“Avoid becoming commoditized.”
That’s Spotify’s biggest challenge.
Apple Music is closing the gap on number of users (growing twice as fast as Spotify). And a herd of giants and startups also have millions of users.
It’s all about branding war.
Anyone can stream music. That’s a commodity.
A brand stands out. It’s a noun with a capital letter – that owns a word (or two). Uber = ride hailing.
When the brand name dominates a new market category, the name becomes a substitute for the category: Google = search.
That’s the coveted Gorilla position, rarely leapfrogged by a competitor. Branded into the mind of the customer. Never changes. Share of market is typically around 30 percent.
Following the Gorilla will be a couple of Chimpanzees, owning half the Gorilla’s market share, somewhere in the teens. To thrive and compete, each must be different, stand out. Think of the pink of T-Mobile and the psychological implications to customers.
And following them will be a dozen starving monkeys. Rarely will a few be able to survive and thrive for long. iHeartRadio is in bankruptcy proceedings.
Spotify dreams of holding forever to the Gorilla position it’s currently in. That’s a likely possibility. Yet we see that the company is making major moves, striving to strengthen and differentiate its brand. For instance, to gain some exclusivity on content, it has arranged for exclusive streaming of new songs from some labels and singers.
But there’s more.
The market leader should always block a move by a competitor making an offensive move. Let’s take a look at Spotify’s rumored move into hardware.
Spotify is thought to be readying a smart speaker device to compete with Amazon Echo, Google Home, and the new Apple HomePod. The voice assistant in Amazon Echo is Alexa who has already cemented (branded) Amazon Echo as the leader in the smart speaker category (will it become The Gorilla?). Spotify’s hardware move is a blocking move. But can it stop or even slow the competition?
Apple has chosen to be different by positioning the Apple HomePod as the best sounding device to use to listen to music. This is a clever move, putting both Spotify’s future device and those existing devices on the defense (when the competitors cry “me to” they’ll strengthen Apple HomePod’s position).
Spotify has even more of a problem with the giants. They are able to limit or even block Spotify being used by their platform. That’s power for the giants and can do real harm to Spotify.
The objective of the giants is to change the game, from streaming music to voice-engagement music ordering (“play some Mozart piano”). Already users of smart speakers listen to twice as much music. Industry observers say it’s just a matter of time, a few years before voice-engagement takes over from simple music streaming (which is then commoditized). Just like streaming music out-flanked music CDs. This is a clever flanking strategy and most likely to win, according to marketing history.
That’s not good news for Spotify.
Stay tuned. It’s going to get intense.
- BOTTOM LINE: Startups can learn from the competitive moves by Spotify, by studying its response to attacking, offensive competitors and to the flankers. Apply the marketing strategy lessons from the Marketing Warfare pros like Al Riese who win consistently.
- The market leader always has a weakness. If a competitor decides to attack, use an offensive strategy, the attacker must focus everything on the single weakness in order to win. The move is dangerous because the market leader most often can block the move by responding with a quick “me-too” move. Microsoft became notorious for that in its early PC years, destroying attacking competitors.
- Flanking into an uncontested market category is the superior competitive strategic move. Avoid the head-on attack, instead swing into a fresh market category and race onward to attain the leadership position. Most great startups have succeeded using the flanking strategy. And so have clever product managers of giant corporations as they launch new products.
You can do the same with your new enterprise! Learn from Spotify and the best of the best marketing pros. Apply the lessons to your startup. And succeed!
I wish you The Best on your Adventure!