Making Personalization the Center of Your Customer Retention Strategy like Spotify (2024)

Long-term customers are more valuable to your company’s growth than you may think. A study from Harvard Business School found that increasing customer retention rates by even 5% can boost your company’s profits by 25-95%. And, when compared to the cost of customer acquisition, customer retention costs almost 5x less than bringing new customers under your umbrella.

That said, you’re losing out on business growth if you don’t focus on brand loyalty. Aside from saving you on customer acquisition costs, when you can establish a pool of customers who are loyal to your brand, you have an edge over your competitors. Your customers do your marketing for you, spreading good words about your product and service.

But, how do you connect with your customers to make sure they keep coming back? The music streaming platform Spotify masterfully retains customers. And, we’ve done a deep dive to see just how they do it.

Spotify Finds Success

Spotify, originally founded in 2006 in Sweden, continues to see success. They have growing customer retention despite more and more competitors on the playing field. In Q4 of 2022, Spotify had 489 million active users and 205 million are premium subscribers, up from 180 million in Q4 of 2021.

And that’s why this month we’re crushing on Spotify’s customer retention strategy. Here are a few reasons we admire Spotify’s customer experience strategy.

1. Spotify emphasizes customer onboarding

For Spotify, customer retention starts at the very beginning of the customer relationship. Right off the bat, they give new users a list of reasons to stick around. Although Spotify users can use the app for free, the Premium subscription gives users more functionality. The main differences between a Premium account and an unpaid account is that Premium users can listen to music ad-free, can select any song they wish to listen to, can skip songs, and can download music and playlists.

But, even with all of these perks, Spotify can’t assume when a customer upgrades, they’ll want to keep paying for Premium access for life. You have to remind customers what they’re paying for and why it’s worth it. Spotify immediately engages customers and immerses new users in the product’s features. So, for example, when a new customer signs up for a Premium subscription, they get a branded email explaining all of the features they now get to exclusively enjoy.

An effective onboarding program shows the value of your product or service while also demonstrating you value your customers. Make sure customers feel welcome after they sign up, subscribe, or make a purchase. This welcoming allows you to establish a solid foundation to build your brand relationship.

2. They prioritize high-quality customer service

Any online streaming service risks the possibility of a dreaded outage. In these moments of inconsistency, your customer retention depends on your customer service team. Spotify is a company that still manages to delight customers in the midst of a crisis – and they even have a dedicated Twitter account for customer support called @SpotifyCares, which promptly handles customer issues.

Imagine you’re in your office, headphones in, in your workflow. You’re keeping focused when suddenly, your music stops playing abruptly. Ugh. You’re distracted now, wasting time refreshing the app, searching online to see if it’s just you or a system-wide issue. Your work is interrupted and you’re questioning why you pay $9.99 a month for a Premium Spotify subscription.

After brief outages, Spotify promptly responds to all customer concerns across all channels. Even after they fix the problem, Spotify customer service reps prioritized reaching out to each customer who sent a message. During an outage, one customer praised their fast service and her overall customer experience with Spotify in the aftermath. In response to her tweet, Spotify thanked her with a curated playlist with a special hidden message in the song list. Even when something goes wrong, Spotify delivers a personal and unique customer experience.

3. They make their customer experience as personal as possible

You could say Spotify is customer-obsessed. They’re pros at gathering customer data and using AI to generate the most personal experience possible. What’s more, built on personalization, Spotify caters to the preferences and needs of each customer.

Here are a few key ways Spotify delivers personalized experiences:

• • They actively monitor the content customers listen to in-platform

• • They use listening-related insights to deliver personalized recommendations

• • As customers’ preferences changes, Spotify’s curated songs change with them

Spotify uses AI to surface the right content to the right user at the right time. Above all, they use it to make sure each Spotify customer has a unique experience built for their taste. No Spotify customer has the same dashboard. Instead, each customer gets a fresh and unique “Daily Mix” playlist every day, along with specialized “Discover Weekly” lists, offering customers recommended music based on their listening habits. And in the “Made for you” section of the app, customers can find playlists curated based on their past listening trends.

Spotify uses customer data to empower customers to discover new content. This not only makes customers feel heard, but it also offers customers a unique benefit other music streaming platforms struggle to compete with. After you’ve experienced such personalized touchpoints, it’s hard to walk away.

4. Spotify Incentivizes Customers to Share their Experience

The use of AI and customer data culminates in one of Spotify’s most popular features (and best marketing strategy) “Spotify Wrapped.” Spotify Wrapped, described in their 2022 promos as “a celebration of the year gone by and an invitation to join in on the fun” releases the first week in December and has every year since 2016. To sum up your year, Spotify offers each customer a full report of their listening habits from the previous year in an exciting and sharable way.In 2022, brands even got in on the “wrapped” bandwagon by creating their own unique, humorous, and relatable takes on the trend.

By providing users with fun and personalized animated reports to walk you down your own music memory lane, Spotify Wrapped has become a much anticipated annual event for users and music lovers alike. Furthermore, Spotify Wrapped reports are easy to share with friends over social media. Many users find themselves laughing over the crazy amount of time spent on Spotify and ridicule one another for the embarrassing number of minutes listened to an artist they swore they didn’t enjoy.

Customers want to share their Spotify experience with others. So, Spotify incentivizes users to generate content on social media, organically marketing the brand and helping Spotify to grow its brand presence among potential future customers.