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4 P’s of Pandora

Anyone who has pursued school for business and marketing is well versed on the topic of the 4 P’s of marketing: product, price, place, and promotion. The model has been considered a form of control, both simple and instructional. Companies market to consumers. Products are created for their worth and features defined, prices are set, and market areas are selected to sell. The company’s product and services are promoted through advertising programs, public relations, direct marketing and other such forms to meet the audience. Ultimately, the company controls the message.

Every company now competes in two worlds: a physical world (marketplace) and a digital world (“marketspace”). The future is here, and most products and services are now sold in the marketspace (Tapscott, 2000). Pandora Radio launched a music project that encompasses all 4 P’s of marketing and gives a birds eye view into understanding the marketing mix. History of Pandora Radio A new music discovery project was launched in 2000. Tim Westergren established the Music Genome Project with the idea to approach and analyze music analytically. The project analyzes the structure of a song and identifies similar songs that listener’s may also like. The original company of Westergrens’ was called Savage Beast. The concept built a database that took five years and utilized over 30 experts in music theory. In 2006, their library contained in excess of 400,000 analyzed songs from 20,000 contemporary artists (Joyce, 2006). Pandora Radio has expanded to become the radio app nearly all app-enable devices include. By 2010 the radio app became integrated into TV devices such as Samsung, Sony, Roku, and others. Increasing numbers of tablets like BlackBerry and Barnes & Nobel started implementing the app and even in-car apps with BMW/Mini, Toyota, Ford and Hyundai.

There was even a Wi-Fi enabled refrigerator from Samsung (Hampp, 2011). Founder Tim Westergren said, “Smartphones really turned Pandora into an anytime, anywhere service without us doing anything.” The company grew from 40 million to 75 million users within the span of 12 months in 2010. During this time, Pandora had more than 40 strategic content partners on more than 400 different devices and this was considered to be just the beginning (Hampp, 2011). While the company was in a stage of exponential growth, it became one of the most powerful music discovery platforms. Pandora accomplished this by connecting artists and fans through numerous devices. The history of Pandora Music has had a considerable impact on the music industry. Now well on their way, the company must develop the next area of the 4 P’s; pricing. Pricing Pricing strategies are a vital marketing function for both short and long-term profit. Pandora Radio’s media discovery platform competes with the lines of companies as prominent as Apple Inc., Microsoft, Facebook, Twitter, Netflix, Amazon.com, and Spotify.

In 2016, Pandora added Ticketfly, a ticket distribution service that would target local concerts based on the user’s music preference. In 2017, the company added Pandora premium allowing users to specify songs to play instead creating a station with a limited number of skips.

They also increased the number of skips with ads and now offer offline access. According to The Motley Fool, in 2016 Pandora had around 78 million active users and by 2020 they aim to increase that number to 110 million. The ad revenue per 1000 listening hours in 2016 was $58 million. In 2018, 2019, and 2020 their revenue is expected to increase to $60, $70, and $80 million respectively. A consolidated view of the company’s 2020 business model can be seen below (DiPietro, 2017): Metrics ($ in millions) Core Radio Premium Ticketing Consolidated Revenue $2,400 $1,300 $300 $4,000 Content costs $1,160 $850 N/A $2,010 Ticketing costs N/A N/A $180 $180 Other costs of revenue $115 $15 N/A $130 Gross margin 47% 34% 40% 42% Operating margin 18% 10% 15% 15% According to Reuters.com, the revenue and earnings per share for Pandora Media in 2016 was $392.6 million and in 2017; $395.33 million. Although Pandora Media has been met with increased competitors and a decline in users over the past few years, their business plan is focusing on new methods to target their customers and hopefully reach their 2020 goals. Place The term “marketing mix” was coined by Neil Borden. The “mix” constitutes the fundamental elements that make up the 4 P’s of marketing refined by E. Jerome McCarthy (PurleyBranded.com, 2018). When combined, the 4 P’s promote Pandora’s unique selling points and differentiate it from its competitors.

The next “P” of marketing is promotion. Promotion includes elements such as advertising, social media marketing, search engine marketing, public relations, email marketing, and video marketing. The Pandora brand must be well positioned to truly maximize its return on investment. In 2015, 10 years after the launch of Pandora, the company rolls out its biggest brand-marketing effort. The multichannel campaign was used to separate it further from competitors like iHeartRadio, Spotify, and Apple Music. The CMO at the time Simon Fleming-Wood says the company has finally come to a point where they have the capability to invest in marketing. This was driven by a topline growth of 67% from its local advertising revenues. The closest Pandora had to a brand campaign previously was the digital-only “Thumbs Moments.” Pandora begins its new campaign releasing a video ad online and then moving to TV later. The add promotes the tagline “The Next Song Matters” which celebrate the anticipation of knowing what song is coming next. Fleming-Wood manages 5 teams; a growth and analytical marketing team; a business development team, focused on “getting us into cars and the next generation of where music listening will take place,” and Pandora One, its subscription business. He also oversees a PR and communications team. In his first year, they rolled out a campaign called “Now Playing,” used to measure impact on different loyalty segments. That lead to “Thumbs Up” and “The Next Song Matters” (Rooney, 2015).

In recent years, after the exit of Fleming-Wood and entrance of previous owner and CEO, Tom Westergren, the company, in addition to its traditional internet service has broadened its services through applications for users of mobile devices including Apple iPhone and iPad, the Blackberry, and Google’s Android operating software. Pandora uses display ads on its landing pages and launched a program that lets advertisers sponsor free streaming of new albums before they are released, with custom banner landing pages, banner ads, and an advertiser-branded radio station. Pandora also invested in helping artists connect to their fans. They introduced AMP (Artist Marketing Program) with artist audio messages in early 2015 and AMPcast in early 2016.

The program allows artists to gather data and performance metrics and gives them the ability to geotarget artist audio messages and share these messages via social networks (Press.Pandora.com, 2016). Pandora continues to build its marketing campaigns to cover not only their consumers, but the artists and their own marketing availability. Promotional Strategy One of the vital elements of the marketing mix is promotion. Promotion includes advertising, sales promotion, personal selling, and public relations. Advertising strategy deals with any one or two-way communication that takes place with the consumer (marketing-made-simple.com, 2018). Promotional strategy involves knowing who your customer is, how to reach them, and developing a message that meets the target audience. These questions can be used to build a program that is relevant for all of the marketing mix; segmentation, targeting, positioning, and messaging (marketing-made-simple.com, 2018) Pandora Radio did little marketing in their early days. In the past few years it was mainly word of mouth. Susan Pancio, Pandora’s vice president of sales marketing, oversees brand strategy, positioning, messaging and marketing plans on the B2B side. In a 2017 article with [a]list.com she talks about how Pandora has a large enough audience because of promoting the personalized music experience. Next, they are focused on building a stronger connection to their audience by launching a paid model which can compete with Spotify and Apple Music. Much of their marking is centered on the music discovery element of Pandora (Akopyan, 2017).

Also, in 2017 Pandora partnered with ad personalization firm “A Million Ads,” to bring display and video ads to the audio marketplace. These formats help with brand awareness and include globally recognized brands like FedEx and McDonald’s to local mom and pop shops in different markets around the country. Pandora is focusing on one-to-one personal experiences, working with brand partners which allows other brands to learn how to reach customers through music. Pandora also uses their mass amount of data for direct marketing. The data captures what kind of devices are being used, the time of day they are listening, and use it align the artists for optimal exposure (Akopyan, 2017). Pandora Radio has continued sponsorship with SXSW music festival. The huge event enables them to connect with people and new artists, music and advertising partners. Susan Pancio believes every marketer should really be looking at music as a platform in which to get their brand message across and the other part is because of the proliferation of mobile devices and acceleration of technology, music is a must-have strategy and the audio ad is a must-have medium (Akopyan, 2017).

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