Guest post by Alex Hoffman (@alexbhoffman).
The Katy Perry superfan that not only streams her music ten times a day, but also comments, shares, favorites, and downloads, is subject to the same experience as a fan who streams her music once a week.
Considering the data overload facing today’s listening platforms (i.e. Pandora streaming 1.6 billion hours of music during Q1 this year), it’s no surprise that even top fans are often resigned to feeling like the proverbial needle in a haystack. And resigned fans are—of course—opposite of gratified and engaged fans: the type of fans that music professionals aim to cultivate.
Recognizing this opposition, music/tech entrepreneurs began launching fan measurement and engagement solutions. These tools, which I’ll name later, comb through the haystack to identify fans and insights that matter (i.e. effect listener satisfaction and ultimately artist revenues).
Interestingly, similar measurement and engagement technology is now progressing outside of the music space, as e-commerce social loyalty startup 500Friends recently announced their latest product rollout: consumer archetyping software.
For those unfamiliar, since its launch in the summer of 2011, 500Friends has enabled e-commerce retailers to incentivize, track, and reward consumers’ social and spending habits. Its signature LoyaltyPlus software, which hooks into a retailer’s website and social networks, keeps tabs on who’s writing reviews, sharing, referring, subscribing, checking-in, purchasing, etc., and then converts those activities into points and rewards.
CEO Justin Yoshimura believes the return on offering loyal consumers a “ridiculously amazing experience” can be hefty. The numbers seem to back his claims. He says their clients’ ROI is typically 10-20 times what they pay to 500Friends in the first year. Not bad if you can afford the initial investment starting at $1500 per month...
So what’s the fuss about 500Friends’ new product?
According to Anthony Ha's recent TechCrunch article:
“Yoshimura says 500Friends' new product creates ‘archetypes’ of different kinds of customers, then uses the businesses’ data to determine which archetypes are going to be the most valuable, either in terms of dollars spent or social influence. Then, when a new customer comes to a website, a business can match them against the different archetypes, effectively identifying which ones are likely to be the most valuable and allowing businesses to give them special service and offers."
Yoshimura provides the following illustration:
“For example, if you purchased a necklace from Ice.com , we could compare your data points (what you bought, your Facebook interests, and what other sites you’ve visited) against their BEST customers and influencers to PREDICT your lifetime value. If you are determined to be a potential high value customer, your order could be overnighted."
What It Means For Music
Groupon launched less than four years ago, Foursquare less than three, and Facebook Places two—but the impact they’ve had on the way we purchase and engage is revolutionary. After all, Groupon didn’t turn down Google’s $6 billion offer for nothing.
The hype surrounding 500Friends’ latest product reminds us that modern consumer loyalty incentives/rewards programs are still in their infancy, especially in the music industry.
Perhaps beginning with things like Topspin bundles and the 1000 True Fans theory, the idea of loyalty rewards and consumer archetyping has found more concrete and scalable grounding in music technologies such as: MusicHype, Beluga, BigChampagne, Musicmetric, Next Big Sound, and Buzzdeck. In one way or another, each of these platforms segments audiences using data mined from their social and consumption activities. This could mean tracking a stream or free/paid download, recording a Like/Follow, or using more complex methods to gauge fan sentiment or brand affinities.
But here’s the problem: there’s no universal turnkey solution for artists kicking off a loyalty rewards strategy. The jumble of services just mentioned is impressive, but disjointed. Imagine software as powerful as 500Friends’ that’s applicable and affordable for everyday musicians. Software that aggregates fan activity across all listening/commerce platforms then provides artists with a foolproof analytics dashboard and points/rewards engine.
Don’t worry though, as digital/direct-to-fan matures and consumer culture continues to reinvent itself, this will change for the better. And the artists that adopt these new technologies sooner than later will be remembered—creating direct-to-fan legacies akin to Trent Reznor and Radiohead.
A Word Of Warning
Albeit anticlimactic, the adoption of any new technology or habit comes with concerns and consequences. In his article “The Negative Effects of Rewarding Music Fandom”, Hypebot Editor, Kyle Bylin warns of the dangers involved in measuring and rewarding music fandom on too narrow a spectrum:
“Understand that by incentivizing behaviors, you’re discouraging others; behaviors that can’t be easily defined and may be stifled. Once a fan has their eyes on the prize, they try to get it, nothing else.
Value is created when fans do things an artist could’ve never anticipated, could’ve never rewarded. Once there are rewards, fans grow predictable.
You don’t want that. Predictable fans are terrible marketers.”
So reward systems must remain creative, organic, and adaptive if they’re to be sustainable; otherwise, intentionally or not, people can quickly game and spam them into oblivion, which would be a teenage dream.
This article is the first in a feature series on fan loyalty measurement and rewards. Next week we’ll dive into why fan loyalty programs were never quite institutionalized in the music industry. There will be fun economic concepts and such so get excited.
Alex Hoffman is the former Director of Artist Services at Grooveshark and founder of the non-profit DJ Mentoring Program, Scratching For Success. Follow him on Twitter: @alexbhoffman