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5 Lessons From Pandora’s Path To Profitability

5 Lessons From Pandora’s Path To Profitability
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Looking deeper into Pandora's history and success offers some key insights and lessons into how a brand can succeed in winning customer loyalty and engagement profitably.

Paloma M. Vazquez
  • 8 march 2010

Sunday’s New York Times featured an in-depth article on the online radio station Pandora, showing how the company has managed to succeed since its inception, despite many challenges. Looking deeper into Pandora’s history and success offers some key insights and lessons into how a brand can succeed in winning customer loyalty and engagement profitably:

1) Give your audience a valuable reason to spend time with your brand

Like personally tailored streaming music and an “in” to new music recommendations.  With a single mission of “playing only music you’ll love”, Pandora counts on an audience of 48 million (and growing) users to tune in an average 11.6 hours a month.

2) Play within the existing system

Pandora refers customers that want to buy an album to Amazon or iTunes – rather than ignoring the presence and market share of these giants – or trying to go it alone.

3) Know and love the product you sell with an equal balance of brains and passion

Founder Tim Westergren is a trained jazz pianist and former film composer that came up with the idea for a music genome when analyzing the construction of music for film directors.  Pandora’s music recommendations are based on the Music Genome Project – “the most comprehensive analysis of music ever undertaken” – by a team of fifty musician-analysts (Pandora employees) that have categorized a 700,000 song library based on 400 musical attributes.

4) Stay nimble and adaptive to changing market dynamics

Pandora has shifted directions – from business to consumer, from subscription to free, from computer to mobile – in order to adapt to the changes that impacted the music industry since the early digital days of 2000.  The iPhone app launched in 2008 let people stream music, and quickly inspired 35,000 new users a day to join Pandora from their cellphones – doubling the number of daily sign-ups.

5) Happy customers breed loyalty and advocacy

When a federal royalty board raised the fee paid by online radio stations to record labels for each song, Pandora recruited listeners to write to their representatives (along with hiring a lobbyist). The board agreed to negotiations and after two years settled on a lower rate.

Pandora’s continued success is evidenced in a January deal with Ford to include Pandora in their voice-activated Sync system, where drivers can easily launch personalized station.  Samsung, Vizio and Sonos are also integrating Pandora into their Blu-ray players, TVs and music systems.

As long as Pandora continues to connect its audience with a beloved product (free streaming music) where they are (at the office, home, mobile or car) with a valuable proposition (mostly passive insight to new music and artists) – they – and advertisers -are likely to continue to flock to Pandora.

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