Research on customer acquisition and retention strategy used in music companies

Research on customer acquisition and retention strategy used in music companies


Index
Introduction………………………………………………………………………….
Literature review…………………………………………………………………….
Research objective…………………………………………………………………...
Research question……………………………………………………………………
Sample technique and size…………………………………………………………..
Data collection……………………………………………………………………….
Data analysis…………………………………………………………………………
Time frame…………………………………………………………………………..
Expected result and findings…………………………………………………………
Conclusion……………………………………………………………………………












Introduction
The sole aim of the current study is to highlight the customer acquisition and retention strategies adopted by the companies in music industry. This study will try to catch the general trend prevailing in the music industry as well as the evaluation of each of the company’s marketing strategy to acquire the new customer for its business. And also at the same time research will try to include the customer perspective on the customer acquisition strategy used by the companies.
Customer acquisition is one of the crucial aims of any companies marketing strategy since in today’s era when customer are more focused towards functional and technical benefit offered by the company and since the switching cost are very low so there is not much loyalty in the music industry (Buttle, 2008). Along with that there is intense competition prevailing in the music industry due to which companies have to focus on customer acquisition since in order to sustain in such intense competitive environment successful customer acquisition strategy is required by the companies (Leihs, H. 1999).
The study here focus on some of the largest music companies which are operating not only in a specific country but around the globe and are considered to be the world’s best companies. These include music players like Universal Music Group, Sony Music Entertainment, EMI Group and Warner music group (Rogers, 2004). The study will compare the marketing strategy used by these companies in order to acquire the new customer for their companies. Since it has been proved from various studies that acquiring a new customer is much more costlier than retaining a customer so study will also focus on how these companies retain their customers.
Universal Music Group
Universal music group is world biggest music group in recording industry. It was founded in year 1934 as Decca records. It has revenues of $6.14 billion. It is the largest of the big four record companies looking at its market share and operation in various countries. It has its own music publishing house which has become world’s largest after the company have acquired the BMG music group in year 2007.
EMI Music Group
Electric and music industries (EMI) are a well established name worldwide in music industry. It’s a British music company which was founded in year 1931. It’s a part of the parent firm called Terra Firma. Its annual revenues are $1.65 billion. Company has its competitive advantage into stereo sound recording field.
Sony BMG
Sony BWG music entertainment is a joint venture between Sony music entertainment which is a well known music company from USA and Bertelsmann AG. It was founded in year March 2004. It is a part of the big four recording companies of the world. And it is involved in ownership and distribution of recording labels. Some of the big names of recording labels under its name include Arista records, Columbia records, Epic records and Legacy records.
Warner Music Group      
Warner music group is the third largest business group in the record family and a part of the big four recording family in the world. It was founded in year 1958 by as warner Bros records. It has annual turnover of more than $3.4 billion. It also has a music publishing arm with name called Warner/ Chappell music.












Literature Review
Customer Acquisition
Customer acquisition is the continuous customer involvement process which ends up with the customer first purchase. Another acquisition perspective approach says that the customer acquisition process ends up with the purchase and non purchase encounters of the customer with the company (Mary Jo, 1981). Repeat purchases are also assumed to be the part of customer acquisition process according to the customer acquisition perception process.
Customer perception theory is better since it includes the initial phase of customer bonding between the customer and the firm which strengthen the relationship between the two (Gerson, R.F. 1993). There are always huge costs involved in the acquisition process which are also said to be the non product cost for the company since these do not include expenditure on the products of the company.

Customer Acquisition Strategy
The general framework for the customer acquisition strategy includes the following steps:
1.      Selecting suitable target customer for the company offerings
2.      Providing the flexible product that can suit customer requirement
3.      Managing customer complaints
4.      Analysing account closures
Though the marketing processes followed in the companies tries to define their customer segments and offer their products according to their requirements (Kotler, P. 2003). But there are certain gaps which are responsible for the failure in customer retention strategy of the companies (Armstrong, 2010). These gaps are as follows:
1.      No specific retention targets
2.      No focused marketing strategy
3.      A one size fit all strategy
4.      Lack of customer database
5.      Lack of switching barriers
Customer Acquisition rules:
1.      Acquire the customer which has the customer lifetime value of more than the acquisition cost spend by the company on customer acquisition
2.      Broader the acquisition effect lower the response given by the customers
3.      More the profits given by the existing customers of the company more is the investment made by the company in order to acquire the customers
4.      As the initial acquisition investment is recovered by the company in its initial periods the investments keeps on increasing in following periods
 Hunting Vs Harvesting Customer Acquisition strategy
In hunting customer acquisition mode of the companies they are just looking out for the “dollars” and adopt aggressive marketing plans to acquire the maximum number of customer. Marketer feels resistance at every step of their marketing planning. And often customer rejects the offerings of the company (Booms, B.H. 1983). Generally company works with the prospects not even with the customers of the company since the competition is also very high in the market and there are very thin margins available in the market. Marketer tries to persuade the prospects by providing those lucrative options and waste lot of their time and money while doing that if customer does not get acquired (Keegan, 2002).
In harvesting mode of the customer acquisition strategy marketer is working smartly and moving its sales up and down (Berry, L.L. 1990). Prospects are attracted towards the marketer looking at the lucrative offerings of the company. Generally there is no resistance at all and marketer spends most of their time closing the deals (Weinstein, 2001). Not much efforts and money is poured in by the marketer in acquiring the customer since company has something unique to offer the customer which their competitor might not be having and also there is not much competition in the market so initially there are very huge margins available in the market (Baker-Prewitt, J.L. 2000).
Strategy to shift hunting strategy to harvesting
1.      Collects as much information about the prospects as possible
2.      Send customer with market offerings that suits their profile
3.      Proper communication should be established with the prospect
4.      Continuously track the lead

Customer Retention
Customer retention is the process undertaken by the any organisation in order to reduce the customer defection (Sleight, 2004). Since customer acquisition is six time more costly then customer retention so it is cost effective to retain the customer instead of acquiring the new customers. Also according to the research an engaged customer provides 1.7 times more revenues than the normal customer of the company (Pilling, B.K. 1997). Also an engaged employee provides the 3.4 times more revenue to the company.
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A retained and satisfied customer is very beneficial for the company and following are some of the traits of a satisfied retained customer for the company:
1.      Future intention of buying
2.      Advocacy for the company
3.      Perceived value for money
4.      Overall satisfaction
5.      Brand Strength
Some of the typical customer retention strategies used by the companies include the following:
1.      Membership cards and programs offered by the company in order to offer the discount and other schemes.
2.      Thanking statement and sales acknowledgement given by the company
3.      After sales customer satisfaction and complaint handling
4.      After sales service which can add value to the customer purchase
5.      Eventful communication which can relate customer with the company

Research Objectives
Objectives of this research are:
*      To find out the customer acquisition strategy prevailing in the music industry
*      To compare the acquisition strategies of various companies
*      To find out and compare retention strategy used by companies
Research questions    
Research will try to find out answer for the following questions:
*      How customers perceive the acquisition strategy of the company?
*      What factors determine customer retention?
*      What factors customer consider while using a particular brand of music utility?
Research Design
The research will utilize both the aspects i.e. quantitative as well as qualitative aspect of the research. For undertaking the qualitative research two separate questionnaires will be designed, one for taking the customer’s perception and other for taking the retail outlet and salesman perception about customer acquisition strategy. The aim of the qualitative research would be to find out the current customer acquisition and retention strategy used by the company’s from customer as well as salesman perspective. The other aim of the qualitative study would be to find out factor affecting customer retention as well as customer purchase decision. Other quantitative method would be used in order to find out the factor which is of immense importance for customer while making purchase decision among the given reasons.
Sample Technique and Sample size
For taking the sample from the population convience sampling would be used. A sample of 50 customers would be taken by the surveyor in order to take the responses. Other than 50 customers responses from the shopkeepers at the music store outlet and salesperson would be taken in order to fill the questionnaire.
Focused interview would be conducted with total of 30 customers and the aim of the interview would be to discuss the main criteria which customer takes into account while deciding about a particular purchase. Interview duration would be around 20 minutes. Content analysis method would be used in order to analyze the findings of the focused interview.
 Data collection   
For collecting the data for the research both primary and secondary data collection method would be used. To collect the secondary data marketing history of the company’s will be looked after in order to find out historic development companies have done in order to acquire and retain the customers. The marketing strategies of the company would be searched from the various resources like recent articles and news about the marketing developments about the companies.
Primary data about the customer perception as well as the salesman perception would be gathered by designing the questionnaire which will take customers and salesman viewpoint in consideration. Focused group discussion would also be carried out with a group of customer in order to find out the strategy in deep. Also another questionnaire would be designed with the help of the conjoint analysis which will be having various profiles which customer have to rank, the aim of this questionnaire would be to find out the most important parameter which decide the customer decision for purchase and customer retention strategy.
Data analysis
For qualitative data collected through the questionnaire and the historic developments, content analysis would be done in order to gather all the marketing efforts undertook by the company for customer retention and acquisition. While for quantitative data analysis conjoint analysis would be used with the help of SPSS tool which will find out the most important parameter deciding the customer retention and factor driving the customer purchase decision. With the help of SPSS data which is gathered with the help of questionnaire is being analysed in order to find out the relative importance of the various factors which help customer to decide about the purchase.    
Time Frame
Sr. No.
Task accomplished
Time duration
1
Questionnaire designing
1 week
2
Focused interviews
2 weeks
3
Data analysis
2 weeks
4
Presenting the findings
1 week

Expected Results and Findings
The probable result of the research would be to various customer acquisition and retention strategy adopted by customer and difference between them. Various factors which customer takes into account while making purchase will include product performance, warranty, price sensitivity and brand name.
Conclusion
The marketing strategy of various music companies for customer acquisition and retention would be analysed with the help of customer survey and finding would be helpful in analysing the trends in music industry.











References

  • Francis Buttle, 2008, “Customer relationship management”, pp14-88
  • Martha Rogers, 2004, “Managing customer relationships: a strategic framework”, pp 223-501
  • Booms, Bernard H. and Bitner, Mary Jo, (1981) Marketing Strategies and Organizational Structure for Service Firms in Marketing of Services, edited by Donnelly, J. and George, W.R., American marketing Association, Chicago, pp. 47-51
  • Gerson, R.F. (1993) Measuring Customer Satisfaction: Kogan Page, UK
  • Kotler, P. (2003) Marketing Management, 11th Edn., Prentice Hall, Inc
  • Lewis, R.C. and Booms, B.H. (1983) The Marketing Aspects of Service Quality, In Berry, L.,
  • Parasurman, A., Zeithaml, V. & Berry, L.L. (1990) Delivering Service Quality: Balancing Customer Perceptions and Eadxpectations: The Free Press, USA.
  • Sivadas, E. and Baker-Prewitt, J.L. (2000) ‗An examination of the Relationship Between Service Quality, Customer Satisfaction and Store Loyalty‘, International Journal of Retail & Distribution Management, 28 (2), pp73-82
  • Barczak, G., Ellen, P.S. and Pilling, B.K. (1997), “Developing typologies of consumer motives for use of technologically based banking services”, Journal of Business Research, Vol. 38 No. 2, pp. 131-9.
  • Mu¨hlbracher, H., Dahringer, L. and Leihs, H. (1999), International Marketing: A Global Perspective, International Thomson Business Press, London.
  • John A. Czepiel, "Managing Customer Satisfaction in Consumer Service Businesses." Marketing Science Institute, Cambridge, Massachusetts. 1980
  • Philip Kotler &Gary Armstrong, 2010, “Principle of marketing”, pp48
  • Tevfik Dalgic, 2006, “A handbook of niche marketing”, pp 141
  • Malcolm McDonald, Warren J. Keegan, 2002, “Marketing Plans that work”, pp98
  • Art Weinstein, 2001, “The Handbook of market segmentation: Strategic Targeting for business and technology firms”, 3rd edition, pp41
  • Peter Sleight, 2004, “Targeting customers”, pp11-171

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