Retention and Acquisition of Customers in the Music Streaming Industry - Deezer - Case Study Example

The role and influence of relationship marketing in the retention and acquisition of customers in the music streaming industry? A Case of Deezer Student name Course name Institution Date of submission Student Number Introduction The music streaming industry is among the modern-day industries tremendously affected by the increased internet and mobile innovation. Indeed, during the last half a decade, the industry has become among the fastest growing ventures, as it has continually adopted innovative and more advanced policies to attain competitive advantages, bring in technological vitality, as well as offer subscribers beneficial services across the globe (Hennig-Thurau et al, 2010). An example is Deezer, a French music-streaming service. Current media reports show that Deezer has recently been embroiled in rigid competition with popular and already established video and music streaming companies like Spotify, Apple Music, YouTube, and Tidal (Godeau 2015; Lunden 2015). In 2014, the company ventured into the American market. Deezer's strategy has concentrated on global expansion, and is currently accessible in 180 countries (Godeau 2015). The stiff competition in the American market led to huge losses of approximately $86 million in the third quarter of 2015 due to the difficulties to acquire and retain customers, as companies like Spotify, Apple Music and YouTube already command a large market share in the United States. It is suggested that Deezer will have relied on the concept of relationship marketing, due to the concept’s potential to acquire and retain customers (Lunden 2015). Current scholarly evidences on the real effects of relationship marketing have provided convincing results indicating its potential to acquire and retain customers over the long term. According to Suphan (2015), a major component of marketing during the 21st century has been to promote relationship building between a business and its body of customers. The concept of relationship marketing is not a totally new concept. Instead, it is a paradigm that has evolved over time based on the traditional marketing practices. It is argued that the concept of relationship marketing (RM) has a potential to improve Deexer’s profit potential particularly in the United States. It is based on this rationale that this paper provides a review of literature on the concept of relationship marketing with a view of establishing its potential to attract and retain customers for Deezer. Nature and definition of RM From a review of literature, it is established that the chief purposes of relationship marketing is to create and enhance customer relationship from the outset in order to satisfy and retain a company’s current customers (Sheth 2002; Shajahan 2006; Nakhleh 2012). Undeniably, it is based on this assumption that the definition of relationship marketing is developed. Hennig-Thurau et al. (2010) view relationship marketing to be a variant of marketing created from direct response marketing campaigns that stress retention and satisfaction of customers, instead of concentrating strictly on sales transactions. What this show is that, rather than concentrate on expanding its sales transactions, Deezer will need to refocus its efforts on creating direct response marketing campaigns that call attention to retaining and satisfying customers. Consistent with this view, Rahman and Masoom (2012) argue that relationship marketing is different from other marketing types, as it lays emphasis on creation of long-term value of customer relationships by extending communication further than just using sales promotions or intrusive advertising. A related study by Shajahan (2006) portrayed relationship marketing as a marketing concept rooted in the creation of relationships through application of systematic ways that enable a business to acquire and retain customers. Sheth (2002) tends to agree with the description. He perceives relationship marketing to be a marketing concept focused on how a business attracts, retains, and improves customer value. For this reason, a company and its consumer has to share an interest in providing a mutually satisfying exchange. A study by Kanagal (2004) established that exchange is central to relationship marketing, where profitable parties engaged in exchange. Without a doubt, following the rapid adoption of internet and mobile platforms globally, the concept of RM has continually evolved and advanced in sync with technology advancement where customers and business can engage and interact using social media channels. What these show is that to create a loyal customer base, Deezeer will need to build and develop strong relationships with its customers using social media channels. Basic goals of RM The fundamental goals of relationship marketing have been widely researched and experimented. In a study by Rahman and Masoom (2012), the researchers suggested that the goal of relationship marketing is to create customer identification. They argued that by interacting with customers in order to build long-term relationships, customers get to acquire information regarding the customers’ value, as well as who are their return customers. From this, it could be reasoned that acquisition and retention of customers begins from identifying them and their long-term values. Another goal of relationship marketing is to create customer differentiation. According to Thorsten Hennig-Thurau and Hansen (2013), interacting with customers allows a company to segment customer based on their unique values and service requirements. The concept of customization as a goal of relationship marketing is also emphasised by Kanagal (2004). In his view, relationship marketing serves to enable an organisation to treat customers differently, such as by customising certain processes to allow for customer retention. From these goals, it becomes clear that relationship marketing serves to enhance the acquisition and retention ability of a company to boost customer lifetime value using better customer service practices, as well as through interaction. However, while the concepts of customer acquisition and customer retention seem to be mutually exclusive, they are not. According to Arnold et al. (2011), the two are not mutually exclusive as a company can decide to focus on both, although to varied degrees. How Relationship Marketing contribute to Customer Retention A review of current marketing trends shows that marketing has shifted from merely focusing on achieving transactional marketing to customer acquisition, retention, and selection. In a related study by Arnold et al. (2011), the researchers acknowledged that relationship marketing seeks to attract, interact with, as well as retain the more highly profitable customers. At this level, it is crucial that the concept of customer retention first be explored. Hadush (2005) defines customer retention as referring to a company’s ability to provide the requisite services to the more profitable customer with the view of satisfying their needs and retaining them. Suphan (2015) defined customer retention as the systematic processes of keeping and maintaining customers with the view of maximizing customer life-time value through the creation of effective relationship with the company. As Arnold et al. (2011) later argued, the significance of RM in retaining the few profitable customers has increasingly become significant. These assumptions are also consistent with Suphan (2015) remarks that in the current business environment, selling has shifted from making short-term, quick sales to “partnering” with customers and building relationships. Through relationship marketing, therefore, a business gains a capacity to create long-term relationship with the customers instead of just concentrating on single transactions in order to manage a relationship that can add value both to the customers and to the company. Ultimately, the main objective of relationship marketing is to retain customers, and the key to retaining them is by means of using diverse means and practices that promote repeat business transactions with the existing customers through satisfaction of their needs better than how the competing brands do. How Relationship Marketing contribute to Customer Acquisition Hadush (2005) views the concept of customer acquisition to be central to building customer relationship. In his view, to target, attract, and retain the right customers, a business should consider making a fit with the current customers. The concept of relationship marketing in determining the fit and attracting the customers is widely accepted in the relationship marketing literature. According to Arnold et al. (2011), the reason why many companies today fail in their customer retention strategies is that they do not identify and attract the more profitable customers because of marketing strategies that do not focus on building relationships In Nakhleh’s (2012) view, the appropriate approach to improving customer acquisition is by using relationship marketing, as the concept allows a firm to identify the more profitable customers it needs to acquire and retain over the long-term. This view is widely supported by Hadush (2005), and Nakhleh (2012). It is the ultimate acquisition of customers that makes it possible to retain the customers. At this rate, the concepts of customer acquisition and customer retention could be assumed to be mutually exclusive. However, they are not. Arnold et al. (2011) explain that customer acquisition and customer retention are not mutually exclusive marketing concepts, as a company can decide to focus on both, although to varied degrees. Conclusion Deezer has recently been embroiled in rigid competition with popular and already established video and music streaming companies like Spotify, Apple Music, YouTube, and Tidal in the United States market. As a result, Deezer’s US subsidiary has made significant losses. From a review of literature, it is established that relationship marketing would create and enhance the company’s capacity to attract, satisfy and retain its existing yet more profitable customers. What this show is that, rather than concentrate on expanding its sales transactions, Deezer will need to refocus its efforts on creating direct response marketing campaigns that call attention to retaining and satisfying customers. To create a loyal customer base, Deezeer will need to build and develop strong relationships with its customers using social media channels. Ultimately, the main achievement of relationship marketing at Deezer would be to retain customers, and the key to retaining would be through the use diverse means and practices that promote repeat business transactions with the existing customers through satisfaction of their needs better than how Spotify, Apple Music, YouTube, and Tidal do. Reference List Arnold, T., Fang, E. & Palmatier, R. (2011). The effects of customer acquisition and retention orientations on a firm’s radical and incremental innovation performance. Journal of the Academy of Marketing Sciences 39, 234–251 Godeau, L 2015, “Deezer prepares for battle in competitive music streaming sector,” PhysOrg, viewed 30 Nov 2015, Hadush, D. (2005). The Role of Customer Relationship Marketing on Customer Retention: A case of Ethiopian Insurance Corporation in Mekelle Branch (Tigray). Retrieved: Hennig-Thurau, T., Malthouse, E., Friege, C., Gensler, S. & Lobschat, L et al (2010). The Impact of New Media on Customer Relationships. Journal of Service Research 13(3) 311-330 Kanagal, N. (2004). Role of Relationship Marketing in Competitive Marketing Strategy. Journal of Management and Marketing Research 2-17 Lunden, I 2015, "Loss-Making Music Service Deezer Postpones $343M IPO, Citing Market Conditions," TechCrunch, viewed 30 Oct 2015, Nakhleh, H. (2012). The Relationship Between Customer Relationship Marketing Tactics, Relationship Quality And Customer’s Loyalty In Mobile Communication Industry. Academic Research International 3(2), 538-547 Rahman, A. & Masoom, M. (2012). Effects of Relationship Marketing on Customer Retention and Competitive Advantage: A Case Study on Grameen Phone Ltd. Asian Business Review 1(1), 97-102 Shajahan, S. (2006). Relationship Marketing: Text and Cases. New Delhi: Tata McGraw-Hill Education, Sheth, J. (2002). The Future of Relationship Marketing. Journal of service Marketing 16(7), 590-592 Süphan. N. (2015). Customer Relationship Management Strategies in the Digital Era. Hershey, PA: IGI Global, Thorsten Hennig-Thurau, T. & Hansen, U. (2013). Relationship Marketing: Gaining Competitive Advantage Through Customer Satisfaction and Customer Retention. New York: Springer Science & Business Media Read More