Spotify is a music streaming service used by more than 200million users worldwide. Spotify offers a free version thatprovides basic streaming and includes ads. They also offer SpotifyPremium for a monthly fee that gives users higher quality audio,song downloads, and no ads.

Offering music as a subscription service instead of somethingyou buy and own is a new model for the music industry—but one thatis growing quickly. Other competitors include Apple Music andPandora. Let's look at some unique aspects of this model:

1. Since royalty rates are lower for streaming, artists such asTaylor Swift and AC/DC initially refused to offer their music onthe service. But as Spotify has grown, artists increasinglysee the benefit of having their songs streamed on the service.

2. The 100 million customers using Spotify Premium can downloadsongs and listen online. However, if they cancel the service, thosedownloads are no longer available.

3. Spotify offers family and student plans with one price formultiple users. The pricing of these plans represents a significantdiscount over having multiple individual accounts.

4. Because Spotify can track what music you listen to, they canoffer special promotions such as premium concert tickets for theartists you enjoy.

A. If Spotify were to advertise that you can listen to "anysong," but you found that Taylor Swift was not on the service, thiswould be an example of which gap in service quality?

Gap 3

Gap 1

Gap 2

Gap 4

B. Suppose that a Spotify Premium subscriber downloaded aplaylist to their phone but never listened to the songs. They thencancelled their subscription and were disappointed to find out thattheir songs were no longer available on their phone. The fact thatthe consumer could only listen to those songs when activelysubscribed to the service demonstrates which characteristic thatdistinguishes products from goods?

Pricing strategy

Reliability

Perishability

Heterogeneity

C. By offering price discounts, building social connection,offering personalization, and offering value-added services such aspremium seating at events, Spotify is demonstrating which level ofrelationship marketing for services?

Level 4

Level 3

Level 1

Level 2