The music business has had a rollercoaster ride in recent years. The advent of music streaming and downloading has transformed the way consumers want to purchase music, resulting in the near disappearance of CDs, and shaking the industry to its core.
With over 50 years’ experience supporting small businesses, we know that across all industries and business sizes, it is vital to be alert to – and embrace – changes to consumer demands. For small businesses looking to grow their customer base, recognising what motivates both existing and potential customers is imperative to success. The lessons learned during the evolution of the music industry can serve as a guide to help SMEs successfully navigate change.
The music business discovered how crucial it is to act quickly when music streaming first took off in the late 90s. The industry had been the same for years; customers would hear a song on the radio or at a concert, then purchase the record. But when fans began demanding music via downloads and streaming, its decision makers did not adapt.
Rather than changing in accordance with consumer spending habits, the industry continued to push physical music formats. In the absence of official streaming services, consumers resorted to unofficial sources, which cost the music business vast sums in lost sales. Only when it eventually embraced new purchasing models – through services such as Spotify – did it begin to reclaim its customers.
It’s not just music lovers changing the way they spend; businesses across all sectors must remain alert to the latest consumer trends, both in-store and online. For example, consumer demand for a range of payment options in-store has grown substantially, but a significant proportion of SMEs have failed to respond. Barclaycard research indicatives half of SMEs in the UK still do not accept credit and debit cards, despite this being the preferred way to pay for 70% of shoppers. As a result, these businesses are collectively losing sales of up to £8.8bn every year.
Often with a less formal structure than larger competitors, small businesses are perfectly positioned to respond quickly to new developments in consumer demand, and should take advantage of their agility to stay ahead of the curve.
Revamp the customer experience
Despite a slow start, the music business has successfully adapted to changing customer expectations. For example, whereas previously artists would tour to promote a new album, they now use their album to promote a tour. Similarly, small businesses should adapt their product or service offerings in response to evolving demands.
Just as digital channels have changed the way people discover and experience music, so too have they changed the way consumers want to buy other goods and services. For example, shoppers increasingly want to use mobile devices to make purchases online. Providing a mobile-optimised solution is therefore important to ensure a seamless experience. When it comes to the in-store experience, offering multiple payment options to deliver the quick and convenient service customers expect is imperative.
Engaging with customers
Engaged customers are more likely to be repeat customers. The music business has successfully built up communities of fans through communicating with customers on a regular basis, ultimately driving sales. This model of building up a loyal base is something that small businesses should imitate.
In order to create an engaged community, it is important first to gain an understanding of the customer, and then respond with a strategy which suits the brand’s identity. This will demonstrate the business is listening and committed to providing a tailored service. Communication should also be a two-way street. Providing the opportunity for customers to engage with the business through different channels is vital to ensure they feel their voice is heard.
Learning from other industries and businesses is a vital first step in understanding how to respond to the evolving needs of consumers, but acting on those insights is what makes the difference. Through listening to its customers, the music business managed to deliver in the face of immense pressure to innovate. Small businesses who keep in touch with their customers and the wider industry will be best placed to reap the rewards.
By Greg Liset, head of e-commerce for small business at Barclaycard