All posts by 375468lt

Fair share for all musicians.

May 1, 2015 375468lt Leave a comment

The music industry is constantly changing and in need of new business models. This is due to several factors including disruptive technology. For example, the format on which music has been delivered to the consumer over the last few decades we went from mixtapes, to CDs, to MP3s, and more recently music is also delivered in the form of streaming. Popular streaming services include Pandora, Spotify, and Beats. Beats has been bought by Apple and is expected to be re-released in summer 2015.

However, with the digitization of musical content and the internet, it has also become easier for consumers to get music without paying for it. For, example in the form of illegal album downloads and illegally copying and sharing such content. Hence, it has become increasingly difficult for new musicians to make a living based on record sales. Nowadays, as music is more often offered nearly for free, the majority of a musician’s income is from touring, endorsements, and merchandise.

Major record labels, such as Warner Music Group recognized this trend now requires all new artists to sign “360 Deals” contract. In such a contract, record labels receive a percentage of all earnings, and not just earnings from record sales. In return record labels will commit more managing every aspect of a musicians career. For example, record labels are now allowed to give away music for promotional purposes.

Over the years, many artists have voiced their opinion about the services through which they deliver their content. Rapper Nipsey Hussle believed that Apple’s iTunes did not give him a big enough cut for every download of his song and decided to sell his Mixtapes for $100 each. The 1000 copies that he printed sold out. Also, singer Taylor swift was not happy about how much she and artists earn for each song stream on Spotify. In 2014 she decided to remove her music content from Spotify which lead to a lot of media attention.

“The future is Tidal.” according to rapper Jay-Z. Tidal a streaming business bought by Jay-Z for $50 million and looks to redistribute the wealth among musicians. It promises to offer all artists on the streaming service a higher percentage of pay per stream than its competitors. The subscription fee for consumers is also higher than that of competitors, while the differentiation of the service, which is higher audio quality that requires special equipment to hear, is negligent to most users who listen to their music on their phone. It is still early to judge Tidal’s success, but the company is already valued $250 million since the artist bought the company.

Another way to support artists is through funding the artists on a crowdfunding platform, such as Patreon. Patreon lets fans become patrons of their favorite artists and content creators. It’s different from other crowdfunding platforms such as Kickstarter. Whereas, on Kickstarter you fund specific projects, on Patreon you fund artists.

Patreon seeks to empower content creators by allowing patrons to donate money to their artists. This could be in the form of a one time “tip” donation, or a monthly contribution, or an amount for every time the content creator releases new content, such as a new song, video or recipe. Content creators can set what patrons will get in return for the monetary support. For example, meeting monthly on google hangouts, production tutorials, pre-sale concert tickets, or any other way to show their gratitude.

Grooveshark, a platform where consumers could upload copyrighted content, recently shut down with the following statement: “If you love music and respect the artists, songwriters and everyone else ho makes great music possible, use a licensed service that compensates artists and other rights holders.”

Based on recent developments such as the shutdown of GrooveShark and the continuous deletion of copyrighted content that is uploaded on youtube, I expect that as time continues, the regulation on music increases. Hence, I expect that in the future, paying for music will be the norm again, just like it was before the era of illegally downloading mp3s.

But what will be the best way to support an artist? To subscribe to a streaming service, funding through Patreon, or somehow donating to the artists directly?

References:

https://consumervaluecreation.wordpress.com/2012/01/28/music-industry-in-need-of-new-business-models/

https://consumervaluecreation.wordpress.com/2014/04/27/grooveshark-search-play-discover/

http://time.com/3554468/why-taylor-swift-spotify/

http://www.forbes.com/sites/natalierobehmed/2013/11/06/rapper-nipsey-hussle-and-the-100-mixtape/

http://musicians.about.com/od/ah/g/360deals.htm

http://www.engadget.com/2015/05/01/rip-grooveshark/

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Articles

The Effect of Customers’ Social Media Participation on Customer Visit Frequency and Profitability

April 26, 2015 375468lt Leave a comment

As people are spending more time on social media sites, firms allocate more of their resources to social media. Social media could be used to acquire and or retain profitable customers. However, it is difficult to measure the direct effect of social media efforts on firm profits. This could make it difficult for managers to justify their promotional budgets and social media spending (Rishika et al., 2013).

Rishika et al. (2013) study firm’s return of investment on social media efforts. Moreover, in their study they investigate how the overall social media activity and customer characteristics affect the customer-firm relationship, which is measured as the frequency that the customer visits the firm’s shop.

The authors verify that participation in firm hosted social media by focal customer will have a positive impact on the intensity of the customer-firm relationship. Moreover, they find that customer’s participation on a firm’s social media site increases customer’s frequency of also visiting the firm’s shop. Also, the firm’s amount of message postings and responsiveness on social media increases the customer’s participation on the social media site. However, these vary for different customers with different customer characteristics.

The CRM literature suggests that there is a positive association between the consumer’s average transaction amount and satisfaction, which results in better behavioral outcomes, such as increased commitment towards the firm. This brand loyalty contributes to an increase in the customer lifetime value (Crosby et al., 1990). Rishika and al. (2013) argue that high value customers feel that they are more important to the firm and that thus they are likely to value a firm’s relationship investments in social media more than low value customers. Indeed, they verify their Hypothesis 3: The impact of participation in firm hosted social media on the intensity of the customer-firm relationship will be greater for customers with a larger purchase amount.

Customers who purchase premium products are often the most lucrative firms, and hence it is in the interest of firms to retain these customers. The authors find that the impact of participation in firm hosted social media on the intensity of the customer- firm relationship is greater for customers who have a greater share of premium product purchases.

The findings of the study by Rishika et al. (2013) have several managerial implications. Firstly, it is that it is important to nurture customer relationships through social media, since active social media efforts could increase the bond between customer and the firm and lead to long term financial performance, due to increasing customer visit frequency. Secondly, since different customers react differently to certain social media efforts, it is important to segment your customers on social media. Managers can create subcommunities or discussion forums customers who are interested in premium/unique products.

References:

Rishika, R., Kumar, A., Janakiraman, R., & Bezawada, R. (2013). The effect of customers’ social media participation on customer visit frequency and profitability: an empirical investigation. Information systems research, 24(1), 108-127.

Crosby, L. A., Evans, K. R., & Cowles, D. (1990). Relationship quality in services selling: an interpersonal influence perspective. The journal of marketing, 68-81.

Business Case

Stitch Fix’s value co-creation

April 4, 2015 375468lt Leave a comment

In the past it was easy to make a choice due to the lack of options among products. However, this has changed drastically. According to the NY times consumers see around 3,000 to 20,000 marketing messages a day. Moreover, we are bombarded with choices. Choice overload, which happens offline as well as online, exists for all kinds of products and services that we need.

Choice overload also exists when we shop for new clothes. Offline overload could exist when we go into a store and are presented with too many choices. Online overload happens when we browse a web store and experience choice overload. Source overload happens when too many websites and or platforms exist that makes it difficult to choose where to shop.

In 2011 Katrina Lake launched Stitch Fix. Stitch Fix is a fashion retailer that combines expert styling and technology to deliver a shopping experience that is personalized for the customer. It does so by having you first fill out a survey so that your personal stylist knows your preferences. Then it will send you five clothing items or accessories from various brands tailored unique to your taste. You can try all the items at home. You can buy what you want and then return the rest. Shipping and returning items are for free. Hence, Stitch Fix partially solves the choice overload that customers experience when shopping, by filtering the endless amount of choices into five choices.

Online recommendation systems used by companies such as Amazon.com learn from your preferences by tracking your searches and clicks in order to provide you with products that you might want. However, depending whether the algorithm and machine learning works well, this could lead to undesirable outcomes. For example, you could end up getting unwanted recommendations after you buy a gift for a friend or your mother who have different tastes and preferences in products than you have.

What makes Stitch Fix different than other online shopping experiences is that there is a human personal stylist involved in the item recommendation process. Your personal stylist handpicks five items just for you, based on your set preferences. Stich fix charges $20 styling fee for each item that you buy. But if you decide to buy all five items, you will get a 25% reduction on the total price of the shipment. The company gathers data and your feedback on the items that you decide to buy and the items that you decide to return to update your preferences. This will be then used to make better recommendations in the future. Hence, as stated by Stitch Fix, the more you make use of the service the better your personal recommendations will be and greater your satisfaction.

The success of Stich Fix proves that there is indeed a need for personalized recommendations and active customer participation. Furthermore, it shows that customers are willing to pay a premium on top of store prices for services that makes things convenient and or saves time.

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