Music Giant Refreshes Digital Music Strategy by Understanding New Consumer Behaviors and Product Models
Background and Challenge
New and disruptive streaming music services have unsettled the music business. A major music company was evaluating the future of its digital music offering as physical sales and downloads plummeted.
As a result, the major record label enlisted L.E.K. Consulting to further understand the consumer audio listening behaviors and trends of current and potential customers. One challenge was assessing the landscape for existing and emerging digital models in order to prioritize future action.
Approach and Recommendations
L.E.K. organized a consumer survey across various demographics and U.S. locations to gain insight. The survey focused on key behaviors and psychographics to understand the broader U.S. population. Key inputs of the survey involved:
- Historic and current music consumption
- Key purchase drivers and inhibitors
- Marketing access or action channels for distribution
- Segmentation characteristics
The survey indicated that digital purchases were growing significantly, with digital streamers forming the core targeted market. To better understand the population, L.E.K. segmented customers into seven groups across all demographics: ethical downloaders, obsessed music customers, sharers, peer-to-peer copiers (pirated music), free-only streamers and traditionalists (still favor CDs).
We then analyzed these core customer groups to evaluate their spending habits and how spending was changing. The results indicated that there were new opportunities to increase conversion from digital service to paid acquisition, convert the traditionalists, monetize the free-only streamers and deal with the pirates.
Equipped with specific and actionable strategic recommendations, the major media giant refreshed its global music strategy. L.E.K. also recommended it build a robust period-to-period or continuous response tracking system. The company is now able to better track trends over time, achieve economies of scale, and create the ability to evaluate customers and noncustomers at the segment level.