Improving Customer Retention
Spotify transformed the music industry and continues to change the way people listen to music. Though the majority of customers are happy, a meaningful percentage cancel their Spotify Premium subscription each month. The questions are: Why do they cancel, and what can Spotify do to retain or win back these customers?
A kick-off meeting set the stage for this project. In this session, we clarified the scope and objectives of the study, discussed hypotheses, and came to consensus on a plan of attack.
To gain the confidence of numbers while also exploring the topic broadly, we developed a quantitative tool that included both closed- and open-ended questions. This allowed us to dig below the surface, understanding not only why customers state they cancel, but also the triggers, cultural changes, and other influencing factors.
We concluded by conducting a facilitated stakeholder session to present and discuss the quantitative findings, internalize the proximate and influencing factors of customer churn, review recommendations and brainstorm additional solutions to retain and win back these customers.
Our learning confirmed some suspicions, and shed light on several additional factors influencing customer churn.
One interested customer finding: Spotify’s users skew younger, college and even high school, and so they do not have a steady income. For this reason, they often switch back and forth between Spotify Premium and Spotify Free depending upon their finances each month. This finding led to the concept of Giving the Gift of Spotify, so family and friends can gift an annual subscription to young Spotify fans.
A cultural finding identified a shift from the bundled cable model to the new subscription model. As Spotify Premium users reviewed their bills, they realized the number of services they subscribe to had swelled. From Netflix and HBO to Amazon Prime and Blue Apron, subscription culture has changed the marketplace, and Spotify Premium can end up on the chopping block. This finding led to bundling concepts, partnering with other subscription services to help customers on a budget see greater value.
The Spotify team moved forward sharing these findings across the company, and DFT Strategy continues to be a close partnering supporting many other initiatives.