Monthly Archives: November 2015

Review: Success factors for online music marketing

Assignment#1: Article Report

Title – Success factors for online music marketing – eTransformation: from the four Ps to the four Cs.

Authors – Cornelia C. Krueger, Paula M.C. Swatman, and Nhiem Lu

Link:http://www.researchgate.net/publication/228607822_Success_factors_for_online_music_marketing-eTransformation_from_the_four_P’s_to_the_four_C’s 

Introduction

As a part-time busker and an MBA candidate who specializes in product and service management, I have always looked for ways to utilize what I learned in classes, especially those that are marketing related, in delivering my own music to as many people as possible via internet. As music produced by professional musicians can be easily obtained freely over the internet it has become extremely difficult to sell music online and make a profit even for major record companies. The article “Success factors for online music marketing – eTransformation: from the four Ps (price, promotion, place, and, product) to the four Cs” carefully looks at the implications of the four Ps and the changes the internet brought to the four Ps. Furthermore, the article talks about the newer concept of four Cs (customer solution, customer cost, convenience, and communication) and how it can dramatically help music retailers and musicians with their online sales.

Synopsis

The article talks about three main points:

First, having mentioned that the marketing mix (i.e. the four Ps) is an integral part of marketing strategy as it defines the marketing instruments used to achieve the company’s marketing goals, the article goes on to argue that its focus on “product” can be considered a weakness in an eCommerce environment and that in today’s more customer centric environment, “pull” approach instead of “push” approach, in which producs are created to cater to people’s needs, is the key in successful marketing strategies, with products being created to suit customers’ expressed needs.

Second, the article argues that the four Ps should be redefined into the aforementioned four Cs (customer solution, customer cost, convenience, and communication) in order to ensure success in eCommerce. Appendix A summarizes the differences between the four Ps and the four Cs.

Third the article goes on to analyze how Amazon.com uses the four Cs effectively in order to boost their sales and how musicians and music retailers on the other hand fail to do the same. Based on this analysis, the article discusses the so-called success factors for online music marketing. Appendix B summarizes these factors. 

Review

Overall I truly enjoyed how the article applied the concept of the marketing mix to its search for the success factors for online music marketing, and how the article successfully sheds a light on a very important fact that in this age of internet, it is indeed the customers who get to choose what, when, where and how they consume in a strike. In other words, the music industry should not dictate the four Ps in this new economy but instead should try to treat potential customers as partners and place them at the centre of the new marketing mix. Having said that, there seem to be a few flaws in its arguments.

First, though the idea of decriminalizing peer to peer by making people pay for streaming services has been implemented by companies such as Spotify, it does not seem to help major record labels and musicians with recovering displaced revenue. According to the analysis done by Aguiar and Waldfogel (http://www.cnbc.com/2015/11/04/does-spotify-hurt-the-music-industry.html), Spotify is revenue-neutral. In other words, Spotify barely maintains the royalty rate (i.e. around $0.007 per stream goes to the musician or record label) that meets the traditional sales displacement rate (i.e. one’s streams effect on track sales) as seen in the appendix C. Even if streaming somehow boosts sales, that is because it indirectly promotes the music (which in turn may generate sales increase).

Furthermore its argument that there are many similarities in concept between selling music online and selling books or CDs online (e.g. Amazon) and that the recorded music sales would increase when the four Cs are carefully taken into account sounds somewhat farfetched. Though it is true that many companies such as Spotify and Apple implemented the four Cs following the Amazon’s success (Appendix D) and managed to switch to subscription streaming services from the traditional downloading distribution in order to secure their revenue source from online music distribution, the fact that the recorded music sales either via downloading and streaming are nearly 50% below their peak in 2000 is indisputable (http://www.wsj.com/articles/itunes-music-sales-down-more-than-13-this-year-1414166672). The increasing availability of free music (e.g. Youtube) clearly has been eroding the demand for digital music download as apparent from the fact that global revenue from music download has been declining. On the other hand, according to Apple’s iTunes sales report, the demand for movies, apps, and books download is increasing. What this implies is that implementing the four Cs does not necessarily lead to sales increase for record labels and independent musicians.

In conclusion, although most of the success factors for online marketing, namely “customer as an allied”, “De-criminalise P2P networks by making them pay”, and “use the Internet technology to make customized offers”, can be said to be effective in promoting music online, the key success factor “concentrate on selling digital music as a core competence” does not seem to work for increasing digital music sales as apparent from the declining volume of digital music download in the new economy.

Appendix

Appendix A: Putting the marketing mix into practice – the four P’s vs. the four C’s (Sources: Strauss/Frost, 2001; Chaffey et al., 2000)

Screen Shot 2015-11-14 at 10.14.18 PMScreen Shot 2015-11-14 at 10.14.45 PM

Appendix B: Success Factors for Online Music Marketing

Screen Shot 2015-11-14 at 10.44.20 PM

Appendix C: Sales Displacement Rate

Screen Shot 2015-11-15 at 8.53.44 AM

Appendix D: Implementation of the four Cs on Amazon.com

Screen Shot 2015-11-15 at 7.43.01 PM