NAPSTER CASE STUDY

Question: Assess how Napster competes with traditional and online music providers by reviewing the
approaches it uses for different elements of the marketing mix.

Napster was firstly created in 1998-1999 as a peer-to-peer music downloading program. However, on
March 5, 2001 Napster was ordered by the U.S. court to stop trading copyrighted material. The following
Year Napster filed for bankruptcy and was bought out by Roxio, Inc.

Napster has since reopened its online doors for business. It now does business in Canada, the U.S. and
the United Kingdom, has 410,000 customers, each of which pay ₤14.95 per month to get the right of use
to 1.5 million songs. With the increases in technology, Napster has had to focus on new ways to attract
customers and keep up with its competitors such as iTunes. Because of this fast moving environment,
the company has strategically diverse its marketing mix.

Product:
The core product of Napster’s is music. The company offers unlimited access to 1.5 million songs to
subscribers at a fixed price per month. It also offers mass customization through radio stations based on
particular artists and recent consumer downloads, along with a page that lists recommendations from
Napster. These additional features (part of Napster’s extended product) give the company an edge over
competitors who only offer music downloads. The Napster name is deeply tied in with its product. The
objective of Napster is “to continue to build the Napster consumer brand – as well as increase
awareness of the Napster brand identity”. Napster has a reputation as an “all you can eat music service
which is fun and affordable”. These branding characteristics assist customers in recognizing Napster over
other music retailers.

The company name also carries a lot of brand equity. Napster executives said in their annual report that
they rely heavily on the value of the Napster brand and if it is not maintained at a high level of
recognition, their revenues could suffer. Napster provides value to customers who want their music and
electronic devices to be compatible. It provides a list of all devices compatible with its services on the
company website.

Price:
Napster offers a different pricing model than its competitors. iTunes and other competitors allow “users
to purchase songs on a per-track basis or in the form of albums”. Napster on the other hand offers
simplicity with a monthly fee that allows users to download as many tracks as they can. There are many
different ways that a customer can pay Napster for its service. Napster’s payments are made in advance
“via credit card, online payment systems or redemption of pre-paid cards, gift certificates or
promotional codes”. These payment services are common and accepted by most of Napster’s
competition.
Place:
Napster carries out all of its business online. The strategy of Napster is to become the “leading global
provider of consumer digital music services”. It is currently offered in the United States, Canada and the
United Kingdom. The company is looking at expanding its business into “other countries such as Japan”.
In order for Napster to stay competitive with other music retailers it needs to focus on localization.
Localization involves “tailoring of web site information for individual countries or regions. Offering a
global product can bring about many different concerns. These issues range from different product
needs, language differences and cultural differences. Localization will address these issues by
“converting the web side to suit [the values and characteristics of] another country”.

Promotion:
One way Napster promotes itself is through strategic partnerships. One of the company’s four key
focuses is to “continue to pursue and execute strategic partnerships”. Napster believes that they must
maintain and add to their strategic marketing relationships in order to be successful. Napster has
entered into strategic partnerships online as well as offline. Some of the partnerships include Microsoft,
Best Buy, Blockbuster and Target. Napster is able to use these partnerships to be innovative by investing
in the new services and technologies that these companies develop. These partnerships separate it
from its competitors such as Apple. Apple in a way “locks people into purchasing Apple hardware”
because its services are only compatible with its own products. Because of its partnerships Napster is
able to bundle its services with hardware manufacturers by creating a more widespread marketing
campaign. The partnerships Napster has entered into help ensure that its services are compatible with
the newest technology on the market. Napster also participates in traditional offline and online
marketing. Napster markets offline with television, radio and print advertisements. The company’s
online advertising consists of placing advertisements “on a number of websites (including affiliate
partners) and search engines”. Both of these forms of advertising follow the company’s mission of
marketing “directly to customers through an integrated offline and online marketing program consistent
with the existing strong awareness and perception of the Napster Brand”.

People:
Napster offers its services to anyone within the region that it operates in. In 2005 the company had
“around 410,000 subscribers in the United States, Canada and the United Kingdom”. In that same year
Napster reported that “80% of its subscribers are over the age of 25, half of them have kid” and “some
three-quarters of them are male”. These statistics show that either a lot of men that have kids like to
download music or a lot of kids use their parents accounts to purchase their music online. The case does
not give this information, however it would be helpful to know so that Napster could market itself
accordingly. Napster executives also stated that “subscribers bought more music online than folk who
buy one-off downloads” and “one in five of them no longer buy CD’s”. This shows that their strategy of a
once a month payment helps retain more customers than their competitors, who offer a pay as you go
rate.
Process:
Napster does not directly participate in new product development since it does not sell products that it
can develop. However, it is focused on being innovative with its file formats by investing in new services
and technologies to “encourage a wide range of platforms from portable MP3 players, PC’s cars, mobile
phones, etc”. This ensures that Napster will continue to be competitive because it is constantly in the
growth stage of the product life cycle.

Physical Evidence:
Napster provides a unique online experience to its customers. The web site is tailored to making the
customer’s experience easy and free of stress. Napster’s once a month payment to gain unlimited music
downloading access, saves the user a lot of time and stress by eliminating a payment each time a
purchase is made. The actual website of Napster is extremely easy to navigate through. The top of the
page includes a list of tabs that helps the customer find their way around the site. This list of tabs
prevents the customer from searching all over the site to find what they are looking for. Napster has a
high-quality selection of features available. These features include “Napster recommendations, Napster
radio based around songs by particular artists, Napster radio playlists based on the songs you have
downloaded and swapping playlists and recommendations with other users”. These features, which are
only available to subscribers, provide a personal touch and help the customer easily connect with his or
her interests.

Napster has used its marketing mix to separate itself from its competitors. Napster’s unique once a
month payment, website features and product compatibility are just some of the ways that it is building
its name recognition among users. In order for Napster to remain competitive it needs to continually
revise and modify its marketing mix. The fast paced environment that Napster operates in is constantly
changing. If Napster can follow adapt and follow the trends of the industry, it will have tremendous
future success.

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