Analysis of the Marketing Mix Adopted by Napster - Case Study Example

Running Head: CASE STUDY – NAPSTER Executive Summary The main aim of this study was to analyse the marketing mix adopted by Napster and to analyse how the company has been able to use the marketing resources to a more effective and efficient manner. The paper also aims at discussing strategies to overcome risks for the company. The paper discusses in detail the marketing mix of the company. Also the three risks that have been chosen for this study include, as explained in the case “a) The success of our Napster service depends upon our ability to add new subscribers and reduce churn, b) We rely on the value of the Napster brand, and our revenues could suffer if we are not able to maintain its high level of recognition in the digital music sector and c) We may not successfully develop new products and services” (Napster, 2010). These have been chosen from the list as provided in the case. A set of recommendations have been set out for the company based on the above mentioned risks. Firstly, to improve the customer retention and to use churn models along with customer relationship marketing to reduce the customer attrition to a great extent. Secondly, it is advisable that the company considers a brand extension to be able to keep up their market position and brand image. Table of Contents Executive Summary 0 1.0 Introduction: 1 2.0 Evaluation of Marketing Mix: 2 2.1 Product 2 2.2 Price 3 2.3 Promotion 4 2.4 Place 5 2.5 People 5 2.6 Process 6 2.7 Physical Evidence 6 3.0 Risk Strategies: 6 3.1Customer Churn: 7 4.0 Conclusions 10 References 10 1.0 Introduction: Napster has brought about a new brand and a very useful programme for friends and family to share music online in a simpler and effective manner. The company was started in 1998 and 1999 by a young Shawn Fanning and the system was then known as Peer to Peer. Although the company only operates within United States, the company was a big hit among the customers and there was a clear interest in people across the world as this was a very effective way of sharing music online. However, the success of the company was short lived and the company was faced with a number of lawsuits by the recording companies and others. The main aim of this paper however is to focus on the marketing techniques and marketing mix of the company and to assess the company’s marketing mix. The paper will deal with each of the 7 P’s of marketing and will evaluate the company’s performance based on the same. Also the paper will develop strategies for the company to be able to deal with the perceived risks and will help provide recommendations to the company. The next section will deal with the evaluation of the marketing mix used by the company. 2.0 Evaluation of Marketing Mix: The aim of this section is to discuss the 7 P’s of marketing and the position of Napster in the markets based on the 7 Ps. The section provides a clear analysis of the company and relates it to each of the seven elements of marketing. Based on the research, the marketing mix of the company can be explained as follows: 2.1 Product Clearly, the main product of the company is music. The company provides unlimited access to the customers to access a number of different songs. The services that the company provides include radio, and also downloadable songs along with an option for the customers to also customize their choices. The choice that the company provides acts a competitive advantage of the company when compared to a number of its competitors. The company has also been able to develop a reputation which explains, “All you can eat music service which is fun and affordable” (Chaffey, Ellis-Chadwick, Johnston, & Mayer, 2006). The company has been able to develop a strong brand image and has also been able to create a number of happy customers across the world. The main objective of the company is, “to continue to build the Napster consumer brand – as well as increase awareness of the Napster brand identity” (Chaffey, Ellis-Chadwick, Johnston, & Mayer, 2006). These help in the strong development of the brand name and image of the company. 2.2 Price Napster has provided a very different approach to the overall music download experience. Unlike its competitors the company does not price its products on a ‘per track’ or ‘album’ basis and the company simply follows a monthly fee based on which the customers can download as many tracks as they prefer. This is a relatively modern approach being used by the company and it provides the customers with a completely different experience (Gillin, 2008). The company also provided the customers with a wide range of choices for the payment options which includes, credit cards, online payment systems like Paypal (Gronroos, 1994). This is very similar to many of the competitors like Apple as well. However Napster has been able to take the pricing aspect to a whole new level, when compared to its competitors. 2.3 Promotion One of the main methods that the company has adopted for its promotion includes that of strategic partnership. The company to a great extent relies on the strategic marketing relationships and makes continuous efforts to build better relationships. There have also been a number of efforts offline as well to build the brand name and image (Bearden & Laforge, 2003). The company has developed strategic partnerships with companies like Microsoft, Target, Blockbuster and many others which in turn permit better promotions for the company and better marketing as well. With the assistance of these relationships the company is able to use the partnership to its benefit and to invest in newer technologies and also newer services to develop the company. The company unlike its competition Apple does not bind its customers to buy the same hardware by making sure that the services and products that they provide is compatible with hardware of different companies. With the partnership that the company currently possesses, it is essential to note that the products and services are more compatible and flexible and can be used with the latest technologies available in the markets (Kistner, 2001, Moran & Hunt, 2008, Hakansson & Waluszewski, 2005). 2.4 Place The company’s main area of operations is online. The company although can cater to the markets across the globe, it presently operates only within United States, Canada and United Kingdom. Presently there have been a number of efforts to expand its business across other countries like Japan as well (Noel, 2009). The company however requires a great deal of improvements to be able to meet the competition and to do so firstly the company requires to work on improvising local based websites for the countries and regions, to cater to the needs of languages, culture and also the taste in music. Developing local sites for the different countries will allow a better and more focused approach for each market (Kistner, 2001). 2.5 People The company caters to the needs of many people across the markets. The company statistics show that it had as many as 410,000 subscribers and the company’s main audiences were men over the age of 25. This however cannot be used as a clear evidence of the customers that the company caters to. It is also essential to note that a number of customers who buy from Napster tend to use the opportunity to listen to the music before buying the original album or CD (Hope, Casey, & Design, 2008). The main focus here is to retain as many customers as possible based on a pay as you go rate. This forms the basic strategy of the company. 2.6 Process The company in the present times does not deal with any new product development and is mainly focused only on the sales of music. The company does work based on innovation and works on developing better file formats which are flexible and can work on different platforms (Hakansson & Waluszewski, 2005). This is one of the only aspects that allow the company to compete in the markets and to continue to be competitive in the markets. 2.7 Physical Evidence Since the business is based online, practically there is no physical evidence that is available in the markets. The physical evidence however can be related to the user experience that the company provides the customers (Kotler, Kotler on Marketing: How to Create, Win, and Dominate Markets , 1999). With an excellent user friendly website and a simple payment system, and wide range of high quality features, the company clearly portrays good physical evidence when compared to any of its competitors. 3.0 Risk Strategies: Every company has a strong set of perceived risks. In the case of Napster the case puts down sixteen such risks and brings out the potential areas that require to be covered to compete in the markets. Three risks of the sixteen have been chosen and recommended strategies have been discussed in the following sections to be able to tackle these risks. The three risks chosen here for the case includes as explained in the case, a) “The success of our Napster service depends upon our ability to add new subscribers and reduce churn. b) We rely on the value of the Napster brand, and our revenues could suffer if we are not able to maintain its high level of recognition in the digital music sector c) We may not successfully develop new products and services” (Napster, 2010) Based on the study and research, the following strategies have been developed for the company to overcome the risks. The recommendations have been based on through research and based on various theories and models that have been discussed by experts in the past. The most appropriate approach for each risk has been discussed in the sections below. 3.1 Customer Churn: It is a known fact that it is extremely difficult and costly to acquire a new customer. Marketers have to be abreast of all technological advancements happening in the market and make way for their own selves. Gronroos (1994) says that better service delivery clubbed with competitive pricing and features with a sharply focused marketing strategy can help the customer acquisition process the best (Gronroos, 1994). The main focus for the company needs to be on retention of the customers/subscribers. The churn model can be combined with the Customer relationship marketing metrics like profitability per customer, longevity of each customer, so as to design a tailor made retention strategy whenever a churn probability appears (Evans, O’Maley, & Patterson, 2004). Moreover, this way the retention plan can also be made realistic and given adequate time. With this it helps when a customer churning happens. In that case, more revenue generating customers are contacted as soon as possible and are ‘forced’ by various attractive offers to maintain their subscriptions. Some customers, whose revenue addition to the company is not very high, are encouraged to increase their usage (Evans, O’Maley, & Patterson, 2004). These churn models have a capability to apply retention strategies on consumers with high tendency to churn. Not only those, the retention strategies are personalized and hence vary on the basis of customer value. This effectively helps in the churn management as well as control, resulting in high cost savings. 3.2 Brand Recognition: In terms of the brand name and image the company has been able to build a brand image for the music sector. It is essential that this is kept up and the brand name is well promoted to allow customers to remember the name. However, Napster also has a high opportunity to develop newer brand stretching (Chaffey, Ellis-Chadwick, Johnston, & Mayer, 2006). Brand Stretching refers to use of the well established and stabilised brand names of products to develop product or service of a completely unrelated market. An example of this is Yamaha, a motorbike company originally from Japan. Yamaha has created a strong market presence for itself across the world and the company moved into production of branded hi – fi music instruments and equipments and also sports equipments (Kotler, Kotler on Marketing: How to Create, Win, and Dominate Markets , 1999). In the case of Napster the company can opt to move into development of their own t-shirts and accessories. The company can use this opportunity to develop a new side business and this can be used to help promote the company and will also act as a brand extension for Napster as well (Kotler & Keller, Marketing Management, 2008). This is an effective manner to not only increase the brand and brand awareness but also a positive method to improve the brand reach as well. 3.3 Product Line: Diffusion of new products into a market place needs careful analysis and strategic planning. These strategies can be effective if a right choice is made regarding the target markets and where the products need to be introduced (Johnson, Scholes and Whittington, 2006). Authors and experts in the field have developed a ‘diffusion of innovation process’, which explains how a new product spreads throughout a market over time. The diffusion of innovation process is very easily linked to the product life cycle. According to Jobber (2003, p.229), “a product is anything that is capable of satisfying customer needs”. It is essential to understand that the needs of a customer change over time. These changes in the needs of the customers, to a great extent lead to the changes in the products as well. In the case of Napster the company requires to concentrate on development of new techniques and formats that can be used for the music business and can also concentrate on development of hardware that can be sold (Johnson, Scholes, & Whittington, 2006). However more than the new product development the main focus of the company should be more so on the innovations and improvements of the current products than the new product development. 4.0 Conclusions In conclusion, a lot of care needs to be taken by companies while trying to diffuse the new products into markets as well as when companies adopt to extend the brand. Napster has a strong opportunity for a brand extension and is necessary that the company uses this as it will assure better brand image for the company (Evans, O’Maley, & Patterson, 2004). It is also essential that the company focuses on strategies to improve and increase the customer retention and loyalty of the customers to help it grow and face the competition in the markets to a greater extent. References Bearden, W. O., & Laforge, R. W. (2003). Marketing, Principles and Perspectives: Principles and Perspectives. Irwin Professional Pub . Chaffey, D., Ellis-Chadwick, F., Johnston, K., & Mayer, R. (2006). Internet Marketing. Harlow: Prentice Hall. Evans, M., O’Maley, L., & Patterson, M. (2004). Exploring Direct and Customer Relationship Marketing. London: Thomson Learning. Gillin, P. (2008). Secrets of Social Media Marketing: How to Use Online Conversations and Customer Communities to Turbo-Charge Your Business! Linden Publishing. Gronroos, C. (1994). From Marketing Mix to Relationship Marketing – towards a paradigm shift in marketing. Marketing Journal , p322-339. Hakansson, H., & Waluszewski, A. (2005). Developing a New Understanding of Markets: Reinterpreting the 4Ps. Journal of Business and Industrial Marketing , p110-117. Hope, E. V., Casey, S., & Design, N.-I. (2008). Mastering Niche Marketing: A Definitive Guide to Profiting From Ideas in a Competitive Market. Globalnet Publishing. Jobber, D. (2009). Principles and Practice of Marketing. McGraw Hill Higher Education. Johnson, G., Scholes, K., & Whittington, R. (2006). Exploring Corporate Strategy. Essex: Prentice Hall. 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