also grateful to our parents for their inexhaustible source of inspiration.
We would extend our gratitude to DR. DHRUV BRAHMBHATT for his
constant guidance and support.

Finally, we would like to thank all those who helped us in one way or the other
way at every stage of our project work.
 INTRODUCTION OF SPOTIFY

Spotify is a proprietary Swedish audio streaming and media services provider founded on 23

April 2006 by Daniel Ek and Martin Lorentzon. It is one of the largest music streaming
service providers, with over 433 million monthly active users, including 188 million paying
subscribers, as of June 2022. Spotify is listed (through a Luxembourg City-domiciled holding
company, Spotify Technology S.A. on the New York Stock Exchange in the form
of American depositary receipts.

Spotify offers digital copyright restricted recorded music and podcasts, including more than

82 million songs, from record labels and media companies. As a freemium service, basic
features are free with advertisements and limited control, while additional features, such as
offline listening and commercial-free listening, are offered via paid subscriptions. Spotify is
currently available in 180+ countries, as of October 2021. Users can search for music based
on artist, album, or genre, and can create, edit, and share playlists.

Spotify is available in most of Europe, as well as the Americas and Oceania, with a total
availability in 184 markets. The service is available on most devices
including Windows, macOS, and Linux computers, iOS and Android smartphones and
tablets, smart home devices such as the Amazon Echo and Google Nest lines of products
and digital media players like Roku.

Unlike physical or download sales, which pay artists a fixed price per song or album sold,
Spotify pays royalties based on the number of artist streams as a proportion of total songs
streamed. It distributes approximately 70% of its total revenue to rights holders (often record
labels), who then pay artists based on individual agreements. According to Ben
Sisario of The New York Times, approximately 13,000 out of seven million artists on Spotify
generated $50,000 or more in payments in 2020.
Spotify was founded in 2006 in Stockholm, Sweden, by Daniel Ek, former CTO of Stardoll,
and Martin Lorentzon, co-founder of Tradedoubler. According to Ek, the company's title was
initially misheard from a name shouted by Lorentzon. Later they thought out
a portmanteau of "spot" and "identify".

Spotify offers an unlimited subscription package, close to the Open Music Model (OMM)

estimated economic equilibrium for the recording industry. However, the incorporation
of digital rights management (DRM) limitation diverges from the OMM and competitors
such as iTunes Store and Amazon Music that have dropped DRM.

In 2013, Spotify revealed that it paid artists an average of $0.007 per stream. Music
Week editor Tim Ingham commented that the figure was not as "alarming" as it appeared,
writing: "Unlike buying a CD or download, streaming is not a one-off payment. Hundreds of
millions of streams of tracks are happening every day, which quickly multiplies the potential
revenues on offer – and is a constant long-term source of income for artists."

Early international launches

Former Spotify Headquarters in Stockholm

In February 2010, Spotify opened public registration for the free service tier in the United
Kingdom. Registrations surged following the release of the mobile service, leading Spotify to
halt registration for the free service in September, returning the UK to an invitation-only
policy.

Spotify launched in the United States in July 2011, and offered a six-month, ad-supported
trial period, during which new users could listen to an unlimited amount of music for free. In
January 2012, the free trial periods began to expire, and limited users to ten hours of
streaming each month and five plays per song. Using PC streaming, you would see a similar
structure to what we see today, with a listener being able to play songs freely, but with ads
every 4-7 songs depending on listening duration. Later that same year, in March, Spotify
removed all limits on the free service tier indefinitely, including mobile devices.

In April 2016, Ek and Lorentzon wrote an open letter to Swedish politicians, demanding
action in three areas that they claimed hindered the company's ability to recruit top talent as
Spotify grows, including access to flexible housing, better education in the programming and
development fields, and stock options. Ek and Lorentzon wrote that to continue competing in
a global economy, politicians needed to respond with new policies, or else thousands of
Spotify jobs would be moved from Sweden to the United States.

In February 2017, Spotify announced expansion of its United States operations in Lower
Manhattan, New York City, at 4 World Trade Center, adding approximately 1,000 new jobs
and retaining 832 existing positions. The company's US headquarters are located in New
York City's Flatiron District.

On 14 November 2018, the company announced a total of 13 new markets in

the MENA region, including the creation of a new Arabic hub and several playlists.

Spotify operates under a freemium business model (basic services are free, while additional
features are offered via paid subscriptions). Spotify generates revenue by selling premium
streaming subscriptions to users and advertising placements to third parties. Some of the
premium options users may choose from include individual, duo, family, and student.

In December 2013, the company launched a new website, "Spotify for Artists, " explaining
its business model and revenue data. Spotify gets its content from major record labels as well
as independent artists and pays copyright holders royalties for streaming music. The company
pays 70% of its total revenue to rights holders. Spotify for Artists states that the company
does not have a fixed per-play rate; instead, it considers factors such as the user's home
country and the individual artist's royalty rate. Rights holders received an average per-play
payout between $.000029 and $.0084.
DATA ANALYTICS OF SPOTIFY
At the heart of Spotify lives a massive and growing data-set. Most data is user-centric and
allows us to provide music recommendations, choose the next song you hear on radio and
many other things.  We do our best to base every decision, programmatic and managerial, on
data and this extends into the culture.

At my previous job, I developed software for Ad Agencies in the Digital Asset Management
space, so you can say I was relatively new to “Big Data” as it were. New engineers at Spotify
will notice that the culture has a way of engulfing you in a data-driven mindset. After
working at Spotify for only a few months, I was talking about term weighting and signing up
for internal courses on the R programming language.

I also participated in a hackathon where I developed a Spotify App code-named Genderify

that tapped into our massive data-set to determine exactly how “manly” a playlist is. It was
mostly a joke, but utilized listening data to provide an accurate statistical map of a playlist
and displayed a result of 0-100, 100 representing an extreme edge case where a person
registered as female had never listened to any tracks on your playlist.

Our Analytics Pipeline powers far more than satirical apps. It allows us to recognize trends,
discover bugs, and analyze the effect of an event on a user and the entire ecosystem.

Analytics Tools

Internally, everyone (not just engineers) has access to three tools: Dashboards, Data
Warehouse, and Luigi. Dashboards provides an interface similar to Google Analytics and
allows users to create their own custom screens containing data they are interested in from
our pipeline. For instance, we have dashboards that show us user growth in particular regions,
or user engagement, or even the number of emails we deliver.

Data Warehouse is a more complex system that allows you to access our data-set directly.
You can query the data, create map/reduce jobs using Hive, and even create mini data
pipelines if that’s the kind of thing you’re into. For more complex operations, we
have Luigi at our disposal, governing a zoo of Python, Pig and other animals which can be
made to talk to any storage systems, run machine learning algorithms and even provide daily
reports.
So what do we do with all this data? Pretty much everything. An example of an entirely data-
driven decision would be our choice of a music recommendation algorithm that powers
Spotify Radio.

Analytics Infrastructure

Most of our recurring data is added to our analytics pipeline by a set of daemons that
constantly parse the syslog on production machines looking for messages we have defined
along with the associated data for each message. Matching data is compressed and
periodically synced to HDFS.  Typically data is available in our Data Warehouse and
Dashboards within 24 hours, but in some cases data is available within a few hours or even
instantly through tools like Storm.

So all this sounds… complicated. And I assure you, to build a pipeline and infrastructure like
we have, it is. But to make use of it is actually really easy.  Engineers can easily add data to
our analytics pipeline by adding a new message to our log parser and simply logging
information to syslog using the correct format.

Becoming Data Driven

My experience at Spotify is a perfect example of how simple this is and shows how any
engineer can make a meaningful impact.

Shortly after joining Spotify, we decided as a company that we wanted to send users emails
telling them if their friends joined and if new songs were added to a playlist they subscribed
to.  The hypothesis we wanted to test was that sending these emails would have a positive
impact on user engagement and help more users to come back to using the app more often.

So… we needed a transactional email system.  I took this project on as an opportunity to

learn Python. With the help of a few other engineers, we built a fairly simple system that had
the ability to deliver a lot of emails and also provided a way for people to create new email
templates and A/B test different versions of an email template.
Within a few weeks we knew which email templates worked best and, more importantly, we
could see the impact these email campaigns had on our users.  We could clearly see that these
emails were having a positive effect on user engagement.

So, how did we know the effect these emails had on users?

This backend system for sending emails would simply log a message every time an email was
sent with the fields (username, timestamp, email-campaign, campaign-version).

Once this data made its way into HDFS, we had all the data we needed to determine the best
performing email template for a campaign and we could track the effect a single email had on
a user’s experience. We were able to see if an email had any effect on your listening habits,
your account status and so on.

Remove Bias, Acquire Data

Spotify strives to be entirely data driven. We are a company full of ambitious, highly
intelligent, and highly opinionated people and yet as often as possible decisions are made
using data. Decisions that cannot be made by data alone are meticulously tracked and fed
back into the system so future decisions can be based off of it.

Using Big Data to create value

One of Spotify’s funniest feature is “Wrapped”. Every December, “Wrapped” gives users a
roundup of their favourite or most listened to song/artist of the entire year. “Wrapped” also
lets users know if they were in the leading 1% of an artist’s most loyal listeners. This
information is presented using data visualization to create a personalized story to all users.
Spotify creatively encourages user engagement with “Wrapped” by issuing users with
badges. For example, if a user’s playlists gained a number of new followers, they can be
awarded with a Tastemaker badge. If a user listened to a hit song before anyone else, they are
issued with a Pioneer badge.

Perhaps Spotify’s most impressive piece of engineering is its use of convolutional neural
networks (CNN). Using CNN, Spotify analyzes raw audio data such as the song’s BPM,
musical key, loudness, etc., to classify songs based on music type and further optimize its
recommendation engine.
MARKETING ANALYTICS OF SPOTIFY

We now have a better understanding of Spotify’s products and marketing components after
seeing the company’s overview. Let’s take a look at Spotify’s marketing strategy to
understand how it got to where it is today as the most popular music streaming service. In
reality, few rivals can match Spotify’s user base. The marketing strategy of Spotify is not
static, but it is evolving. Spotify isn’t just following the latest trend; it’s also inventing new
ones to promote itself. So, let us dissect Spotify’s marketing strategy.

A freemium model
Spotify has made the freemium model available on phones and desktop computers or even
laptops. Users will receive an ad every three to five songs. These advertisements are a way to
generate revenue for the company. No free user can skip the ad or play in shuffle mode or
even skip through songs without an ad.

Although this advertising can get irritating after a time, most individuals enjoy getting free
items and want to tell their friends about it. Spotify is being talked about among brand
marketers in the hopes of marketing their brands through the service because it has a platform
that can promote to millions of consumers.

A collaboration for content

The second way of marketing that Spotify uses very constantly is collaborating with artists.
This not just increases their audience base but also gives them exclusive content. This is a
very familiar technique but not very often used. Spotify not only included visual and audio
elements in their songs for free, but it also made the artist’s work more accessible to their
listeners. Which is a major reason that more and more artist small to big want their music to
be published on Spotify.

Because the streaming service is becoming increasingly competitive, all businesses must
work to provide value to their customers. Spotify appears to be producing excellent content
that people appreciate and maintaining that momentum by providing the most tailored
experience possible to clients. That is what makes Spotify so exclusive from all its
competitors.
In 2020, with people being home, the podcast community started gaining some audience,
Spotify once again came to the rescue and added themselves into the Podcast streaming
market as well. Not just deals signs and contracts with big brands like Joe Rogan but people
like Robert Downey Jr, Elon musk, and Mike Tyson are also featured in the podcasts which
again is exclusively available only on Spotify. 

Usage of Data
Spotify has used the tool of technology and data like no one. The algorithm usage is
impeccable. It is so well designed for users to explore new music and expand their list of
songs. It very specifically records the users’ behaviors, interests, and past actions and then
uses a powerful algorithm to create a customized playlist for each of them and personalized
recommendations.

The most surprising part is the efficiency of the algorithm and a user gets an experience
without extra effort or fee. All one needs to do is use the platform as their regular music-
playing app and the algorithm will pick it up and send you recommendations according to
your behaviour. Also making a user value of paid service that it provides. Give the user the
best experience as soon as they put their earphones on.
These loyal users tend to tell others, family, and friends about the app automatically
marketing the product. Of course, Social Media marketing has played such a big role in these
marketing strategies. And we will also discuss the best ads since 2016. 

Social media Marketing

Spotify’s social media is so well created and maintained that every music lover appreciates
and enjoys it. Of course, one gets regularly updated about the new albums and launch dates.
Creating constant buzz Spotify also promotes new artists as a way of marketing strategy as
well as supporting each other. It has various social media handles, depending on the
geographical area.
Consistent branding all over the handles. Also, the platform uses various campaigns, most
constantly hashtag campaigns. Also, the trendsetters of all time are constantly evolving. This
creates brand awareness and visibility in the market.

Influencer marketing on social media platforms has been one of the most successful
collaborations ever seen. Running sponsored ads there too, which influencers help them.
In 2017, the company launched the #2018Goals global hashtag campaign. I’m sending out a
message that 2018 will be a fun and upbeat year of rhythm. Since #Goals were trending that
year, in a way capitalized on the idea to gain popularity. 

Best Campaigns in India and Worldwide

#Listening Together:
This campaign was introduced again for all Indians as there was observed a rising trend of
global music being loved by Indian Listeners. Billboards were crated to send through the
message and social media was flooded during this venture. Listening Together features some
great playlists based on followers, one of the very constantly used is ‘Today’s Top Hits’
followed by 15 million followers. 
2014 Spotify launched the #thatsongwhen campaign- to evoke memories from music. This
connected the audience emotionally and made them share songs on various social media
platforms. 2016 Data-based marketing campaign began. Which worked wonders by
connecting users to the Team, helping the company put close attention on personal music
choices, and recommended the best for each. 2017 was a great year for Spotify.
Its revenue climbed by 40%, signaling that it was the appropriate time to draw more attention
from the globe and make a strong statement, which Spotify did. Spotify’s marketing team
continued to rely on social media trends after their successful 2016 and 2017 campaigns. The
most popular trend in 2018 was an auditory illusion that first appeared on Reddit. 2019
Spotify aims to strengthen its relationship with millennials and gen Z, and using memes was
the ultimate way. 
Customer analytics of Spotify

Spotify has become the undisputed leader in the music streaming industry.

The Swedish-born media services company has bridged the gap between listening to your
favorite songs and buying MP3s online. It has improved the way people listen to music
around the world.

The popularity that Spotify has found can be verified with the following 30+ statistics for this
music streaming platform that we will cover in this article.

Here, we look at Spotify's stats from different angles to help us gain valuable insights into the
company and its strategies to rule the music streaming world.
Spotify’s target audience
The Spotify target audience is located worldwide, with more users in Europe than any other
region.  The typical Spotify user is young adults – Millennials and Gen Z – however there is
not a small audience of older adults aged 55+ who also enjoy the app’s music.

The Spotify audience skews more female than male – 56% female to 44% male – and the
average user is loyal, spending around 118 minutes a day listening to Spotify.

A focused analysis of Spotify user statistics will give an even deeper understanding of these
and other data points. 

 
Spotify Target Market Segmentation insights:
If you are marketing to users similar to the Spotify audience, take into account Spotify
demographics, geographic, behavioral and psychographic segmentation data. This will give
you better understanding and insights to target your audience more accurately. Let’s explore
these Spotify customer segments one by one.

Demographic Segmentation

Although the brand is popular among all age groups, it is stronger with young
audiences. 29% of Spotify users are members of the millennial generation, and 26% are under
24 years of age.

In fact, in 2020, Spotify was the most popular online music service in the US for those aged
12 to 34. In contrast, the over 55s Spotify age group of users makes up 19%.

Spotify’s freemium subscription is highly popular among younger users – 71% of

people using Spotify for free are under 35 years old. 

 
Geographic Segmentation

The Spotify customer segmentation is largest in Europe, with 66 million users in Europe vs
48 million in the US, 33 million in Latin America and 18 million in the rest of the world.

In the US, the target audience are frequent users of the audio streaming service. 30% of US
listeners tune in to the music app on a monthly basis and 28% listen to it weekly – a figure
that has grown steadily over the past decade.

Behavioural Segmentation

Spotify users typically enjoy the personalized experience offered by the platform. More than
a third of the time spent on Spotify is listening to playlists, of which 36% are created and
shared by other users.
Streaming preferences are highly variable depending on location. In 2022 so far, the most
streamed track on a weekly basis among the global audience is Heat Waves by Glass
Animals, whereas in the US, it’s First Class by Jack Harlow.

Spotify’s success goes beyond music streaming. In 2022, the brand took the top spot in
monthly number of podcast listeners (32.5 million), overtaking even Apple Podcasts, which
moved to second place with 28.5 million listeners. 

Psychographic Segmentation

Spotify’s popularity among Millennials correlates with the generation’s attitude to media
consumption in general: 60% say that audio is the most immersive form of media. Spotify’s
vast audio library of 70 million song titles and nearly 3 million podcasts appeals deeply to
younger listeners aged 14-35. This segment tends to veer away from mainstream music and
look for more indie and alternative styles.

It has similarly been noted that users aged 42 and over have a tendency to return to
mainstream pop music. Spotify uses data-based personalization to recommend music and
audio content to individual users according to their changing preferences and in-app
behavioral data.

Machine Learning Models. Used by Spotify:

Spotify offers a great personalized weekly playlist called "Discover Weekly", one of its
flagship features. Every Monday, each user will receive the latest playlist with new
recommended songs that they choose based on their listening history and songs they are
interested in.

“One of our flagship features is called Discover Weekly. Every Monday, we give you a list of
50 tracks that you haven’t heard before that we think you’re going to like. The ML engine
that’s the main basis of it, and it’s advanced some since, had actually been around at Spotify
a bit before Discover Weekly was there, just powering our Discover page” – David
Murgatroyd, Machine Learning Leader at Spotify.

Spotify deploys a mix of different data aggregation and sorting processes to design their
specific and powerful machine learning based recommendation system.

Spotify recommendation engine :

Spotify uses a combination of three models to generate the 'Discover Weekly' model which
are;

1. Collaborative filtering

A famous technique introduced by recommender systems, Collaborative Filtering, to predict

user preferences based on similar user preferences.
In Spotify, the Collaborative Filtering algorithms examine several user-created playlists that
contain songs that users have listened to. The algorithm adjusts the playlists after looking at
other songs that appear in the playlists and recommending those songs.

2.Natural language processing

NLP is what machines use to learn human speech, in the context of this Spotify uses it as AI-
powered Spotify browsing, i.e. it tracks metadata, blog posts, the latest artists and songs on
the internet, discussions about musicians, news articles, etc.

This helps Spotify understand what everyone is specifically discussing about music, songs
and artists. From all this, it selects descriptive terms, phrases and other associated texts.

Now, Spotify has related keywords that fall under the umbrella of "cultural vectors" and "top
terms," and then those songs and their artists are associated with those terms.

Specific weight is also calculated for terms that are more imperative than others (showing
how many times individuals will be associated with their artists or songs). It also allows
Spotify to recognize trending musical terms.

3.Audio model:

Audio models are implemented to evaluate data from raw audio tracks and classify songs
appropriately, which helps the application analyze all songs and make recommendations.
For example, if a new artist releases a new song on the platform, the NLP model does not
need to choose whether social networks are weak or converge online.

However, by using song data from audio models, collaborative filtering models are able to
decipher a song and recommend it to users with other popular songs.
 Cluster Analysis:

Spotify has also adopted convolutional neural networks (CNNs) for audio data, which
happens to be the same technology used for facial recognition. In the case of Spotify, these
models are used on audio data instead of pixels.

For example, songs that have a high beat, acoustic or energetic are merged into one category,
then CNN works to categorize the songs into the corresponding groups with great efficiency
and certainty.

We feel the greatest way to see how this method can be applied is to run through a real life
example.

The dataset we will be exploring is on songs of spotify. The dataset contains songs
characteristics such as loudness, dance ability, key, etc, and can be found here.

Since the data set is very large and the computations extensive, we will run through a random
sample of 10 observations which is shown in Table 3.1 to allows us to show how this process
works.

Genre danceability energy key loudness mode speechiness acousticness

RnB 0.767 0.611 5 -5.173 0 0.0983 0.15700

trance 0.628 0.873 0 -6.680 1 0.0634 0.00202

psytrance 0.570 0.868 1 -5.760 0 0.0573 0.00466

Underground
0.709 0.633 2 -7.612 1 0.3000 0.01030
Rap

Dark Trap 0.525 0.651 8 -9.845 0 0.0551 0.14400

Hiphop 0.544 0.812 1 -6.431 1 0.3930 0.01850

techhouse 0.698 0.965 10 -5.616 0 0.1120 0.01120

hardstyle 0.480 0.959 2 -5.165 0 0.1980 0.00179

Rap 0.742 0.711 10 -4.658 1 0.2370 0.06140

techhouse 0.803 0.574 6 -11.681 1 0.0808 0.00205

For this example, lets say Spotify came to us, I know how awesome would that be, and
wanted us to group together similar genres for a local tour they are putting together. They
want to group similar genres for certain days that best fit each other. Running through these
10 observations will give us an understanding of how this process might be down.

Step 1
The way we are going to approach this problem is by first considering that every observation
is its own cluster. Now we want to find the euclidean distance between our observations, to
do so we would treat each row as a vector. Therefore, row 1 would like the following in
vector form;

y′1 = (0.767 0.611 5 -5.173 0 0.0983 0.15700 0.01160 0.0836 0.110 188.068)
similarly for row 2;

y′2 = (0.628 0.873 0 -6.680 1 0.0634 0.00202 0.57000 0.5390 0.128 130.005).
Then we would compute the distance from the formula we mentioned earlier in this section.

d(y1,y2)=√ (.767−.628)2+(.611−.873)2+...+(188.068−130.005)2 ≈5
With some rounding being done we would then say that the distance between observation 1
and observation 2 is 5. You would then proceed in this fashion between all observations.
Using software can make this task more efficient because you can see how tedious this can be
once you go past three variables. Once you compute all these distance you can store them in
whats called a distance matrix.
 Table 3.2: Distance Matrix of 10 Observations

1 2 3 4 5 6 7 8 9 10

0 5 4 4 6 4 5 3 5 7

5 0 2 2 9 1 10 3 10 8

4 2 0 2 8 1 9 1 9 8

4 2 2 0 6 2 8 3 9 6

6 9 8 6 0 8 5 8 6 3

4 1 1 2 8 0 9 2 9 7

5 10 9 8 5 9 0 8 1 7

3 3 1 3 8 2 8 0 8 8

5 10 9 9 6 9 1 8 0 8

7 8 8 6 3 7 7 8 8 0

Step 2
Now that you have created your distance matrix, you will know begin the clustering process.
First, you find the overall minimum distance between two different observations. In this
example, we can see that there are multiple observations that have a distance of 1 from each
other, in this case we would initially cluster these observations together. Now you repeat the
step we did above finding the distance between each observation and the distance between
the observations and the clusters. This is where single linkage comes into play, once you have
created your initial clusters, the distance between an observation and a cluster is the
minimum distance between the observation and one of the observations in the cluster.

For our example, lets say we initially clustered observation 2 and observation 6 together
because they have a distance of 1 which is the minimum distance overall. When we go to
create our new distance matrix if we wanted to find the distance between observation 1 and
this cluster of 2 and 6, we would find the distance between observation 1 and observation 2.
Then we would find the distance between observation 1 and observation 6. We use the
original distances we calculated up above, so the distance between observation 1 and 2 have a
measure of 5. The distance between observation 1 and 6 have a measure of 4. The single
linkage method would use the distance of 4 because that is the minimum distance between
observation 1 and the cluster of 2 and 6 so you would update that numeric value into the
distance matrix. You would then proceed to do this for every observation and cluster, finding
the overall minimum distance and either creating new cluster of joining observations into the
clusters. You repeat this process until there is only 1 cluster left which is all observations
joined together.

Dendrogram
Once you finished your clustering there are nice visualizations you can create, one popular
one is called a dendrogram. A dendogram is essentially a easy way to show where your
clusters form and what observations are joined together.

Figure 3.1: Spotify Genre Grouping

Summary
Figure 3.1 gives a great visualization of how this process works. All observations are initially
in their own cluster and you can see when each cluster is formed. So for our example lets say
Spotify is having their tour on a Friday and Saturday so they want two clusters from this data
set. Based on this sample we worked with we would tell them that RnB, Underground Rap,
Psytrance, Hard style, Trance and Hip hop are similar to each other so they should plan on
having these genres on one day. Tech house, Rap, and Dark Trap are similar to each other
based on our analysis so those genres should be on a separate day. Since we only worked
with 10 observations this is not a great representation of the actual clusters but this is the idea
that cluster analysis strives for.
Perceptual Mapping of Spotify:

Spotify uses a broad differentiation strategy. Spotify is hoping to deliver a differentiated

product to a large group of customers through personalized playlists and exclusive podcasts.
Spotify is the leader in market share in the industry.

Apple Music also uses a broad differentiation strategy. They also try to bring a differentiated
product by having the largest music library and having a seamless connection to other Apple
devices and services.

Amazon Music uses a focus differentiation strategy by specifically targeting current Amazon
product users and Amazon Prime subscribers. Amazon tries to have a differentiated product
through a large music library and exclusive podcasts that work well with Amazon smart
devices.
YouTube Music uses a broad differentiation strategy that focuses on users that might
already use YouTube extensively and can pair with other YouTube products.

Pandora broad low-cost strategy to target users that do not want to pay for streaming music
by giving them ad-supported radio streaming that gives customers customized music
suggestions. Pandora was recently acquired by Serious XM, a broadcasting and satellite
radio company.

MARKETING MIX OF SPOTIFY

Product

Spotify offers itself as a music streaming service, which allows consumers to either use a free
account, or a premium one that prevents commercials and opens-up access to even more
music for paying consumers. The service promises access to nearly all music for users, and it
promotes an easy to use format, while also utilizing an eye-catching design. Personalization
is one of the main tenants of Spotify, as the entire customer experience is centered around
allowing people to create playlists to fit any mood they are in. Users can customize these
playlists however they wish, use an algorithm driven radio, or even connect with friends via a
following system. The service allows for users to use a limited amount of skips on the free
version as well. However, there is a difference between the versions available on laptops
compared to smartphones. For example, on Apple iPhones, the Spotify app only allows for
shuffle play for free accounts. Spotify aims to develop music connections by allowing friends
to see each other’s musical preferences, and their tailored playlists as well; all enhancing the
overall listening experience for consumers.

Price

There are two versions of Spotify: a free account, or a paid for premium account. While the
free account has access to almost all the same music as the premium 19 version, it is hindered
by advertisements and the inability to do offline listening. Consumers can pay $9.99 a month
to gain access to the premium version, which eliminates ads, allows full access to all of
Spotify’s stream-able music, and allows users to use the service offline. The price is a bit
more expensive compared to some competitors like Pandora Radio, which offers premium
service for only $4.99 a month. However, Spotify also offers a discount for premium for
students, which comes down to $4.99 a month as well. Other main competitors for Spotify
include Tidal, i Heart Radio, Apple Music, and iTunes. The regular music industry also
competes with Spotify in terms of making money by album purchase, instead of by
subscribers.

Place

Spotify, being a digitally driven app, is accessible through any digital device that has access
to Wi-Fi. This makes Spotify a readily accessible app, and it allows for a large pool of people
to use it. Anyone with a smartphone, laptop, or tablet can access the service and stream
music. Spotify is also available on both Android and Apple platforms. Essentially, having
access to the Internet is the main requirement to use Spotify. This also allows for the service
to be portable and versatile for users that may want music on the go. With this amount of
easy accessibility, one would expect a large user base. According to the site Statistical,
Spotify’s total users worldwide has grown exponentially over the past four years. In 2012, the
amount of active global users was only 15 million people; however, as of June 2016, the total
amount of active users is now 100 million worldwide.

Promotion

One of the areas that Spotify currently lacks, the streaming service does not utilize a ton of
advertising. Interestingly enough, Spotify does a lot of self-advertising on their own site, as
users who utilize the free account are occasionally hit with 30 second advertisements trying
to convince listeners to switch to premium. Most of this is because the company obtains most
of its revenue from premium users, and only a third of the total users are premium accounts.
However, Spotify has recently started a new advertising campaign, where the company has
taken user data to create a funny take on the Spotify experience. Across different cities, there
are several billboards that detail anonymous user habits to comedic effect. For example, one
of the billboards in New 21 York City’s Time Square read, “Dear Person in the Theater
District who listened to the Hamilton Soundtrack 5,376 times this year, can you get us
tickets?” These ads are a fun way to connect to users, and they do a good job showcasing the
personalization that comes with Spotify. The ads are being used globally as well, helping to
expand their global user base
Customer journey mapping and CRM Activity done
by Spotify:

Spotify is one of the most popular audio streaming services in the world. When Spotify
wanted to improve the music sharing experience for its customers, it hired a marketing firm
to create a customer journey map. The goal of this customer journey map was to determine
where music sharing features best fit into the customer experience.
In this map, we see the user experience mapped from the moment a user opposes Spotify on
mobile to whether they like a song shared by a friend.

At each stage, the brand indicates what the customer is doing, what he is doing, what he is
thinking and what he is feeling. The agency used data mining and customer surveys to better
understand how users felt at each point in the customer journey to collect this information.

Based on the customer journey map, Spotify was able to identify user pain points and address
those pain points, making the music sharing experience smooth and seamless and
encouraging more users to share music – and do it more often.

This roadmap is excellent because it identifies key areas of customer engagement, takes into
account customer behavior and aims to make the customer experience as pleasant as possible.

Spotify uses Big Data for customer relation activities

1. Development of personalized content

Spotify's fundamental approach to receiving data generated by its users is to use it to develop
content that each user will find exclusive to their unique tastes. The aim is to ensure that users
are provided with a satisfactory experience so that they become long-term customers. This
has been achieved by adopting various artificial intelligence and machine learning
algorithms.

For example, an integral role in Spotify's data collection is played by the platform's
"Discover" feature, which was originally introduced in 2012. This feature appeared as a list
of songs released by a user's favorite artists, but slowly evolved into a type of
recommendation engine that, after completing a user's playlist designed a collection of songs
that were aligned according to the song lines that the playlist contained.
2. Digitization of user taste

The listener's daily flavor profile is also incorporated into Spotify playlists called "Daily
Mixes". These playlists are different from the music genres that the user normally gravitates
towards, and generally consist of songs that the user has added to or saved to their playlists,
or that have been created by artists that the user has included in their current playlists or other
songs. fresh artists or albums unknown to the user.

These playlists are extensive and dynamic, although they may contain more familiar music
compared to the "Discover Weekly" playlists, Spotify may still add some interesting songs
that the user is not familiar with in an attempt to liven up the playlist.

Another example is the "Release Radar" playlist. This is a weekly playlist that includes
various fresh releases from artists that each user is following, and is also in the format of the
main "Discover" playlist. If listeners follow their favorite artists on Spotify, the algorithm is
able to generate an accurate playlist with suggestions for new songs from that artist. The
algorithm can also add some other new songs, making the playlist compelling.

Currently, "Discover Weekly" has emerged as one of Spotify's biggest assets, which is fully
assembled using a machine learning algorithm and generates a personalized playlist that is
exclusive to the user's listening activity. The algorithm examines other users' playlists to
determine similarities between songs, and then takes that data to create a new playlist that
aligns with the user's prevailing song preferences. In addition, each user has a personal "taste
profile" created from micro-genres that plays a role in personalizing these playlists. You can
learn more about the process here.

In order to personalize these playlists, the platform had to pay close attention to both the
songs that users stream and how they interact with each song in general.
For example, if a subscriber played a song but skipped it in less than the first 30 seconds,
Spotify will see this as a less than enthusiastic response and the song information will not be
included in the playlists. However, when a user has added a song to their library or playlist
and it has been fully listened to, the platform sees this as a positive response, giving them
confirmation that the song agrees with the user's taste, which in turn helps the algorithm
further develop the user's overall taste profile.

3. For enhanced marketing through targeted advertisements

While improving the customer experience, Spotify has also been able to take in a huge chunk
of data generated through its users to update its ad campaigns and target customers in a more
impactful way.

This is basically done by the platform examining the knowledge it has gained about its
listeners and then taking that knowledge to create ads that are deceptively targeted to the
platform's target audience.

For example, one display ad that first ran in Williamsburg, New York launched an expanded
mainstream marketing campaign for Spotify, where the platform embraced listening history
to develop witty, targeted ads.

The first ad, which read "Sorry, Not Sorry Williamsburg, Bieber's hit was trending highest in
this zip code," was popular, engaging and entertaining among local audiences, helping
Spotify gauge possible impression based on listener data. the development of such
personalized advertising campaigns could create engagement and sales of platform users.

This experience started the trend of strategic and well-responsive ads that are adopted to
promote the platform even now. Some of the famous campaigns include a series of holiday
ads as well as a series of meme-inspired ads. In 2019, Spotify started running a campaign in
the global market based on the listening history of its users. In this campaign, funny and
meme ads were created for prospecting. In our prevalent world of meme-culture, there has
been an enthusiastic response from Spotify's potential and target customers.

4. Continuously update your system

In early 2018, the streaming platform said that their free users would no longer have to just
randomly play music in their app. Rather, their users now had the freedom to explore the
platform's 15 well-known playlists, which included the popular "Discover Weekly" as well as
"RapCaviar."

The primary intent behind the platform decision was data. The approach shift allows the
platform to produce data from hundreds of millions of additional users, which is very useful
as the company focuses on refining its design algorithms to provide its users with a satisfying
personalized experience.

In an effort to make their vast amount of data available to both their musicians and their
managers, the platform introduced the Spotify for Artists app, which provides access to
analytics such as playlists that help generate new users and the number of streams they
receive overall.

The mobile app allows musicians to access information through their tour bus, and streaming
geographic data can be useful for musicians and their teams to map out tours more
effectively. It also allows artists to gain more control over their presence on Spotify, such as
selecting an "artist selection" as well as tasks such as updating their bios or publishing
playlists..
5. Spotify Wrapped

This is Spotify's annual report, a tradition that gives every user of the platform an excuse to
share their musical tastes on social media without hesitation. The Spotify Wrapped data
application is not just about simple analysis.

The company has its own listening platform to incorporate ingrained ego-boosters for its
users. Around the end of the year, users will receive a report telling them if they're in the top
1% of, say, a band's most loyal followers, or among the top non-mainstream listeners.

Through Spotify Wrapped, the platform essentially serves data to its users on a silver platter
and presents it in a way that would engage and entice them. And it definitely works.
Artificially presented data succeeds in making users feel recognized and validated and sparks
their enthusiasm. Through this data, the platform develops a story-telling experience using
musical data instead of words.

"Seeing the best tracks on Spotify Wrapped is like seeing an old best friend you've lost touch
with."

- Haley Weiss in The Atlantic

This form of natural engagement becomes an integral reason why Spotify has retained
Spotify Wrapped to serve as a useful weapon in their long-term marketing design. Listeners
to the platform fill their social media accounts with screenshots of their Spotify profile and
also link their playlists to let their friends and family know where they stand on the platform.
Hence, In the modern world, where streaming now dominates purchased music, the industry
has been forced to shift its fixation from record sales to collecting such data in order to reveal
the impression a certain song, artist or album creates on the public. As the data also provides
deeper insights into listening trends, audience markets and other such sections, it represents
an unceasing revolution for people in the industry.

By being a social and sharing environment, and by combining its data application with a
robust user experience tailored for social media, Spotify is inadvertently becoming a self-
selling platform as users promote their engagement on their own.

Making Personalization the Center of Your Customer Retention Strategy

like Spotify

Long-term customers are more valuable to your company's growth than you might think.
A Harvard Business School study found that increasing your customer retention rate by
even 5% can increase your company's profits by 25-95%. And compared to customer
acquisition costs, retaining customers costs almost 5x less than bringing new customers
under your umbrella.

This means you're missing out on business growth if you don't focus on brand loyalty. In
addition to saving you customer acquisition costs, being able to build a pool of customers
who are loyal to your brand gives you an edge over your competitors. Your customers do
your marketing for you and spread the good word about your product and service.

But how do you connect with your customers to keep them coming back? The music
streaming platform Spotify is masterful at retaining customers. And we took a deep dive
to see how they do it.
Spotify is celebrating success
Originally founded in 2006 in Sweden, Spotify continues to see success. They have a
growing customer retention despite more competitors in the field. In the second quarter of
2021, Spotify had 172 million premium subscribers worldwide, which is even more than
the previous year. And Spotify's subscriber base has nearly doubled since 2017.
And that's why this month we're breaking down Spotify's customer retention strategy.
Here are a few reasons why we admire Spotify's customer experience strategy.

1. Spotify emphasizes customer onboarding

For Spotify, customer retention starts at the beginning of the customer relationship. Right
from the start, they give new users a list of reasons to stick around. Although Spotify users
can use the app for free, a Premium subscription gives users more features. The main
differences between a premium account and a free account are that Premium users can listen
to music without ads, can choose any song they want to listen to, can skip songs, and can
download music and playlists.

But even with all these benefits, Spotify can't assume that when a customer upgrades, they'll
want to pay for premium access for life. You need to remind customers what they're paying
for and why it's worth it. Spotify immediately engages customers and immerses new users in
the product's features. So, for example, when a new customer signs up for Premium, they'll
receive a branded email explaining all the features they can now use exclusively.

An effective onboarding program demonstrates the value of your product or service while
also showing that you value your customers. Make customers feel welcome after signing up,
subscribing or making a purchase. This welcome allows you to create a solid foundation for
building a brand relationship.

2. They prioritize high quality customer service

Imagine you are in your office with headphones and your workflow. You're concentrating
when suddenly your music stops playing. Yuck. Now you're distracted, wasting time
refreshing the app, searching online to see if it's just you or a system-wide problem. Your
work is cut out and you're wondering why you're paying $9.95 a month for a premium
Spotify subscription.

Any online streaming service runs the risk of the dreaded blackout. During these moments of
inconsistency, your customer retention depends on your customer service team. Spotify is a
company that still manages to please customers even during a crisis.

After the outage, Spotify immediately responded to all customer concerns across all channels.
Even after they fixed the issue, Spotify's customer service representatives made it a priority to
reach out to every customer who sent a message. One customer subsequently praised their
quick service and overall customer experience with Spotify. In response to her tweet, Spotify
thanked her with a curated playlist with a special hidden message within the playlist. Even if
something goes wrong, Spotify provides a personal and unique customer experience.

3. They make their customer experience as personal as possible

You could say that Spotify is obsessed with customers. They are professionals at collecting
customer data and using artificial intelligence to create the most personal experiences
possible. What's more, built on personalization, Spotify caters to each customer's preferences
and needs.

Here are a few key ways Spotify delivers personalized experiences:

• They actively monitor the content that customers listen to on the platform

• They use insights related to listening to provide personalized recommendations

• As customer preferences change, so do the Spotify playlists

Spotify uses artificial intelligence to show the right content to the right user at the right time.
They use it primarily to ensure that every Spotify customer has a unique experience tailored
to their tastes. No two Spotify customers have the same dashboard. Instead, each customer
receives a fresh and unique "Daily Mix" playlist every day, along with dedicated "Discover
Weekly" playlists that offer customers recommended music based on their listening habits.
And in the "Made for You" section of the app, customers can find playlists built based on
their past listening trends.

Spotify uses customer data to enable customers to discover new content. This not only makes
customers feel heard, but also offers customers a unique advantage that other music
streaming platforms struggle to compete with. After experiencing such personalized touch
points, it's hard to leave.

4. Spotify encourages customers to share their experiences

The use of AI and customer data culminates in one of Spotify's most popular features (and
best marketing strategy) "Spotify Wrapped". Described as "the story of your year with
Spotify", Spotify Wrapped is published at the end of each year. To wrap up your year, it
offers each customer a full report on their listening habits from the previous year.

As Spotify describes it in its Wrapped 2021 promos, "Wrapped is a deep dive into the artists,
songs and podcasts that defined your 2021. The more you listen, the better your Wrapped will
be when we launch it later this year."

These animated reports take you down memory lane, showing your listening minutes, your
top artists, top songs and favorite genres. Plus, your personal Spotify Wrapped can easily be
shared with friends via social media. Every year, customers share their Spotify Wrapped
messages, laughing with their friends about the crazy number of minutes they've been
listening to Spotify. And then welcome ridicule for the embarrassing fact that all of their top
songs were by Taylor Swift.

Customers want to share their Spotify experience with others. Thus, Spotify incentivizes
users to generate content on social media, promote the brand organically, and help Spotify
expand its brand among potential future customers.
Customer Lifetime Value for Spotify:

Spotify is a digital music, podcast, and video streaming service that monetizes service through both
subscription and advertising from the monthly active user (non-premium membership). The analysis
of the total value of customer prediction to the company during the term of the business relationship.
It can help to measure the future profit over the customer’s lifetime purchase (Customer Lifetime
Value). According to Spotify business model, We placed the concern to several accounts to capture
developing formulation to calculate customer lifetime value in Spotify business data, especially on
Premium Membership Segment.

Social media Marketing

Spotify social media handles are a great place to visit if you are a music lover. The music
streaming platform brings posts about various artists, new album updates of the music
industry.

Spotify has different social media handles based on different geographic locations. The brand
focuses on consistent branding across all of its pages.

The platform also runs various hashtag campaigns and social media trends to create
awareness of its brand.

The brand also works with social media influencers and runs sponsored ads where the
influencers promote the brand in their style.

Data-Driven Marketing Campaign

Spotify is mastering the art of selling using data from its streaming platform. The company
uses its music recordings to create marketing content. So it means that Spotify uses Spotify to
sell Spotify.

An example of a data-driven campaign is the campaign Spotify launched in 2016 that

connected the music platform with its users.
2016 was a strange year with Trump becoming the US President, celebrity deaths, Leonardo
de Caprio winning an Oscar and a lot more happening. So the music company took advantage
of this and created a campaign called "Thanks 2016, it was weird". The company used their
dates and playlists to create some jokes that made the audience laugh. The music platform
gained a lot of popularity after the campaign.
Conclusion And Scope

A Google Cloud customer since 2016, Spotify is the most popular global subscription audio
streaming service with 248 million users, including 113 million subscribers, in 79 markets.
Spotify is the biggest revenue driver in the music business today.

Industry: Media and Entertainment

Location: Global

Spotify exemplifies a new era of business expansion. It launched a music streaming service in
late 2008, surpassed 1 million customers in early 2011, and today offers 248 million monthly
active users in 79 markets access to more than 50 million songs and podcasts.

That's technology-driven hypergrowth by anyone's standards. Equally striking, however, is

the way Spotify continues to innovate its offerings while adhering to the enduring principles
for growing and sustaining a successful business: Pay attention to the customer. Find new
ways to please them. Use your comparative advantage, double down on the things you're best
at, and find good partners for your next work. Focus on scaling your culture even as you scale
your technology.

These old truths may be even more urgent in the digital age. Streaming audio is a competitive
business that requires rapid product development, customer understanding, and powerful
tools for things like recommendations, music discovery, and connecting people. In addition to
helping people find new music and podcasts, Spotify helps artists connect with fans and
collaborate with each other.

Google Cloud is proud to support Spotify's growing diversification and success. In 2016, we
worked together to move 1,200 online services and DAGs (directed acyclic graphs) for data
processing, as well as 20,000 daily job executions that affect more than 100 Spotify teams,
from Spotify's data centers to the cloud. Today, Spotify customers listen to billions of music
and podcast streams daily using the global Google Cloud network.
By leveraging automated developer services on Google Cloud, Spotify's teams could better
focus on their core business while gaining access to services like data analytics to grow.

“Google Cloud removes much of the operational complexity from our ecosystem. This saves
time,” said Tyson Singer, vice president of technology and platform at Spotify. “We can
iterate faster on key needs like data insights and machine learning. By managing the
infrastructure for us and removing the lower-value details, it simplifies our ability to focus on
what's important to our users and give them the experience they know and love with Spotify.”

Not surprisingly, Spotify has a very engineering culture, with nearly half of its employees
dedicated to building, marketing, and maintaining its products. With major research and
development offices in Boston, Gothenburg, London, New York and Stockholm, the size of
its workforce matches the global scope of its business. This requires a culture of collaboration
and fast execution. In the fourth quarter of 2019, Spotify announced 271 million monthly
users and 124 million Premium subscribers, a record that continues its history of global
growth.

Efficient use of data that preserves customer privacy, even as the scope of services is another
key part of the process. Part of this growth comes from a growing user base, but even more
from an effective understanding of the customer experience on Spotify. Technical brilliance
that combines data-driven insights with better customer experiences is getting easier and
faster in the cloud.

Robust building blocks that exist on top of the underlying data storage, computing, and
network services help eliminate many of the backend problems along the way to building
new products. Spotify's technology leaders point to the special importance of BigQuery,
Google Cloud's data analysis tool, as well as Pub/Sub, for faster software application
development. The data stream was also particularly useful for real-time and historical data
analysis.
Much of this data goes to solving the complex problem of personalization in new ways. Data
privacy is at the heart of Spotify's development efforts as it strives to offer music lovers new
ways to find the sounds they love and connect with artists. Podcasting, a recent pioneering
effort, relies even more heavily on robust discovery to discern things like topics, creators, and
user interest levels.

For artists, another dimension of data-driven discovery is the ability to find and connect with
fans or work on new material with other musicians. Artists on Spotify have access to
dashboards that allow them to get information about their fans and other artists, helping them
make better informed decisions about everything from where to schedule their upcoming tour
to when to drop their next release.

Ultimately, it's great user experiences that drive business. In the last year alone, the number
of Spotify premium subscribers has increased by 29 percent. The company attributes this
increase to growth in new markets as well as innovative new products.

At the root of Spotify's growth is its commitment to experimentation and innovation. Being
able to test a wide range of new features and ideas faster and more efficiently means that
Spotify will be able to focus its DNA of creativity and excellence on even more innovative
experiences for its satisfied listeners.
Biblography:

https://en.wikipedia.org/wiki/File:Spotify_HQ.jpg

https://cloud.google.com/customers/spotify

https://www.analyticssteps.com/blogs/how-spotify-using-big-data

https://www.forbes.com/sites/bernardmarr/2017/10/30/the-amazing-ways-spotify-uses-
big-data-ai-and-machine-learning-to-drive-business-success/?sh=6297989c4bd2

https://www.statista.com/statistics/294640/spotify-listenership-in-the-us/