Why are marketing strategies important? Companies use marketing strategies to increase their profitability by growing their market share. A higher market share can create a strong advantage for an organization. If a company releases a product or service for which there is a demand, then that means more people will purchase it (generating more revenue), it will be easier to advertise (reducing ad spending), and it will be more difficult for competitors to compete against (solidifying the organization’s position in the marketplace). Companies rely on effective strategies to increase market share, such as innovating with their products, developing and maintaining good relationships with their customers, and outperforming their competitors. In this Discussion, you will consider how a specific company could benefit from increasing its market share, as well as provide recommendations for how to do so.
Select a company you are familiar with or one that is well-known that you feel could benefit from increasing its market share.
Post an evaluation of marketing strategies for capturing market share for a company, to include the following:
Provide a brief description of the company you selected.
Explain how you think the company could benefit from increasing its market share.
Justify at least three recommendations that the company could incorporate to increase its market share.
Benefits of Increasing Spotify's Market Share
Spotify is already the market leader, but increasing its market share (especially its share of premium subscribers and its share of the total audio market) offers several critical benefits:
Increased Negotiating Power (Reduced Costs): Spotify's largest cost is royalty payments to music labels. A higher global market share gives Spotify greater leverage in negotiating lower royalty rates or more favorable licensing terms with the "Big Three" record labels. This directly and significantly improves its profitability and gross margins.
Network Effects and Data Moat: A larger user base (the network effect) makes the platform more valuable to artists and advertisers. More users lead to more listening data, which in turn makes Spotify's personalized algorithms (its "secret sauce") even more accurate and "sticky," making it much harder for competitors like Apple Music or Amazon Music to offer a comparable user experience.
Monetization of the Free Tier: An increase in the total user base (including the free tier) exponentially increases the revenue potential from ad-supported services. Furthermore, the freemium model acts as a highly efficient funnel, where a larger free user pool ensures a continuous flow of conversions to high-margin premium subscriptions.
Recommendations to Increase Market Share
To increase its market share, particularly in high-growth audio categories and emerging markets, Spotify should focus on product differentiation, price segmentation, and content exclusivity.
1. Launch a True "HiFi/Lossless" Tier (Product Differentiation)
Justification: While Spotify pioneered music streaming, competitors like Apple Music and Amazon Music offer high-fidelity (lossless) audio at competitive, or even bundled, prices. By launching a true Spotify HiFi tier, potentially priced higher than the current Premium subscription, Spotify can target and capture the audiophile segment of the market and eliminate a key point of differentiation currently used by its rivals. This retains power users who might otherwise switch and justifies a price hike, boosting Average Revenue Per User (ARPU).
Sample Answer
Marketing strategies are vital because they provide the roadmap for achieving business objectives, particularly profitability through market share growth. Effective strategies create a virtuous cycle: increased market share leads to higher revenue, lower ad spending per customer (due to easier advertising), and a strong competitive moat.
I've selected Spotify for this evaluation.
Company Description: Spotify
Spotify Technology S.A. is the world's leading audio streaming subscription service. It is known for its freemium model, offering both a free, ad-supported tier and a paid, ad-free Premium tier. With hundreds of millions of monthly active users across over 180 countries, its core competitive advantage lies in its proprietary algorithms for music discovery, such as "Discover Weekly" and "Release Radar," and its extensive investment in both music and non-music content like podcasts and audiobooks.