Spotify - Engagement and Retention Strategy
- Naveen Selvaraj
- Oct 28, 2024
- 8 min read
In this assignment, I have developed a strategy focused on significantly improving Spotify's engagement and retention efforts. This plan includes actionable steps designed to increase user engagement and encourage long-term loyalty. Key components of the strategy include user segmentation, product hooks, and resurrection initiatives that can be customized for different audience segments. So, without further ado, let's jump into the assignment!
In the first section, we will examine the Engagement strategy, and in the second section, we will discuss the Retention strategy.
Engagement
Understanding Spotify
What is the core value prop of your product?
For this assignment, I've only considered Spotify's listeners, not the creators.
Value proposition for listeners: Experience a unique and superior audio listening experience. This refers to "audio" broadly, not just music.
In recent years, Spotify has positioned itself as an audio-first platform, enabling diverse audio experiences, including music, podcasts, audiobooks, music videos, and more.
How do users currently experience the core value prop?
Curation: data-driven personalisation and customisation of each user’s listening experience.
Extensive music catalogue: An extensive, growing music catalogue with over 80 million songs and 4 billion playlists. Over 60K songs are added every day. - 3.2 million+ podcasts
Convenience: Ease of access anywhere through quick, high-performance streaming.
Interoperability: Seamless across devices: start playing on one and switch seamlessly to another.
As users engage with the platform over time, they gain a deeper appreciation for its core value. The algorithm effectively learns about each user's profile, listening habits, music preferences, and the duration of their song plays, along with their responses to recommendations. This continuous learning process enables the platform to create a uniquely personalized experience for every user, enhancing their overall enjoyment and satisfaction.
What is the Natural Frequency of the core product(music)?
Do they have other sub-products? What is their core value prop?
Music can be considered Spotify's core product, and podcasts and audiobooks can be considered the major sub-products.
Following are the value propositions for all the major products:
Music: Enjoy a wide range of music, from popular hits to niche genres, tailored to your taste and mood.
Podcasts: Discover a wide range of podcasts that keep you informed and entertained, featuring everything from trending shows to exclusive content you won't find anywhere else.
Audiobooks: Enjoy captivating stories and expert insights with on-demand audiobooks, available anytime and anywhere.:
What is the best engagement framework for Spotify?
Considering the Depth, Frequency, and Breadth Framework:
Depth: Motivate users to engage more deeply with the product.
Frequency: Encourage users to engage more frequently with the product.
Breadth: Expand user engagement with different product verticals.
Depth would be the best engagement framework because the total listening time on Spotify(average session duration x number of sessions) makes much more sense and strongly correlates with user engagement.
Focusing solely on frequency can be misleading; some ICPs prefer one long audio session lasting several hours, while others may visit the app multiple times daily.
Breadth could also be considered a viable framework for engagement due to strong cross-selling opportunities across music, podcasts, audiobooks, and future content like news and sports. Spotify can leverage its existing music audience to enter these new areas.
However, our primary focus will be on depth because, for this assignment, we have not considered the full range of sub-products.
Defining the engagement strategy
Action(s) that make someone an active user of Spotify.
Any listener listening to at least 2 hours in a week's worth of audio content is an active user.
The natural frequency of the product
Users typically engage with the app on a daily basis.
Segmentation
Power/ Core/ Casual users(Detailed segmentaion below)
Casual users - Listens to Spotify once in 2-3 days, typically for < 2 hours a week and primarily contributes to Spotify’s revenue through ads and uses Spotify for music streaming or listening to podcasts.
Core users: Listens to Spotify daily for 2 to 14 hours weekly. They primarily drive revenue through premium subscriptions and use features like playlist creation, downloading audio, Jam Sessions with friends, and music streaming and listening to podcasts.
Power Users: They listen to Spotify 5 to 6 times a day, totalling over 14 hours a week. They contribute to revenue by purchasing Premium, Duo, Student, or Family plans. Apart from music. Listens to music, podcasts, and audiobooks. Also, finishes the 15+ audiobook hours and purchases credits for audiobooks.
ICP/ Persona Based(Detailed segmentation below)
Musical Mark
Loves music & is a big part of their life, views Spotify as a niche premium product
Builds personalized playlists of their own & shares them with their friends & family
Enjoys bonding with friends & family over music
Values time over money
Owns multiple dedicated audio gadgets for different occasions
Paid plan (Premium/ Duo/ Family) user
Budget Brando
Relatively younger and values money over time
Price sensitive as far as spending on music is concerned
Just listens to music in the background while doing some other activity
Listens to the same songs on a loop
Rely on their musical friend for the occasional discovery of new songs
Free plan user
Smart Stanley (Podcasts and Audiobooks lover.)
Is always on the lookout for knowledge, wants to optimize their productivity (content consumed to time spent ratio - Insanely values their time)
Prides themselves on knowing the most obscurest of things in the domains that interest them
Super career-focused, political, workaholic & constantly upskilling themselves
Values time over money
Occasionally also loves listening to music
Mix of free & premium users
ICP segmentation based on personas
Usage-based segmentation
Engagement Campaigns
Campaign 1: Go premium!
Campaign 1 flow and touchpoints
Campaign 2: Join your favourite artists!
Campaign 3: Popular audiobooks in your circle!
Campaign 3 flow and touchpoints
Retention
Understand
Which ICPs drive the best retention?
Musical Mark & Smart Stanley drive the best retention.
If we want to look at the retention rates by plan, data is publicly available.
Which sub-features/sub-products drive the best retention?
Podcasts, Discover Weekly, Charts
Define
Top reasons for churn
Voluntary Churn
Alternate Music Service premium subscription available bundled with access to video content (YT Music, Amazon Music)
Ads
Price Sensitivity
Unaware of most of the features on Spotify paid plans (Free users)
Don't have enough collection of songs in specific languages
Audio Ads in Podcasts - Power Users
Involuntary Churn
Moved to a country without Spotify availability
Students graduating & unable to renew their Student Plan
Negative Actions
Decrease in frequency of usage
Decrease in time spent on Spotify daily
Decrease in the number of songs liked
Decrease in the number of new songs listened to
Removal of Spotify as the default music streaming choice from other integrations like Google Home, Alexa, Shazam, Tinder, Bumble
Subscription renewal to a lower tier
Low NPS/ CSAT
Resurrection Campaigns
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