What‘s Loyalty Got To Do With It

Researching the Factors Influencing Customer Loyalty Concerning the Consumption of Music

Richard Sanders MSc BA Marketing, Faculty of Management and Organization, University of Groningen

Abstract:

Is it a prerequisite to focus solely on illegal downloading, when writing an article about the music industry? Should it not be more important to focus on those consumers remaining loyal and committed to musical artist(s), and subsequently learn from them? This study researches the factors influencing loyalty concerning the consumption of music, but more importantly the various ways in which they influence loyalty. The research was conducted among consumers purchasing music from the record store. The results report that gender, music genre, music discovery, music involvement and media behavior all influence loyalty. Interestingly, men are found to be much more (multi)loyal compared to women and purchase significantly more albums on average. It is suggested that this is partially influenced by the different ways men and women discover new music, and their differences concerning music involvement. Downloading in addition to purchasing music did not affect the (multi)loyalty of consumers, however it did influence the number of albums purchased per month. Therefore it is suggested that downloading might not hurt the artist(s) a consumer is committed to, thus underlining the importance of customer loyalty. Finally, a low percentage of all the respondents indicated their willingness to purchase music online in the near future, subsequently leading to the suggestion that consumers will remain loyal to the physical album format. © 2007 University of Groningen

Keywords: customer loyalty; music industry; album sales

1. Introduction ”Music sales are currently higher than ever before‘. There is little chance that current articles written about the music industry will use this title, but why not? According to the RIAA1, the total units of musical products sold in the US are 21,6% higher than 2006 and 39,2% higher than 19962, which was way before the occurrence of illegal downloading. Therefore, it is argued that consumers have not turned its back against purchasing music in general but are venturing out to new music formats instead. To be completely fair, there are valid reasons for concern considering that the total value of music sales is decreasing year after year. This implies that revenues made by new music formats do not compensate for the loss in sales of the traditional music formats including the physical album. Nevertheless, this study attempts to see beyond, although not ignoring, the effects of illegal downloading, discussed so often before.

McWilliams3 once said that ”our thoughts create our reality - where we put our focus is the direction we tend to go‘. Recent studies (Oberholzer & Strumpf, 2004; Zentner, 2003) concerning the music industry have focused primarily on the effects of illegal downloading. Although results seem contradictory, they all share one thing: they do not focus on those consumers that do purchase music legally.

1 RIAA, Recording Industry Association of America 2 RIAA: 2006 Year-End Shipment Statistics 3 McWilliams, P (August 5, 1949 œ June 14, 2000), writer and activist

1 Although many studies have concentrated on the effects of illegal downloading, there are still millions of consumers legally buying albums from their favorite music artists. By focusing solely on illegal downloading, many of these consumers are overlooked and the lessons that can be learned from these consumers ignored. In marketing, many researchers have focused their attention on the concept of customer loyalty. According to Aaker (1991), the role of loyalty can lead to many advantages including favorable word-of-mouth, which in turn results in the attraction of new customers. Especially in the music industry word-of-mouth is essential, because the advantage of music is that consumers are often eager to discover new music (Hemsley, 2006).

So why is it that customer loyalty has not been properly addressed when it concerns the consumption of music? Returning to the quote from McWilliams, the question can be asked whether the strong focus on the effects of illegal downloading has consequently led the music industry in the wrong direction. In order to fully comprehend the importance of researching customer loyalty in the music industry, it is essential to begin a background discussion concerning music in general and the complexity of achieving success.

1.1 Defining music Music is considered an experience good and according to Nelson (1970), its true value is only shown after it is being consumed. Although recently many opportunities have been introduced where consumers can listen to samples or the entire album before actually buying it, music still has to be heard first before it can be properly valued. Besides being an experience good, music is also considered a hedonic product (Dhar & Wertenbosch), which indicates that evaluations are based primarily on personal experience and individual consumer taste, rather than specific product attributes. Moe & Fader (2001) argue that product sampling is essential because of that.

Hedonic products are defined as products whose consumption is primarily characterized by affective experience (Moe & Fader, 2001), whereas hedonic consumption has been defined as those facets of behaviour that relate to the multisensory, fantasy, and emotive aspects of consumption (Hirschman & Holbrook, 1982). In addition, hedonic products are usually purchased to be part of a portfolio for example; CD‘s are part of a collection. Keller (2002) also mentions that hedonic products offer more opportunities to differentiate the brand in consumers‘ minds compared to utilitarian products. Besides being an experience and a hedonic product, music has also been defined as a fashion-oriented product indicating that it is influenced by the ever changing tastes and preferences of the consumer itself and the preferences of others. Bhattacharjee (2005) therefore argues that this adds to the complexity of music as a product, which is also stressed by Strobl & Tucker (2000) who claim that the music industry is one the most dynamic markets since the popularity of a certain artist can easily fade within a relatively short amount of time.

1.2 Success in the music industry Record companies are involved in many related activities although according to Strobl & Tucker (2000), their principal task remains the recording and selling of music. Additionally, since profit margins on albums are much higher compared to singles, success is generally judged in terms of the number of albums sold. Poel & Rutten (2000) mention that the music industry is a high-risk business were products demand a relatively high up-front investment combined with high uncertainty about returns.

2 Record companies therefore adopt a portfolio approach to their set of musical artists as a way of dealing with these high risks (Leyshon, 2003). By using this portfolio approach, their rosters of artists are regularly turned over by not renewing any contracts with those artists who fail to generate the anticipated sales. To demonstrate the complexity and difficulty of gaining success in the music industry, consider that the four major music labels, also dubbed the Big Four (Universal, Sony-BMG, EMI and Warner Brothers) release about 30.000 albums annually in the US. When looking at the albums released in 2002, the majority (25.000+) sold less than 1.000 copies each (Seabrook, 2003). The other 5.000 did not achieve gold or platinum certifications either, only 404 sold more than 100.000 copies. This small set of successful albums provides the majority of the profits for the record companies (Bhattacharjee et. al. 2005). Reviewing these figures, one could say that you would have a better chance at winning the lottery than releasing a million units selling album. However, researching and analyzing those albums that do become successful reveal some patterns. Before discussing these patterns, it is useful to mention the distinction used by Bhattacharjee (2006) between a pre-time segment and a post-time segment. The pre-time segment leads up until the year 1998 and the post-time segment begins in the year 2000. Between these two time segments some major events occurred including the popularity of mp3-based digital music players, the introduction of p2p (peer-to-peer) sharing software and the opening of many online digital music stores. With the introduction of the p2p sharing software, participants can either download music as a means to sample and make more music purchases or digitally pirate the music. According to the IFPI4, which represents the worldwide recording industry, physical music piracy is the making or distribution of copies of sound recordings on physical carriers without the permission of the rights owner.

Results from a study conducted by Bhattacharjee et al. (2005) show that albums do not last as long on the charts in the post-time period. What does have improved is the average debut rank, which indicates that albums tend to debut at a better position but simultaneously slide down the charts faster in the post- time period. They also found that since the occurrence of the aforementioned events, the effects of debut rank on chart success has risen concerning the longevity of a particular album. Strobl & Tucker (2000) also demonstrated that the initial debut rank is one of the most important characteristics in guaranteeing survival on the charts. Their research resulted in the statement that an album debuting at number 25 survives 38.1% less than an album debuting at the number one spot in terms of longevity. Strobl & Tucker (2000) therefore suggests the existence of the bandwagon effect in the music industry. The bandwagon effect arises when the desirability of a course of action depends positively on the number of people who are expected to undertake the same action (Liebenstein, 1970). To further indicate the importance of the initial debut rank it was found by Bhattacharjee et al. (2005) that albums that debut high on the charts did not experience a significant decline in the post-time period while those albums that debut low on the charts did suffer a statistically significant decline in survival in the post-time period concerning their cumulative number of weeks on the charts.

1.3 Other factors influencing success Many factors exist which could possibly influence an album‘s success. Besides the efforts taken by the record companies through promotional and marketing activities, the timing of the release is also considered influential. Albums that are released in December are estimated to survive 23% more weeks than albums released at other times, reflecting the holiday effect (Montgomery & Moe, 2000).

4 International Federation of the Phonographic Industry

3 Strobl & Tucker (2000) also agree that demand is at its peak during the Christmas period and they further mention that record labels and artists tend to postpone release time until the run-up period to Christmas in order to capitalize on the higher demand. Hendricks & Sorensen (2004) also argue that albums are consequently released earlier than scheduled, to reap the benefits of the aforementioned holiday effect.

The discussion concerning the timing of an album‘s release can also be linked to consumer behavior. In a study conducted by Moe and Fader (2001), consumers are assigned to two segments. Consumers belonging to the first segment have a relatively high rate of purchase and are not responsive to the explanatory variables used in their study (radio airplay and seasonal indicators). Those belonging to segment two are slower to adopt the product under most circumstances but are highly motivated by the Christmas season. It could be suggested that consumers belonging to segment one, are part of the existing fan base and are therefore not responsive to the explanatory variables. Unlike segment one, the consumers assigned to segment two do not instantly buy the album and it could be suggested that they are part of the non-hardcore consumers who are responsive to the explanatory variables.

The type of release behavior the music recording industry conducts also influences the timing of the release. Alexander (1994) argues that record companies recognize that their release behavior affects the release behavior of other record companies. Therefore, a release will sometimes be postponed or released earlier if a competitive record company releases an album resulting in a situation where the consumer possibly has to choose between the releases. In addition to the timing of an album‘s release, the gender of the artist also seems to influence sales. Although little research has been conducted concerning this topic, it was found that solo female artists perform better than either solo male artists or groups, whereas groups tend be even less successful (Bhattacharjee, 2005).

1.4 The growing importance of customer loyalty in the music industry Results from a study conducted for the NARM5, show that consumers still enjoy and appreciate physical music products. In addition, these core consumers remain passionate about collecting physical music from their favorite artists (NARM Report, 2006). Brown et al. (2001) also emphasize this by arguing that a collection of original recordings is still very much appreciated. A possible explanation for this could be the connection between collecting and identity (Brown et al. 2001). A music collection can be seen as a physical manifestation of an individual‘s taste in music. Consequently, if music taste can be seen as part of an identity, than so is a music collection. Brown (2001) therefore argues that having a collection of originals, which reflects your taste in music, is an important reason for buying the original album rather that copying. It is further indicated that record labels should capitalize on this group consumers by creating demand and curiosity for music before consumers leave their home, which can be accomplished more easily since the occurrence of the Internet. As has been mentioned earlier, the Internet provides various ways of introducing consumers to music before it has been officially released, for example to offer the opportunity to listen to the soon to be released album. Subsequently, Vaccaro & Cohn (2004) argue that the music industry needs to better understand its consumers and need to conduct more research concerning their music-buying behavior.

5 National Association of Recording Merchandisers

4 Hesmondhalgh (2006) argues that music as a cultural form has continuously been associated with the visual and the tactile. Therefore, it seems likely that music collections will continue to be a mixture of purchased commodities and home-made copies, which is a situation the music industry has grown accustomed to over the years. It is also indicated that record companies have been very successful in the past selling music to consumers in these parallel formats. Examples are the single and the LP in the 60‘s and 70‘s and the CD and the audio-cassette in the 80‘s and 90‘s.

As indicated in the previous section, the initial debut rank of an album is one of the most important characteristics of the albums success and even more so in the post-time period. According to Yamada & Kato (2002) the initial debut rank reflects an album‘s acceptance by early adopters, which can create a snowballing of further demand from remaining consumers resulting in the before mentioned bandwagon effect. Strobl & Tucker (2000) also mention that the so-called committed fan base are responsible for much of the initial sales of an album. They claim that this fan base consists of the core set of consumers defined as the aforementioned early adopters, who have often completed their purchase by the time the album has appeared on the chart. Yamada & Kato (2002), also report that committed fans conduct 74,5% of their album purchases within one week after the official release. Concerning purchase timings, 62% of the non-fans indicate that they purchase their albums at least one week after the official release. Rogers (1995) mentions that the so-called innovators and early adopters are more venturesome and have local influence and a strong leadership concerning the formation of opinions. The consumers‘ appreciation of a particular artists output further increases as their knowledge of the artist increases (Adler, 1985). Adler (1985) continues by stating that learning about the artists involves direct contact with their work, and discussing the work with others.

The discussion concerning early adopters can be linked to the discussion concerning the survival of a particular album. Previously it was mentioned that in the post-time period, the number of weeks an album survived on the charts decreased whereas the initial debut rank on average increased. Bhattacharjee (2005) also mentions that the number of weeks an album remains on the charts reflects its receptiveness by the non-hardcore consumers. A decrease in the number of weeks an album survives on the chart could therefore indicate a decrease in the number of non-hardcore consumers, whereas an increase in the initial debut rank could suggest a growing fan base. It could also be suggested that the increase in the initial debut rank could be caused by the recent transparency of information concerning the release date of an album. For example, through the Internet more consumers than ever can easily be informed about the actual release date of an album. Not only does the number of weeks an album survives on the chart decrease, they also sell fewer units in total despite the fact that a high number of artists are witnessing their highest first week sales of their entire career. This adds to the discussion of a growing fan base and a decrease in the number of non- hardcore consumers. Nevertheless, Seabrook (2003) speaks about fans as being thieving, lazy and disloyal. When these fans are so disloyal, how is it possible that many first week album sales have now been higher (shown in table 1) than the same artist‘s previous albums? Would it not be more appropriate to thus tag these labels ”lazy‘ and ”disloyal‘ to the non-hardcore consumers?

5 Table 1 demonstrates the increase in first week album sales for five selected artists, each of them belonging to a different genre of music. This shows the growing importance of the initial debut rank stressed by Strobl & Tucker (2000). For example, Beyoncé‘s sophomore album B-Day saw a 70,7% increase in first week album sales in comparison to her 2003 released album Dangerously In Love. This seems even more interesting considering that B-Day‘s leading single Deja-Vu was less successful than Crazy In Love, which was Dangerously In Love‘s leading single back in 2003.

Table 1: Comparison of first week sales Artist First Week Sales Release Date First Week Sales Release Date Genre Justin Timberlake 684.000 12/09/06 439.000 05/10/02 Pop Beyoncé 541.196 05/09/06 317.000 24/06/03 R&B Evanescence 447.342 03/10/06 142.000 04/03/03 Rock Beck 162.000 29/03/05 90.000 24/09/02 Alternative India. Arie 161.000 27/06/06 109.000 24/09/02 Soul Source: Billboard

Discussing the importance of customer loyalty consequently causes a discussion concerning word-of- mouth. In comparison to traditional promotional techniques, such as music press and radio, word-of- mouth can go national and international faster than ever (Hemsley, 2006). Word-of-mouth is obviously useful for promoting an artist but it can also result in an increasing knowledge about the artist, which especially is essential when in concerns the consumption of music. Crain & Tollison (2002) found that the consumption of visual and performing arts is typically regarded as an activity where the more you know about the subject, the more you enjoy consuming it. This is also stressed by Adler‘s (1985) argumentation that appreciation increases with knowledge.

Another aspect that demonstrates the importance of researching customer loyalty is the average time artists take to write, record and release their next album. Often music artists also engage in promotional activities and tours to support the current release and further survival of their album, which sometimes could lead up to almost a full year or longer. The time it takes to produce an album seems to have increased and the average years between album releases in 2004 is 1.832 compared to 1.163 in 1995 (Mortimer & Sorensen, 2005). Additionally, the fraction of albums released between four to seven years after the previous release has also increased. With so much time between album releases, customer loyalty is fundamental and without it, the artist would have to start building a fan base with each new release.

1.5 Digital sharing technologies Whereas the traditional business model in the music industry includes mass production and the distribution of physical goods, the new business model includes legitimate online digital music services (Vaccaro & Cohn, 2004). Although much has been written about the effects of digital sharing on music sales, results seem somewhat contradictory. An expert report conducted by Fader (2000) mentions other notable factors, besides digital sharing technologies, that have possibly influenced the decline in album sales. Alongside the introduction of p2p systems, there has also been an increasing competition for consumer time including video games, DVD‘s and online activities. Strauss (2003) also cites the shifts in purchase priorities of younger consumers, as well as a poor economy in combination with the online peer to peer file trading as the main reasons behind the current decrease in music sales.

6 Continuing the discussion concerning the effects of digital sharing technologies, it was found by Bhattacharjee et al. (2005) that successful albums (albums that debut high on the chart) are not impacted by sharing, while online sharing has a statistically significant negative effect on survival for less successful (lower debut rank) albums. Blackburn (2004), on the other hand argues that file sharing reduces sales for well-known artists and subsequently leads to a decrease in overall sales since most sales are dominated by well-known artists. It is also mentioned by Blackburn (2004) that unknown artists could benefit from file sharing, since the spread of an artist‘s work makes the artist more well-known.

In a research focusing on the positive information digital sharing can present, conducted by Bhattacharjee et al. (2006), an analysis of file sharing was used to predict success on the Billboard Top 100 charts. This was done by comparing the average daily number of files available for sharing (ADFA), two weeks before release, with the actual appearance on the Billboard Top 100 chart. A high number of albums are available on various sharing networks days and sometimes weeks, prior to the actual release. New music is regularly ripped from promotional pre-release CD‘s with the result that it is available long before the actual release date. It was found that albums that appear on the charts have a much higher ADFA in comparison to those albums that did not appear on the charts. Therefore, it is suggested that ADFA can help predict album sales even before its release and this information could be helpful for promotional strategies.

1.6 Problem Statement The purpose of this study is to gain insight in the factors that influence customer loyalty. The central question of this study is: —Which variables influence customer loyalty concerning the consumption of music?“ Alongside the central question, the following additional questions will also be included in this study:

- to what extent do the variables, influencing loyalty, differ in strength? - is it possible to conduct a segmentation of consumers concerning their loyalty? - are consumers loyal to the used music format? - to what extent do consumers, who purchase albums legally, make use of illegal downloading?

The problem statement concerning this thesis encompasses three formats of loyalty: loyalty towards the music artist, loyalty towards the used music format and loyalty towards legal purchasing. The importance of researching customer loyalty in the music industry has been demonstrated and the factors that are going to be researched are discussed in the theoretical framework. This is followed by a description of the method used in this study and the results. The analysis of the results will lead to a discussion followed by recommendations and future research directions.

7 2. Theoretical Framework The discussion concerning the theory essential for this study will begin with an analysis of customer loyalty and other concepts related to either customer loyalty or the purchase of music. This will then be followed by a theoretical discussion about the researched factors.

2.1 Customer Loyalty Customer loyalty has been well researched in the past and has been considered a hot topic resulting in many different definitions. The definition of customer loyalty that suits this study best is the definition constructed by Oliver (1999), who defines loyalty as a deeply held commitment to rebuy a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand set purchasing. By analyzing this definition and attempting to relate it to the music industry, it is essential to discuss two aspects in depth. First, Oliver (1999) speaks about products as well as services, which could lead one to think that this definition might not be appropriate for researching loyalty concerning the music industry. Nevertheless, Fox (2004) argues that the music business is transforming from a product to a service business due to the occurrence and development of digital technologies. Second, the definition constructed by Oliver (1999) mentions same-brand as well as same brand set purchasing. This especially makes this definition best suitable for researching loyalty in the music industry. The —same-brand“ relates to repurchasing music from the same artist, whereas —same brand set“ relates to repurchasing music from the same genre.

In researching customer loyalty towards music, it is fundamental to acknowledge that many music consumers prefer a portfolio of musical artists and there are few consumers that are loyal to only one artist. Consequently, Ehrenberg & Scriven (1999) argue that most customers are polygamous (loyal to a portfolio of brands in a product category), subsequently confirming the occurrence of multi-loyalty. Although little research has been conducted concerning multi-loyalty, its existence seems paradoxical which is also stressed by Chaudhuri (1996). It could be argued that a consumer expressing a high level of loyalty is unable to showcase loyalty towards multiple brands and conversely, the question can be asked whether a consumer expressing multi-loyalty is truly loyal.

A study concerning the different levels of loyalty consumers engage in, resulted in an identification of four categories. Rowley (2005) argues that the loyal customer is either captive, a convenience seeker, contented or committed. Those customers showing loyalty towards musical artists can be categorized as committed customers. According to Rowley (2005) the typical behavior of committed customers is that they are prepared to add value to the brand, for example though participating in supportive customer-to- customer interaction. This engagement in positive word-of-mouth is important for the formation of a relationship with the brand, in this case the artist. Fournier (1998) also stresses the importance of interaction as he sees loyalty primarily as a partnership. This partnership will be stronger when it is supported by other members of a household or buying group.

Expressing loyalty towards a musical artist can often result in the formation of brand love. Carroll & Ahuvia (2006) indicate that brand love includes passion for the brand, attachment to the brand and positive evaluation of the brand. First, music being a hedonic product provides the opportunity for the formation of brand love to occur.

8 Second, it was found by Carroll & Ahuvia (2006) that consumers who feel greater brand love are more loyal and engage in more positive word-of-mouth. Besides the relation of loyalty towards brand love it can also be noted that loyalty has a link with the concept of brand affect. Brand affect occurs when a brand gives consumers a positive feeling and this is positively related to the formation of loyalty (Chaudhuri & Holbrook, 2001). For the formation of brand affect a brand must provoke feelings of positivism, joy and happiness, which obviously music easily can accomplish and therefore is suitable for brand affect to occur and in turn could lead to the formation of customer loyalty.

Finalizing the theoretical discussion concerning customer loyalty it is important to mention the difference between various loyalty phases including cognitive and affective loyalty (Evanschitzky & Wunderlich, 2006). Cognitive loyalty is the first phase of the loyalty formation, which is where attribute information indicates that one brand is preferable to its alternative. A liking or attitude toward the preferred brand has been developed in the affective loyalty phase based on cumulatively satisfying usage occasions. Relating this to the consumption of music, it can be argued that a consumer will move from the cognitive to an affective loyalty phase, as the number of albums purchased from the same artist increases.

2.2 Impulse buying In the context of purchasing music, it is important to analyze the theory concerning the impulse buying behavior. Categories of impulse buying behavior relevant to this study are suggestion impulse buying and planned impulse buying. Suggestion impulse buying occurs when a customer sees the product for the first time at the store and then visualizes the need for it (Stern, 1962). Planned impulse buying occurs when a customers enters a store with the intention of purchasing certain items, but recognizes that he/she may purchase other items dependent upon sale promotions (Stern, 1962).

A rather interesting experiment concerning the impulse buying behavior of music CDs conducted by Adelaar et al. (2003) reveal some useful implications. The experiment began with the development of three distinct websites promoting the same album in different ways. The first website used a text stimulus that contained only the lyric text, whereas the second website only used a still image stimulus that consisted of a series of still images from the music video accompanying the album. Finally, the third website only used a video stimulus. Additionally, all versions used the same two-minute segment of the song and the websites were given a similar look concerning the used color palate and image of the album cover. The results of this study indicate that the presence of a video did not create the impulse buying intent that was expected. Conversely, playing a song while simultaneously displaying the lyrics of the song text generated a higher impulse buying intent, compared to showing a series of still images from the related music video. One explanation for these findings might be that the presence of the song‘s lyrics demands greater cognitive skills of the audience. Krugman (1977) also emphasizes this by suggesting that reading is more cognitively involved than simply viewing. A second explanation could be that despite the fact that lyric texts are to a large extent available on the Internet, they are rarely displayed in combination with playing the song (Adelaar et al., 2003). Therefore, hearing and reading the lyrics of the song simultaneously demands more cognitive involvement and in turn increases the chance of consumers buying the song or album.

9 Finalizing the discussion concerning impulse buying behavior, it is demonstrated by Wood (1998) that women are 1.7 times more likely to report impulse buying. Besides gender, age is also related to the occurrence of impulse buying. Wood (1998) found that as a consumer ages, the occurrence of impulse buying decreases. However, this does not apply to all ages, as it was also found by Wood (1998) that the occurrence of impulse buying increases moderately between the ages 18 and 39. Customer loyalty and its related concepts have now been properly discussed, therefore the following theoretical discussion will focus on the researched factors that are possibly influencing customer loyalty.

2.3 Gender When it concerns the actions male and female fans undertake, it is generally assumed that female fans are seen as passive recipients of popular music whereas males are thought to be more active participants (Feigenbaum, 2005). Discussing the difference between gender and the consumption of music, it is widely known that males tend to purchase more than females. According to the 2006 report concerning consumer profile conducted by the RIAA (Recording Industry Association of America), 50.4% of music consumers are male and 49.6% are female. In the Dutch market the discrepancy in music purchases between male and female is even more obvious. According to a study conducted by the NVPI in 2004, 65% of music consumers are male and 35% are female and compared to 1996 the proportion of males consuming music has increased by 8%.

Hypothesis 1a: Males purchase more albums on average compared to females

In an interesting study conducted by Rhein (2003), it was found that female fans consider the following aspects of significance to fandom: to do something together with others, to be able to talk with others about it. These aspects were found to be as more integral parts of their fandom in comparison to male fans. These aforementioned aspects are of great importance to the formation of loyalty and therefore it could be suggested that female fans tend to be more loyal than male fans. This is in line with Fournier (1998), who argues that women have more and stronger interpersonal brand relationships than men. It was also found that females are more likely to be fans, although a surprisingly high proportion of males also identify themselves as fans.

Hypothesis 1b: Females indicate that they discuss music with friends and relatives more compared to males Hypothesis 1c: Females are more loyal than males concerning the consumption of music

2.4 Age Gounaris & Stathakopoulis (2004), mention that family and friends influence younger consumers concerning the image they have of a brand, and subsequently report that group social influence are having a strong impact on brand loyalty. Moskovitch (1982), acknowledges this by stating that older consumers are less likely to be searching for new information, whereas younger consumers seek alternative information that might influence their loyalty. Research conducted by Evanschitzky & Wunderlich (2006), demonstrates that age has a moderating effect on the formation of customer loyalty. For older consumers, the link from cognitive to affective loyalty is significantly higher than for young customers. Smith (1991), mentions that consumers have been reported to evidence more loyalty as they age.

10 Homberg & Giering (2001) found that age moderates the links between satisfaction with the product and loyalty, such that these links will be stronger for older consumers. In a study conducted by Marcus (1997) concerning the actions taken prior to buying an album, it was found that teenagers are more cautious. Prior to purchasing an album, a consumer between the ages of 15 to 19 needed to hear three songs from an album by a new artist. However, of all the respondents used in this particular study, 40% claimed they only needed to hear one or two songs. It could be suggested that teenagers would like to be more certain of what they buy since they have relatively less money to spend.

Hypothesis 2a: The occurrence of loyalty increases as age increases

Recently, the trend occurs where the average age of the consumer increases, concerning the purchase of music. Analyzing the sales figures of the Dutch market in 2004, consumers between the ages 20 to 29 were responsible for 19% of the total market compared to 31% in 1996. Conversely, consumers between the ages 40 to 49 were responsible for 15% of the total market in 1996 compared to 22% in 2004 (NVPI, 2004). For many years, consumers between the ages 20 to 29 were the biggest group concerning the consumption of music. With the average age of the music consumer moderately increasing, it is now those consumers aged 30 to 39 who are the largest group (25%). When looking at the sales figures in the US music market6 (RIAA, 2006), the shift in the average age of the consumers is also visible. In 1996, 24,2% of the consumers were aged 40 years or older. However, in 2006 this group was responsible for 37,1% of total music purchases. Contrary to the Dutch market, consumers aged 20 to 29 (24,8%) still purchase more music compared to those consumers aged 30 to 39 (20,1%). It seems even more interesting considering that the percentage of consumers aged 20 to 29 is increasing for the first time since 1998.

Hypothesis 2b: Older consumers purchase more albums on average compared to younger consumers

2.5 Education The relationship between the level of education and the formation of loyalty has been well researched in the past. Capon and Burke (1980) argue that people with higher levels of education usually engage more in information gathering and processing and use more information prior to decision making, whereas less well educated people rely on fewer information cues. In the previous discussion concerning the influence of age, it was argued that a younger population is thought to be less loyal due to their constant search for new information. Therefore it could also be argued that consumers with a higher level of education are less loyal because they, like the younger population, continue to search for new information. This is in line with a study conducted by Evanschitzky & Wunderlich (2006), who demonstrate that the links between the loyalty stages are stronger for less educated consumers. Homberg & Giering (2001) also argue that better educated consumers feel more comfortable when dealing with, and relying on, new information. Thus, in general a lower level of education can result in a higher level of loyalty which therefore is also expected concerning the consumption of music.

Hypothesis 3a: Consumers with lower educational levels report a higher level of loyalty

6 RIAA: 2006 Consumer Profile

11 In a study concerning the relationship between the level of education and genre of music conducted by van Eijck (2001), it was found that as the educational level increases, the number of genres a person appreciates increases as well. Also it was found that a person‘s love for pop, top 40 music and genres occupying the charts decreases as a person‘s educational level increases. It could also be suggested that those consumers with a higher level of education have a broader set of artist they prefer, because they expose themselves to more information compared to those consumers with a lower level of education.

Hypothesis 3b: An increase in educational level leads to less preference for pop music

2.6 Genre music The discussion of music genres was briefly addressed in the previous section when it was related to the level of education. When speaking about music genres in general it can be said that they are not easy to describe, and that there exists no complete agreement in their definition (Basili et al., 2004). Many musicians also allow themselves to be active in more than one genre and especially in the last few years, music genres are often mixed together, for example pop with rock and punk with dance music, thereby creating more difficulties defining particular music genres.

A study conducted by Lambiotte & Ausloos (2005) shows that a person‘s musical taste originates from an interplay between personal identification, individual choice, community imitation and the collective trend. The number of genres to which people listen to frequently averages between two and three, but could increase as the level of education increases which has been discussed in the previous section (van Eijck, 2001). Lambiotte & Ausloos (2005) also divide the genres of music into mainstream genres that are listened to by a very large audience, and those genres that do not fit the usual genres, which represent the nonconventional taste. Another interesting issue Lambiotte & Ausloos (2005) tackle is the idea of collective genre hopping which is driven by curiosity and self-identification. The idea of genre hopping is in line with Hemsley‘s theory (2006) who indicates that music consumers are genuinely keen to hear about something new. It could be argued that genre hopping could occur more often for younger consumers as well as higher educated consumers because both groups rely on a growing source of information.

Hypothesis 4a: The number of music genres consumers listen to increases as the educational level increases

The current trend of music genres in a particular country also influences the percentage of domestic repertoire. For instance, US mainstream radio is usually driven by urban music whereas UK radio usually plays straight-ahead pop, rock and dance music. Because many international markets lack a production of high quality urban music, the percentage of domestic repertoire in the US remains high. The most well- known example of an artist affected by the discrepancies between current musical trends in the US and the UK is Madonna. Her latest album —Confessions On A Dance Floor (2005)“ consists of all dance songs thereby receiving minimal airplay in the US. For example, the album‘s third single —Get Together“ had a radio audience of fewer than 1 million listeners in the US. In the UK however, where dance music is generally very well received, the single had a radio audience of 38.4 million listeners (Paoletta, 2006). Consequently, the differences in radio airplay affected the chart positioning in both countries.

12 In the UK, —Get Together“ was the album‘s third top ten hit stacking at number 7, whereas in the US the song only reached number 6 on the Bubbling Under Hot 100 Chart, generally acknowledged as the equivalent to number 106 (Billboard, 2006). Furthermore, locally produced music has increased from a worldwide share of 58% in 1991 to 68% in 2000. There seems to be an upward trend overall in the demand for domestic repertoire. Nevertheless, there is considerable variation between countries. In 2000, 92% of the record sales in the United States were domestic, in comparison to 41% in the United Kingdom (Thorsby, 2002).

Local artist have the advantage of being able to promote their products during its release date. Many US artists release their products abroad while not being able to properly promote it due to promotional obligations in their own domestic market. Often the release date will be postponed thereby creating the possibility of appearing in promotional activities in support of its product. For example, many US artists have different release dates for their albums in comparison to the UK market and vice versa. For example, British singer/songwriter KT Tunstall released her debut album —Eye to the Telescope“ to great success in the UK in December 2004. Following the success in the UK, the album was also being heavily promoted and released in the US in February 2006. Up until July 2007, the album achieved great success in the US, selling well over 1.089.771 copies in the US.

2.7 Music Involvement The theory of customer loyalty related to the consumption of music subsequently leads to the concept of fanaticism and involvement. Bristow & Sebastian (2001) define consumer fanaticism as a unique form of loyalty characterised by strong and intense levels of commitment, devotion, passion, emotional attachment, enthusiasm, and involvement. Doss (1999), argues that fanatic consumers engage in behaviours beneficial to the relationship he or she shares with the brand, such as spreading positive word- of-mouth, protecting the brand, and ensuring the brand‘s continued existence and legacy. This of course is not solely beneficial to the relationship shared with the band, but maybe even more so for the artist.

Hypothesis 5a: Those consumers indicating to recommend the music they prefer to others also report to be more loyal

An extreme case that displays the actions fans will undertake to support their favourite music artist is the case of critically acclaimed singer/songwriter Fiona Apple. After two successful albums released in 1996 (—Tidal“) and 1999 (—When The Pawn“), Fiona Apple was in the working process of writing and producing her third album —Extraordinary Machine“. After finishing the record, its release was postponed due to various reasons. Fans of Fiona Apple were eagerly anticipating the new release but nothing was finalized, and therefore they choose to set up the Free Fiona campaign in the beginning of 2005. Meanwhile, some tracks of the unreleased album had eventually leaked on the internet in 2004 and 2005 and Fiona Apple re-recorded the tracks and finally released the album on October 5 2005 (US), which gave her the highest first week sales (94.000 units) of her career (Billboard, 2005) and eventually the album was certified gold in January 2006. Fanatic consumers can be fundamental for musicians, because according to Chung et al. (2005) they act as opinion leaders who bring others attention to the brand and consequently attract a new group of consumers.

13 Several aspects of significance in fandom were researched by Rhein (2003), and the two most important aspects were music-related such as —to have found the music that excites me“ and —to know a lot about a certain area of music“. This is in line with Hemsley (2006) who argues that the advantage of music is that consumers are genuinely keen to hear about something new. Fanatic consumers are highly involved with all that has to do with their preferred musician. Evans (1993) defines involvement as the level of perceived personal importance and/or interest evoked by a stimulus (or stimuli) within a specific situation. Evans (1993) also argues that the greater the involvement, the more detailed the individual‘s knowledge and evaluations of substitute products, brands, and attributes is expected to be. Fox (2004) argues that the consumption of music appears to be more of an emotionally based activity than many of the products traditionally addressed by marketing, which could lead to the suggestion that a high level of involvement is not rare in the consumption of music. This is in line with Cunningham et al. (2004) who claims that consumers with an intense interest in specific artists are not uncommon and that they may participate, for example, in online communities.

Several studies have been conducted in an attempt to measure music involvement. An online music experience study conducted by Bhattacharjee et al. (2003) found that a total of 52% of the respondents reported a very high level of interest in music, while another 37% listened to music regularly. Dixon (1980) developed a scale for measuring music involvement that includes concert attendance and hours spent listening to audio media. Concert attendance was defined as active involvement whereas the amount of time spend listening to music was defined as passive involvement. Researching the relationship between involvement and gender it was found by Schwartz & Fouts (2003) that there is no significant difference between males and females concerning their music involvement, which was measured by assessing the amount of time the respondents listened to music. Adler (1985) argues that a consumer who devotes little time to art would prefer only one artist and a consumer who devotes more time, would prefer more. Adler (1985) continues by generalizing this result by stating that the more time one devotes to art, the larger his or hers set of stars would be.

Hypothesis 5b: There is no significant difference between males and females concerning music involvement

2.8 Music Discovery The days when new music was discovered solely by listening to the radio or searching extensively in the —new music“ section in the record stores are way behind us. New ways of discovering music have emerged over the past years, whereas more and more music is being discovered online through the use of various methods, partially discussed in this section.

2.8.1 Retail Store According to Whittle (1995), very little music is being discovered in music stores. This could lead to the suggestion that consumers arriving in a retail store already know exactly what to buy and discovered the music through the use of another channel. Whittle (1995) continues by stating that the circumstances under which consumers listen to music in the record store are far from ideal. Consumers are usually able to listen to music on headphones, but they can listen to this simultaneously with what the record store is playing from nearby loudspeakers. Lam & Tan (2001) argue that physical retail stores are social places where music lovers gather to interact in relaxed settings.

14 Therefore, Whittle (1995) mentions that record stores should make it easier for consumers to discover new music in a way that supports the social needs of groups of people shopping together. Tai & Fung (1997) conclude that consumers can freely navigate through the retail store without consulting any staff, therefore defining music stores as self-service stores. A recent example of a retail store reviving its in- store promotion is Wal-Mart (Gallo, 2006). Wal-Mart is using an exclusive video show called Wal Mart Soundcheck which shows 30- to 40-minute in-studio performances and interviews that are unveiled every two or three weeks. To create a buzz, Wal-Mart will produce two- to three-minute sneak previews of each performance that will air regularly nationwide in more than 3.000 stores. Adding to the discussion concerning the purchase of music in the record store, Tai & Fung (1997) demonstrate that consumers respond to an environment that is found novel. A consumer will try to satisfy its curiosity by analyzing the uncertain stimuli, therefore conducting exploratory behavior. This leads to the suggestion that consumers like stimulation and this positively relates to their amount of time being spent in the music store. Finally, it was found by Tai & Fung (1997) that the desire to explore is also triggered by the scale of the retail store. A logical explanation would be that the bigger the store, the more space the consumer has to explore.

2.8.2 Online Music The search for music online can, according to Bhattacharjee (2003), result in one of six actions. First, downloading a song illegally can result in the following four actions: [1] listen and delete the song from the computer and then buy the song, [2] listen and delete the song from the computer and don‘t buy the song, [3] listen and keep the song in the computer and then buy the song, [4] listen and keep the song in the computer and don‘t buy the song. Second, searching for music online, but choosing not to download it can result in two actions: [5] buying the song or [6] not buying the song. It is argued by Mortimer & Sorensen (2005) that sharing files online should be most important for new bands because downloading is a way of sampling new music. McGuire & Slater (2006) predict that recommendations by music consumers online will drive 25% of all Web-based music transactions by 2010, up from less than 10% today. There are many ways consumers are able to search for new music on the internet and a few new important examples will be further discussed. An example of social networking where consumers can not only meet new people, but also discover new music is MyStrands (Honan, 2006). MyStrands scans the iTunes library and compares it with the MyStrands database. As the songs are played in iTunes, MyStrands gives recommendations of similar songs consumers might also enjoy. It is also possible to find people with similar musical tastes through the use of the Discover Members link.

Another way of discovering new music is through the use of music blogs, which reveals other people‘s tastes (Honan, 2006). Those using music weblogs, dubbed ”bloggers‘, tend to be well educated and 57% are male and they also tend to be young (48% are under 30). O‘Donnell (2006) argues that music blogs present an opportunity to gain access to the early adopter crowd and thus could be used to create a buzz. Music blogs are interesting for the discovery of new music, because they often focus on up-and-coming bands and O‘Donnell (2006) argues that bloggers want to learn about new music to be in on the buzz. Wolk (2005), mentions that most music blogs use a similar format where usually an artist is introduced with a paragraph or two containing biographical or background information. This is often followed by a description of the music and a list of similar sounding bands, plus a link to download a few songs in mp3 format.

15 Music blogs encourage buying the songs or albums by placing a link to the band‘s website or from an online retailer and according to O‘Donnell (2006) most songs are only available for download for a limited time, usually seven to ten days. O‘Donnell (2006) also demonstrates that bloggers are true music lovers as they purchase more than five albums a month, and a large majority (69,2%) do not download from peer-to-peer networks.

2.8.3 Radio An interesting thought concerning the relation between radio and sales is the question asked by Moe & Fader (1999), whether radio airplay increases awareness and therefore increases the potential market or whether it speeds up sales that would have taken place at a later time. They argue that the loss of airplay could result in the consumer forgetting about the album and removing it from his or hers consideration set, thereby suggesting that radio exposure increases consumer awareness. Radio stations do have a huge impact on the decision what is being heard, as they filter through a large amount of new releases each week and make a choice of just a few songs that are going to be aired. Marcus (1997) mentions that teenagers often select one radio station to the exclusion of all others, and the repeated playing of music can influence the public‘s perception of what kind of music is popular at the time. However, Montgomery & Moe (2002) argue that the public can also have an impact on the radio station as increased album sales can in turn increase radio airplay. Whittle (1995) further defines the relationship between radio stations and the music industry as awkward, due to the fact that radio often plays what listeners already know and like. However, the music industry wants the radio to play new material with which the audience is not familiar with. Finally, radio stations have seen a growth of competitors due to the rise of online radio stations in addition to their traditional rivals. An example of an online radio station is Last.fm where users get to search the music they like and stream it for free, thereby creating their own personalized radio station.

2.8.4 Word-of-mouth In a study conducted by O‘Donnell (2006) it was demonstrated that 80% of the respondents got their information through word-of-mouth. Marcus (1997) also found that the musical taste of teenagers was mostly influenced by friends followed by radio and television. Word-of-mouth is defined by Carl (2006) as an informal, evaluative communication between at least two conversational participants about characteristics of an organization and/or a brand, product, or service that could take place online or offline. Brown et al. (2001) found that social music listening environments promoted the exchange of information and taste about new music. Concerning word-of-mouth, it was mentioned earlier that female fans consider the following aspects of significance to fandom: to do something together with others, to be able to talk with others about it, as more integral parts of their fandom in comparison to male fans (Rhein, 2003).

2.8.5 Concert Another way of discovering new music is through the attendance of concerts and especially festivals where a whole range of bands showcase their music. Earl (2001) argues that a live concert causes an excitement that cannot be duplicated by listening to an album at home. Leenders et al. (2005) estimates that in the past decade, the size of the audience and the number of music festivals has increased substantially in Europe.

16 This is in line with Mortimer & Sorensen (2005) who assume that the overall demand for live performances will increase as a result from the digital sharing of recorded performances. Music festivals can broadly be divided into two groups concerning their target group. They can either focus on a particular genre or attract as many visitors as possible. The former type of music festival can be defined as a niche festival, and Leenders et al. (2005) mention that this type is considered more successful than those festivals that want to attract a broad target group. Leenders et al. (2005) also argue that the type of music that is staged by a festival often determines the demographic features by which the target group can be defined. For example, the Dutch music festival Pinkpop focuses on a young (mainly 18-30 years old) and a higher educated audience.

Concerning the relation between concerts and album sales, it is demonstrated by Mortimer & Sorensen (2005) that the demand for albums and concerts are interrelated, whereas sales of albums trigger the demand for concerts and concerts in turn stimulate album sales. This relation between concerts and albums is caused for example by the promotional activity that takes place during the weeks prior, during and after a concert. These promotional activities often include increased radio airplay, which could raise awareness of the artist and therefore boost album sales. Logically, the rise in album sales is found to be the highest in the week of the concert and in the following week.

2.8.6 Mobile music Discovering music through the use of a mobile phone is rather new and still in a developmental phase, but is expected to succeed because it is a new way to discover and enjoy music. Sexton (2006) mentions that mobile music adds a significant benefit that portable music does not have, because through the use of a mobile consumers can get the music whenever and wherever they want it. An additional factor that could make mobile music a success is the fact that consumers can easily share it with others and therefore creating a social element, which is essential for the discovery of music. Finally, an example of a mobile music format is WAMO Packs (Sexton, 2006) which is available for consumers in Japan and includes a full track, ringtone, album art and a music video. A further theoretical discussion concerning mobile music will follow when the various music formats are analyzed.

2.8.7 Music television Especially since the 1980‘s, having a music video in addition to a song seems to be a must have since the occurrence of MTV and other music channels. Banks (1997) argues that the music video serves as a three- minute marketing tool and it is essential for the achievement of success, especially in the pop market. The music video can help an artist in various ways including the cultivation of a certain image. Many examples of artists using the music video to achieve this exist, for instance Madonna, David Bowie, Eurythmics and many others. Music videos can also be used to establish an identity and introduce the artist to the public. Banks (1997) argues that music videos are not expected to boost sales for these new acts immediately, but it is used as part of a long-term promotional strategy in order to familiarize consumers with the new artist.

A development that seems to have a negative effect on the music artist is the decision of music channels to focus more on non-music programming due to the need for higher ratings. This decision means less scheduled time for airing video clips that help to promote the artist. However, due to the development of several successful multimedia websites it is also possible to view music videos online.

17 The advantage here is that the music video can be watched at any time, and it can possibly reach a worldwide audience. One of the most successful websites where music videos can be viewed is youtube. An example of an artist gaining audience through youtube is Russian born American singer/songwriter and pianist Regina Spektor. Up until July 2007, her music video accompanying the song ”Fidelity‘ was being viewed over 2.5 million times, thereby reaching an audience she could have never achieved solely through traditional music channels, which rarely broadcast her videos. While the song was being released in September 2006, it finally charted on the Billboard chart in December 2006 and helped her album reach sales of over 400.000 units. An advantage of these online multimedia sites is the possibility for viewers to also showcase their opinion concerning the music video and the particular artist, and therefore creating a sense of community, which is again essential for the discovery of new music.

2.8.8 Magazines O‘Donnell (2006) who argues that 62% of the respondents from his study claimed to receive their information from reading magazines emphasizes the importance of magazines as a source to discover new music. Whittle (1995) also acknowledges this by mentioning that music listeners discover new music through articles and reviews in printed magazines. Analyzing the music magazines market it can be said that music magazines in general experience a significant growth (Hay, 2006). However, the pop music magazines are not experiencing an increase and according to Hay (2006) are being deserted by teenagers. It could be suggested that teenagers are getting their information more and more online and their need to read magazines therefore slowly decreases. Hay (2003), mentions that advertisers are showing their interest for the ”niche‘ magazines who focus on a specific audience. An example Hay (2003) gives is the magazine Tracks, which focuses on the target group aged over 30 who are underserved by radio and thus the magazine could be a source to expose them to new music. Focusing on the relationship between music magazines and the occurrence and influence of mp3‘s and ipod‘s, which are making music much more accessible, Granatstein (2004) makes a rather interesting claim as he suggests that music magazines are needed to help consumers filter through everything that is currently available.

Hypothesis 6a: Younger consumers discover new music more through Internet compared to older consumers

Hypothesis 6b: Younger consumers discover new music more through word-of-mouth compared to older consumers

2.9 Purchase Destination This thesis focuses on those consumers buying music from record stores and therefore it is necessary to start a theoretical discussion concerning the reasons why consumers choose to go to offline stores instead of purchasing music online.

Digital music is the focus of many music industry watchers and it will clearly show its relevance in the near future, however 90% of the Dutch music sales are still being sold offline (NVPI, 2006). Additionally, 65% of music purchases are sold through the traditional record store (NVPI, 2006), thereby remaining the most important channel.

18 In comparison to offline record stores, consumers usually know exactly what they want when they decide to buy music online. A visit to an offline record store is usually described as spontaneous and not planned (Sveningsson, 2002). An unplanned visit to the retail stores leaves room for experimentation and browsing in search for new and unfamiliar music, which is dissimilar to the arguments made by Whittle (1995) who indicates that little music is being discovered in music stores. This experimental aspect of buying music offline is related to the hedonic shopping behavior. Sveningsson (2002) also argues that the reason that consumers buy their music offline is also related to the utilitarian shopping behavior. When buying music offline, the consumers can see the product instantly and therefore is convinced that it gets what he/she expects.

A study conducted by Verhoef et al. (2005), tried to capture the motivations of consumers concerning their use of a specific channel when searching for and/or buying a product. Assigning these motivations to various attributes it is argued that Internet is particularly strong on ”search convenience‘ and ”compare information‘, whereas the store channel is strong on ”service‘ and ”privacy‘. Subsequently, Internet is found to be weak for the attributes ”search effort‘ and ”privacy‘, whereas the store channel is found to be weak for ”search convenience‘. Interestingly, it was found that Internet search positively affects store purchase. Furthermore, the paying routine for offline stores is described as being safer compared to the online paying routine (Sveningsson, 2002). Verhoef et al. (2005) further acknowledge the importance of the perceptions of risk by claiming that risk strongly affects purchase attractiveness, whereas information and search convenience in turn affects search attractiveness.

2.10 Music Format Many formats have been used over the past decades and new ones have been emerging, subsequently causing others to be left behind. For instance, the rise of the compact disc has had a huge impact on the amount of LP‘s sold. Four various formats are discussed here including the compact disc, pay-per-play, subscription model and mobile music. Finally, the influence of price is discussed concerning the physical versus the digital music format.

2.10.1 Compact Disc (CD) Earlier in the introduction it was argued that record companies have succeeded in selling music in parallel formats, for example the CD and the audio-cassette in the 80‘s and 90‘s. These days it is expected that these parallel formats are divided in CD‘s and digital music and many authors (Ortiz, 2003; Cunningham et al., 2004) are convinced that the CD will remain the dominant music format for years to come. Ortiz (2003) argues that there are many advantages to owning real CD‘s, such as the physicality of the product and owning the additional CD booklet. Adding to the discussion concerning the physicality of a CD, Sullivan (2007) stresses the importance of the packaging that comes along with the CD. Sullivan (2007) mentions that an innovative package could give the release an identity, and therefore convinces the consumer to buy the physical products instead of obtaining the digital format. Sullivan (2007) continues by predicting that deluxe packaging will become the norm thereby replacing the standard, jewel-cased CD. This physicality is also stressed by Cunningham et al. (2004), who claim that having an mp3 file does not give the consumer the same level of pleasure and sense of ownership.

19 Furthermore, a physical CD usually is part of a collection and an mp3 file is not able to fit in this collection of music. Since this study focuses on those consumers buying physical albums in the record store, a discussion concerning the success (or lack of success) of the physical album is necessary. The album sales of the UK as well as the US market are analyzed, followed by an analysis of the Dutch market.

Sales figures, which are frequently highlighted in various publications, can be used in different ways, often depending on the publications purposes. For example, when comparing the sales figures of the UK music market in the first quarter of 2007 (Q1 2007) and 2006 (Q1 2006) it can be concluded that sales have decreased substantially. The number one album of Q1 2007 sold 48% fewer than the number one album of Q1 2006 (Cardew, 2007), thereby supporting those publications announcing the fall of the physical album due to illegal downloading. Further analyzing the reasons of the decrease puts these sales figures in a different perspective. Album sales of Q1 2006 where hugely boosted by the release of Arctic Monkeys ”Whatever People Say I Am, That‘s What I‘m Not‘ which was released on 23 January 2006 thus in the beginning of Q1 2006 and sold 900.000. The number one album of Q1 2007, Amy Winehouse‘s ”Back To Black‘ sold 468.000 units, which seems significantly less but was released on 30 November 2006. The first week sales, usually the highest, of this particular album were obviously not calculated within the sales of Q1 2007. Cardew (2007), indicates that up until week 12 the album sales of 2007 were 1% less compared to 2006, but a weak release schedule in the final two weeks of Q1 2007 have caused the sales figures to decrease to 6% (IFPI, 20077). This supports the idea that a weak release schedule is hugely responsible for the decrease in album sales. The BPI8 mentions that the physical CD remains hugely popular in the UK music market. From all the albums sold in the first half of 2007, 96,5% are physical albums. It is also mentioned that compared to album sales in the first half of 1997 (43,7 million units), album sales in the first half of 2007 (57,9 million units) have increased with 32%. The increase in albums sales is mainly due to strong British releases. According to the statement released by the BPI (June 10th, 2007), UK music fans are the biggest CD buyers per head in the world, which is also acknowledged by Hanman (2005).

Album sales in the US show a 12,8% decrease in 2006 compared to 2005 (RIAA, 2006), which causes great concern among industry watchers and also further supports those publications solely blaming the decrease on illegal downloading. Again, further analyzing the album sales of the previous years may turn this concern into hope. Illegal downloading was also heavily used in 2004, however physical album sales increased with 2,8% compared to 2003. Also, 1997 witnessed a 3,3% decrease compared to 1996 which is a substantial decrease, however this obviously could not be blamed on illegal downloading. The IFPI acknowledges that the decline in physical album sales is also due to a weak release schedule.

The Dutch album sales9 of Q1 2007 have decreased compared to Q1 200610. However, week seven of 2007 reported higher album sales compared to the same week in 2006 as well as 2005. Week nineteen of 2007 witnessed an increase in albums sales, shown in figure 1, compared to the same week in 2006 and 2005.

7 IFPI: Market Research, April 2007 8 British record industry‘s trade association 9 Dutch album sales are retrieved from media control Gfk International 10 Due to secrecy reasons, Dutch album sales cannot be shown publicly

20 Week 52 of 2006, usually characterized by the highest album sales of the year due to the Christmas period, showed a substantially higher amount of album sales compared to the same week in 2004. Finally, Q1 sales 2006 were higher than Q1 sales of 2005 thus further indicating that strong release schedules result in higher sales.

Figure 1: Comparison of weekly CD sales of 2006 and 2007 (week 16-24)

Due to secrecy reasons figure 1 cannot be shown publicly

2.10.2 Pay-per-play Compared to the physical CD, the distribution of music online does not require production, shipping and warehousing, and record labels do not need to forecast how many copies of a particular album consumers will purchase in order to avoid over- or underproduction (Fox, 2004). It is also further argued by Fox (2004) that the digital distribution of music is transforming the music business from a product to a service business. All four major recording labels did not only launch their own pay-per-download initiative, they also licensed their music to third parties such as MTVi. Fox (2004) indicates that consumers are willing to pay between 99 cents and $1.99 per track. Fox (2004) argues that the pay-per-play model could be even more successful when it focuses on giving additional value, such as rare tracks or prerelease recordings. The reason for the growing success of the pay-per-play model is caused by the feelings that consumers have towards the quality of the legal track in comparison to those available on peer-to-peer networks, which is thought to be inferior. Concerning the acceptance of digital music, it is questioned why the percentage of women purchasing digital music is so much lower compared to men (Hanman, 2005). Several explanations are given for example, many early adopters of new technology are male and women could be more attracted towards the physical assets of music such as cover art (Hanman, 2005).

2.10.3 Subscription Consumers using a subscription model pay a monthly fee to obtain access to a huge library of music, which can then be legally downloaded. Compared to the pay-per-play model, a subscription model offers certain advantages for the consumers as well as the record companies. From the consumer‘s perspective, a subscription model brings a wide variety of music and it can be downloaded from one single source.

21 This is essential for consumers because according to Fox (2004), consumers find it convenient to get their music from a single site and therefore it is suggested that record companies must ultimately license their catalogues to each other in order to attract the largest number of users. Other important features for consumers using a subscription model are guaranteed file quality and virus protection. Fox (2004) also mentions that in order for the subscription model to be a success it is important to offer additional features such as a song‘s accompanying video, lyrics, song sheets, interviews and links to relevant websites. From the perspective of the music industry it is important to notice that a subscription service can attract the consumers who are defined as ”sleepers‘. According to Fox (2004), ”sleepers‘ are those consumers that would buy music if it were made more easily available (Fox, 2004). Compared to the pay-per-play download model it is argued that a subscription also generates steady cash flow. Additionally, Meyers (2001) mentions that the subscription model maximizes revenues from those who use the service infrequently and also encourages an increase in usage among heavy users. Kennedy (2007) indicates that the subscription model evokes both feelings of support as well as resistance among industry watchers, whereas some are convinced that it could be the music industry‘s hope for the future.

2.10.4 Mobile Music Mobile music is a rather new format for music to be played on, and is included in the mobile entertainment services mix and gives consumers the possibility to select, retrieve and store music. Still in its developmental stage it is already being used in various ways, for example The Cingular Sounds Live gives subscribers the opportunity to listen to concert performances on their mobile phones. Vlachos et al. (2003) mentions that some services allow their customers to pay for the music through their mobile phone bill, while others use methods of payment that include Internet banking and credit cards. Research conducted by Smith (2006) indicates that 60% of handsets sold in the US in 2010 will be music-enabled. According to the IFPI (2006), the growth in mobile music versus digital music differs between countries. In Southern European countries the proportion of mobile music is increasing compared to digital music, whereas in Anglo-Saxon countries legal downloads are proven to be more successful than mobile music. It is indicated that music phones will likely attract the casual music listener, and more intense users will continue to use standalone players for some time. The capability of the memory cards have also grown substantially and it is now capable of holding up to 1.000 songs. The advantage of mobile music compared to other standalone music players is that it allows consumers to purchase the music that they have just heard, thus making the experience more spontaneous. Additionally, mobile music can also be used in a peer-to-peer environment as recommendations about music can be made by sending a song to someone‘s play list (Hakansson et al., 2005).

2.10.5 The influence of price Many discussions have emerged concerning the price of particularly the physical album. It is argued that price is influencing the used music format (Christman, 2002), especially physical versus digital. Analyzing the sales figures from the US market (RIAA, 2007), certain arguments can be made. First, the units sold as well as the value of the physical album have decreased, whereas the total units as well as the value of digital albums have increased. However, this increase of the digital album does not make up for the loss of the physical album in terms of both units and value. Concerning the single format, things are different.

22 Although the physical single witnessed a huge decrease in terms of both the total amount of units sold as well as the value, the digital download single more than makes up for this loss. For example, the digital download single was more successful in 2006 compared to the physical single in 1997 in terms of both units and value. The annual value of the physical single in 1997 was $441 million with 116 million units sold. However, 586 million digital download singles were sold in 2006 with a total value of $580 million. Conclusively, more singles are being sold than ever, only in a different music format and at a much lower price. The price factor could be assumed as one of the most important reasons for the success of the download single. In the 90s, a physical single roughly cost $7 (Farley & Levy, 1996), whereas most digital tracks can now be downloaded at a price of $0.99.

Although sales of the digital download single are still rapidly increasing (+59,8% in 2006), the question can also be asked if the success of the digital download single has inadvertently influenced the decrease in the amount of physical albums sold. The cost of a physical album is approximately around $15, although slightly dependent on whether the release is from a new artist or considered a superstar release (Christman, 2002). Not surprisingly, those albums released by new artists are usually priced lower in order to build an audience. Concerning the Dutch market, the average price for a physical album has further decreased to € 12,71 (NVPI, 2006). The addition of the digital download single has consequently largely increased the discrepancy concerning the price of a single and a physical album. Especially for non- hardcore consumers, the decrease in price may cause them to be more inclined towards the digital download single instead of the physical album. For example in 1997, when a non-hardcore consumer favored only three songs from a particular album, then buying the physical album ($15) would be regarded as more beneficial compared to buying three separate physical singles priced at $7 each. Currently with the price of a digital download single being $0.99, legally downloading three digital singles seems far more beneficial compared to buying the physical album for $15. Another strategy which has been used recently is to pull a highly successful song from the digital iTunes store in order to increase album sales.

Now more than ever, various price strategies are being considered and experimented with. Some industry watchers cite that in order to draw consumers to the stores, an album must be priced $9.99 (Christman, 2002). Recently, British jazz/soul singer/songwriter Amy Winehouse‘s successful album —Back to Black“, released in March 2007 in the US, witnessed a 28% increase in album sales in the first week of June 2007 mainly fueled by a $7.99 sales sticker. This sharp increase has caused her album sales to jump to 49.900 units, which almost equals her first week sales of 51.000 and has caused her album to reach cumulative sales of 493.500 units. This seems to acknowledge the fact that non-hardcore consumers, who are not inclined to purchase the album in the first weeks for its full price, are willing to purchase the physical album at a lower price.

2.11 Media Behavior With the growing number of radio stations, television stations and the rise of the Internet, it is essential to analyze the changes they have caused in the behavior of the consumer. First of all, it was found by Rubin (1983) that those consumers who purposefully use a particular medium for either information or entertainment are likely to stay loyal to that chosen medium.

23 Kayana & Yelsma (2000) compared the use of online media with television and found that in terms of information search, the television was being replaced by the online media, however they did not find evidence to show that the online media was also replacing the entertainment value of the television. The underlying motives for the use of either television or Internet differ, whereas the Internet is used for social interaction purposes. It is also mentioned by Kaye & Johnson (2003) that although the Internet seems similar to television they are not identical, and it is indicated that the Internet uses interactive features which cannot be used by television. It is therefore suggested that television suffers most from the Internet compared to other traditional media.

The increasing number of media alternatives competing for people‘s time have caused them to learn how to multi-task or simultaneously use various media forms at the same time (Pilotta et al., 2004). This means that some mediums which were used exclusively in the past are now being used simultaneously, and this could also mean that the amount of focus and attention paid to the mediums are being spread. Combining activities simultaneously is defined by Blackwell et al. (2006) as polychromic time. Blackwell et al. (2006) further states that technology facilitates polychromic time expenditures. Robinson & Godbey (1997) argue that listening to the radio used to be an absorbing experience which people would participate in to the exclusion of other activities, and as of today is it used more as a secondary activity. This could suggest that compared to earlier years the attention paid to radio has decreased, and Pilotta (2004) also mentions that 51.1% of the respondents in his study noted that while using various medias at the same time, they pay more attention to one medium than they do to the other.

2.12 Conceptual model and hypotheses In figure 2, the conceptual model is shown showcasing the hypothesized relations between customer loyalty and the factors discussed in the theoretical framework. In this study, customer loyalty encompasses the following three elements: loyalty towards the musical artist, loyalty towards the used music format and loyalty towards legal purchase.

Figure 2: Conceptual Model: Researched factors influencing customer loyalty [dotted line: possible relation is researched without a hypothesis]

Characteristics consumers H1a, H1c, H2a, H2b, H3a

H3b, H4 Genre Music H4

H1b, H5b Music Involvement H5a

H6a, H6b Music Discovery Customer Loyalty

Purchase Destination

Music Format

Media Behavior

24 3. Research method In order to answer the aforementioned research questions, a conclusive research has been conducted to test the hypotheses and to examine possible relationships. The type of conclusive research which has been used during this study is defined as a descriptive research, which describes characteristics of relevant groups and estimates the percentage of units in a population exhibiting a certain behavior (Malhotra, 2004). The relevant group in this study are those consumers purchasing music in record stores. Information from the sample was obtained only once thereby defining this type of research design as a single cross-sectional design. During this research, quantitative data was obtained in order to generalize the results from the sample to the population of interest (Malhotra, 2004). The survey method used in this study is a mall intercept method. To get insight into the underlying motives of these consumers, concerning their loyalty towards musical artists as well as music formats, respondents were interviewed while they were in a record store. According to Sloot et al. (2005), the advantage of interviewing consumers while they are shopping is that they can recall their real decision-making situation more easily and therefore enhances the realism and the validity of the responses. The questionnaire was first pre- tested among a small group of students indicating to purchase music from the record store. The pre-test resulted in the inclusion of the additional information mentioned before question twelve (Appendix I).

The actual research took place in late February and early March of 2007 thereby avoiding those weeks before, during and after the Christmas period, which could possibly bias the results. Generally, it can be concluded that during the Christmas period there is a much higher amount of album sales, which causes many albums to be released around this time as has been discussed earlier in the introduction. However, the first weeks after the Christmas period are usually characterized by lower sales. It could therefore be suggested that many consumers buy albums not for themselves but rather as a present and that there is a chance that they normally do not buy music at all. By conducting the research in late February and early March, no holiday effect should have been able to occur.

3.1 Construction of the questionnaire

The respondents in this study were interviewed using a structured questionnaire. The development of the questionnaire is based upon the construction of the conceptual model as well as the research questions earlier defined in the introduction. Most questions used in the questionnaire are fixed-alternative questions using an itemized rating scale namely a five point Likert-scale (1= strongly disagree, 5= strongly agree). Besides using fixed-alternative questions, open questions were used to acquire information about the average number of albums consumers buy in a month as well as the number of artists from which consumers reported to buy all the released albums. Answers that were given to these open questions have been recoded into categories in order to make the analysis more manageable. In order to obtain objective data, a balanced scale is used where the number of both favorable and unfavorable categories is equal. The questionnaire first used classification information such as gender, age and education level, followed by the various statements respondents could agree or disagree to. A question that could be thought of as sensitive is whether the respondent agreed or disagreed with the statement: —besides purchasing music from the record store, I also download music from the Internet without paying for it“ (question 15, Appendix I). This question was purposely placed in the second half on the questionnaire thereby making sure that the respondent was already involved, subsequently increasing the chance of truthfully answering the question. Responding truthfully to this question was also added by the high perceived anonymity since no identification information was asked such as name, e-mail or home address.

25 The collected data is used for statistical analysis in order to test the constructed hypotheses and to find additional relations and findings that give information about the researched factors and their relation to consumer loyalty. Unless otherwise stated, the p-value should be smaller or equal to V = 0.05 (significance level), in order for a reported difference or result to be considered significant. Customer loyalty is the dependent variable and is measured by asking the respondents if they agreed with the statement: —there are one or more artist(s) from which I purchase all the released albums“ (question 5, Appendix I). Those consumers consistently buying the latest album released by a certain musical artists or group are considered most loyal. This is also underlined by Yamada & Kato (2002), who argue that the committed fan always buys the artist‘s new album. Another essential statement that displays loyalty, with which the respondents could agree or disagree to, is: —I recommend the music I like to my friends/relatives“ (question 9, Appendix I). According to Reichheld (2003), recommending a brand or company to a friend can be seen as the ultimate act of loyalty. Another statement concerning music involvement: —I obtain all the released albums from the preferred artist“, is included because it relates to the earlier mentioned ”same-brand purchases‘ mentioned by Oliver (1999). Whereas the problem statement and the first two additional questions focus on customer loyalty towards the musical artists, the third question focuses on loyalty towards to used music format. Statements were used to capture the likelihood of those respondents purchasing physical albums to venture out to purchasing music through the Internet (question 18, Appendix I), and their willingness to try out the subscription model specifically (question 20, Appendix I). The fourth additional question focuses on the loyalty towards legal purchasing and is tested using the aforementioned statement: —besides purchasing music from the record store, I also download music from the Internet without paying for it“ (question 15, Appendix I). Table 2 presents an overview of the questions and statements used in the questionnaire and the related literature.

The research was conducted in four different cities in the Netherlands namely Amsterdam, Groningen, Utrecht and Zwolle. Also, within these cities different stores focusing on different target groups were included in this study thereby reaching all possible musical genres. Approximately 80% of the preselected consumers agreed to participate, subsequently leading to the inclusion of 447 respondents. After data screening 443 respondents were selected for further analysis, the other three respondents did not successfully answer all the questions in the questionnaire.

Table 2: The researched variables and the related questions/statements

Variables Question/Statement Author(s) Customer Loyalty 5,10 Yamada & Kato (2002), Ehrenberg & Scriven (1999) Fournier (1998), Moskovitch (1982), Evanschitzky & Characteristics Consumers 1,2,3 Wunderlich (2006) Genre Music 6,7 van Eijck (2001), Oliver (1999) Reichheld (2003), Dixon (1980), Oliver (1999), Music Involvement 9 Adler (1985), Doss (1999) Whittle (1995), Bhattarcharjee et al.(2006), Brown Music Discovery 8 et al. (2001), Leenders (2005), Banks (1998) Lam & Tan (2001), Svevingsson (2002), Verhoef et Purchase Destination 11,12 al. (2005) Music Format 13,14,15,16,18,19, 20 Ortiz (2003), Brown et al. (2001), Fox (2004) Media Behavior 17 Kaye & Johnson (2003) Additional question* 4 *question 4 measures the amount of albums purchased per month on average

26 3.2 Cluster Analysis In order to classify the respondents into various clusters based on a set of variables, a cluster analysis will be conducted. Those respondents belonging to a certain cluster are relatively similar to each other in terms of these variables and different from respondents belonging to other clusters (Malhotra, 2004). The respondents are classified concerning their level of loyalty, based on four variables. The following four variables are included in the cluster analysis:

° the statement measuring loyalty in this study —there are one ore more artists from which I buy all the albums“, ° the statement measuring loyalty according to Reichheld (2003), —I recommend the music I like to friends/relatives“, ° the number of albums a respondents buys per month on average, ° the number of artists from which the respondents always purchases the released albums.

Various clustering procedures can be used, whereas in this study a hierarchical procedure will be sequenced by a k-means clustering procedure. Concerning the hierarchical procedure, a Ward‘s method will be conducted which has been shown to perform better than other procedures (Malhotra, 2004). The number of clusters used for the k-means method is determined by the output from the hierarchical clustering method. In order to successfully conduct a cluster analysis, outliers can be temporarily deleted from the initial data set because these outliers will form clusters containing a small number of cases (Norusis, 2005). Therefore the number of albums respondents purchase per month on average as well as the number of artists from which all the released albums are purchased is set to a maximum of ten.

4. Results A total of 443 respondents successfully completed the questionnaire given to them during February and March of 2007. The respondents were given the questionnaire while they were shopping in various record stores in four different cities. The collected data was analyzed using various statistical analyses. The distribution of males and females is in line with the consumer profile according to the NVPI. The NVPI indicates that 65% of consumers are male, whereas in this study 66,6% of the respondents are male. Concerning the average age of the respondents, men (35,6) are slightly older than women (29), whereas 42,7% of the male respondents were 29 years or younger compared to 60,8% of the female respondents.

4.1 Researched Factors First, the results concerning the researched factors will be discussed according to the order in which they were mentioned in the theoretical framework. Second, the results of a cluster analysis will be analyzed in section 4.2.

4.1.1 Impulse buying The occurrence of impulse buying was measured by letting the respondents agree or disagree with the following statement: —before entering the record store I know exactly what to buy, but I also find myself buying additional albums“. The output from the Mann-Whitney test indicates that there is no significant difference (p=.622) in the report of impulse buying concerning gender.

27 A Kruskal-Wallis test also reports that there is no significant difference (p=.850) in the report of impulse buying concerning the purchase of music and the various age categories. Interestingly, a One-Way Anova test found a significant difference (p=.000) concerning the average albums respondents report to purchase per month and impulse buying. In addition, a Scheffé test reports that those consumers totally agreeing with the statement measuring impulse buying, report to significantly (p=.003) purchase more albums per month than those respondents not agreeing with the aforementioned statement. Additionally, a significant positive correlation has also been found concerning the average albums respondents report to purchase per month and impulse buying (r = .300, p < 0.01). Finally, those respondents fully agreeing with the aforementioned statement measuring impulse buying purchased 4.25 albums per month on average, compared to 1.90 among those respondents not agreeing with the aforementioned statement.

4.1.2 Gender The average number of albums men purchase per month is 3.2, whereas women purchase an average number of 1.6 albums per month. An Independent Samples T Test reports that men significantly (p=.000) purchase more albums compared to women, therefore supporting hypothesis 1a. Hypothesis 1b will be discussed in the music involvement section.

As has been mentioned earlier, loyalty was measured by letting the respondents agree or disagree with the following statement: —there are one or more artists/groups from which I buy all the albums“. From the cross tabulation and the means it is evident that men (mean = 3.71) agree more with the before mentioned statement concerning loyalty compared to women (mean = 3.23). The test statistics from the Mann-Whitney indicate a significant difference in the Mean Ranks (p=.000) concerning loyalty and gender. In conclusion, both the means as well as the Mann-Whitney test report that men are found to be more loyal than women thus rejecting hypothesis 1c.

Just now it has been found that men are significantly more loyal compared to women, but it is also possible to test whether men report to be more multi-loyal. Again, this was tested using the Independent Samples T test where the test variable was the amount of artists from which the respondents indicated they bought all the released albums from. Not only are men significantly more loyal compared to women, it is also found that they report to be significantly (p=.000) more multi-loyal. The average number of artists from which men always buy the released albums is 4.9 compared to 2.57 among women. Digging deeper into the concept of multi-loyalty, 49,4% of the respondents indicate that the number of artists from which they purchase all the albums varies between two and five. Additionally, 29,8% report that this number varies between six and ten thereby underlying the occurrence of multi-loyalty within the consumption of music. To analyze whether there is a difference between gender and the music genres they prefer, a Mann- Whitney test has been conducted. Examining the Mann-Whitney tests it can be concluded that men and women significantly differ in their preference for rock (p=.003) as well as pop music (p=.022). Comparing the means for rock music reveals that men report a higher mean (mean = 3.51) compared to women (mean = 3.07). Conversely, when it concerns pop music, the mean for women is higher (mean = 3.43) compared to men (mean = 3.12).

28 4.1.3 Age To test if there is a difference in the average number of albums consumers purchase and the various age categories, a One-Way Anova test was conducted. First, the factor age is recoded into five categories and tested against the number of albums consumers buy per month, which is the dependent variable. First, the Anova test indicates that there is a significant (p=.001) difference between at least two age categories concerning the average number of albums consumers buy per month. The Scheffé test indicates that there is a significant difference (p=.007) between the age groups 20-29 and 40-49 concerning the average number of albums they buy per month, which is also stressed by the Bonferroni and the LSD test. Furthermore, the significant difference found by the Scheffé test is negative resulting in the conclusion that 20-29 years buy fewer albums per month on average compared to 40-49 years old. The Bonferroni test found a negative significant difference between the age groups 20-29 and 30-39 (p=.038) in addition to the difference found by the Scheffé test. The LSD test found a negatively significant difference between the age groups 12-19 and 40-49 (p=022). Additionally, a negatively significant difference is also found concerning the age groups 20-29 and >50 (p=.014). Analyzing the means (figure 3) of the five age categories, it is also apparent that the number of albums bought per month on average increases as age simultaneously increases but slowly decreases in the final age category thereby partially supporting hypothesis 2b.

Figure 3 : Comparison of the number of albums purchased per month on average, concerning the five age categories

Number of albums bought per month - Age

4

3

2

1

0 <19 20-29 30-39 40-49 >50

A One-Way Anova test indicates that there is a significant difference (p=.004) between at least two different age groups concerning multi loyalty. Again, a Scheffé as well as the Bonferroni and the LSD were conducted to test which groups differ significantly. According to the Scheffé test, there is a negatively significant difference between the age groups 20-29 and 40-49 (p=.011) indicating that 20-29 year old consumers have a lower set of artists from which they buy all the releases albums from. Additionally, the Bonferroni test found a negatively significant difference between the ages 12-19 and 40-49 (p=.021) and the LSD test also found a negatively significant difference between the age groups 30-39 and 40-49 (p=.029). A positively significant difference was found by the LSD test between the age groups 40-49 and >50 (p=.011) concerning multi loyalty. In conclusion, it can be argued that multi loyalty occurs more often as age increases but reaches its ultimate strength when a consumer is aged 40-49 and decreases afterwards (figure 4).

29

Figure 4: Comparison of the number of artists from which all the albums are purchased (multi-loyalty), concerning the five age categories

Multi Loyalty - Age

7

6 5 4 3 2 1 0

<19 20-29 30-39 40-49 >50

The One-Way Anova test thus found a significant difference concerning age and the average number of albums consumers buy per month as well as the average number of artists from which consumers always buy the released albums. To test if there is also a significant correlation between these variables a Bivariate Correlation test is conducted. First, a positively significantly correlation (p=.001) is found for age and the amount of albums a consumer buys. The Pearson correlation is significant (r = .159, p < 0.01), indicating that the number of albums consumers buy per month increases as age increases. A significantly positive correlation (p=.021) is also found for age and the number of artists from which a consumer always buys the released albums from. The Pearson correlation is significant (r = .109, p < 0.05), indicating that this correlation is slightly weaker. A significantly positive correlation (p=.000) is also found for the number of albums consumers buy per month and the number of artists from which consumers always buy the released albums from. The Pearson correlation is rather strong (r = .402, p < 0.01), therefore it can be argued that a higher set of artists from which consumers always buy the albums, simultaneously can be associated with a higher number of albums consumers buy per month.

Furthermore, analyzing the means of all age categories, there seems to be no indication that older consumers report to be more loyal compared to younger consumer. The means of the five age categories are just over or below the mean of all the respondents (mean = 3.55). This was also tested with a Kruskal-Wallis test and resulted in no significant difference (p=.708) concerning the five age categories and the before mentioned statement measuring loyalty, thereby rejecting hypothesis 2a. Recapitulating, although older consumers report to purchase more albums per month on average and have a higher set of artists from which they always buy the released albums, they do not report to be more loyal than younger consumers.

4.1.4 Education The level of education of the respondents is relatively high, in fact 58.2% own a college or University degree. Testing if there is a difference concerning the level of education and loyalty, a Kruskal-Wallis test was conducted. Analyzing the test statistics, it can be argued that there is no significant difference (p= .175) in the Mean Ranks for loyalty concerning the various levels of education thus rejecting hypothesis 3a. Additionally, no significant difference (p= .487) is found concerning the level of education and the average number of albums bought per month, according to the One-Way Anova test.

30 A One-Way Anova test also found no significant difference (p= .388) in the level of education and the number of artists from which all the albums were bought (multi-loyalty). Additionally, hypothesis 3b is rejected since a Kruskal-Wallis does not indicate a significant difference (p= .518) in the Mean Ranks concerning the level of education and the preference for pop music. Furthermore, to test if a higher educational level resulted in a difference in the number of respondents reporting to buy music from a various number of music genres, a Kruskal-Wallis test was conducted. Analyzing the results it can be argued that there is no significant difference (p=.472) in the Mean Ranks of the various levels of education, therefore hypothesis 4a is rejected. However, a cross tabulation reports that the percentage of respondents completely agreeing to the following statement: —The music I purchase encompasses multiple musical genres“, differs among the various educational levels. The respondents owning a University degree report the highest percentage (55%) compared to HBO (45,6%) and MBO (32,1%).

4.1.5 Genre Music To test if a preference for a certain musical genre leads to a greater chance of being loyal, a Kruskal- Wallis test has been conducted. Analyzing the output from the Kruskal-Wallis test it is found that there is a significant (p=.000) difference in the Mean Ranks concerning both rock (p=.000) and alternative music (p=.001) and the loyalty statement. To test if there is a significant relation between rock as well as alternative music and loyalty, a Correlation test is conducted. Looking at the output from the correlation test using the Spearman correlation coefficient, a significantly positive correlation is found for both rock as well as alternative music with loyalty. The correlation between rock music and loyalty is stronger (r = .240, p < 0.01) than the correlation between alternative music and loyalty (r =.128, p < 0.01). Additionally, the correlation test also found a significantly negative correlation for R&B music and loyalty although the correlation is not strong (r = -.099, p < 0.05). Rock music (60,5%) has the highest percentage of respondents agreeing to the statement that they buy their music mostly within this particular genre, followed by pop music (53,9%) and alternative music (43,3%). A Nonparametric Correlation indicates that there is a significant correlation between the statement —The music I purchase encompasses multiple musical genres“ and the number of albums bought per month (p=.002) as well as the number of artists from which consumers always buy the music (p=.040) although the first correlation (r = .145, p < 0.01) is slightly stronger than the latter (r =.097, p <0.05).

4.1.6 Music Involvement To test if men and women undertake different actions concerning Music Involvement, a Mann-Whitney test has been conducted. From the five various statements measuring Music Involvement, two were found to be significantly different including the following statements: —I obtain all the released albums from the preferred artist“ (p=.002) and —I search for information about the preferred artist“ (p=.014), thus rejecting hypothesis 5b. In both cases it was found that men have a significant higher Mean Rank. Analyzing the means concerning gender and all five statements measuring music involvement, it is noticeable that men have a higher mean on every single statement compared to women (figure 5). Concerning music involvement, the statement yielding the highest mean from all the respondents is —I recommend the preferred music I like to my friends/acquaintances“ (mean = 3.72).

31 Figure 5: Comparison of the means concerning gender, and their scores on all five statements measuring music involvement

Music Involvem ent - Gender

Obtain All Released Albums

Information Search

Male Concert Attendence Female

Discuss Music

Recommend Music

0 1 2 3 4 5

To test if there is also a difference concerning Music Involvement and Age, a Kruskal-Wallis test has been conducted. Again, two statements concerning Music Involvement were found to be significantly different, including the following statements: —I discuss the music I like with friends/relatives“ (p=.000) and —I recommend the music I like to my friends/relatives“ (p=.000). For both statements it is apparent that as age increases the Mean Ranks subsequently decreases. Additionally, both statements —I discuss the music I like with friends/relatives“ (r = -.294, p < 0.01) as well as —I recommend the music I like to my friends/relatives“ (r = -.243, p <0.01) also have a significant correlation with Age. Because both correlations are negative, they support the results found by the Kruskal-Wallis test. It was also found that there is a significant negative correlation between Age and —I search for information about the preferred artist“, although the correlation is weaker (r = -.102, p < 0.05) compared to the other two statements. All three aforementioned statements measuring music involvement also report a decreasing mean, as simultaneously age increases. For example, the statement —I recommend the music I like to my friends/relatives“, reported a much higher mean in the age category <20 (mean = 4.22), than those respondents aged >50 (mean = 2.98). Concerning the five statements measuring Music Involvement it was found by a Nonparametric Correlation test that all five statements significantly positively correlate to Loyalty, thereby accepting hypothesis 5a, although they differ in strength. The strongest correlation exists between Loyalty and —I buy all the albums from the preferred artist“ (r = .527, p <0.01), followed by —I attend one or more concerts from the preferred artist“ (r = .336, p <0.01). To further test hypothesis 5a, a Kruskal-Wallis test has been conducted indicating that there is a significant difference (p=.000) in the Mean Ranks concerning the statement —I recommend the music I like to my friends/relatives“ and Loyalty thus further supporting hypothesis 5a.

Hypothesis 1b argues that women indicate that they discuss music with friends and relatives more often compared to men. This can be tested by analyzing the answers to two statements. First, concerning music involvement the following statement was asked: —I discuss the music I like with friends/relatives“. Second, concerning music discovery the statement with which the respondents could agree or disagree to was: —I discover new music through friends/relatives“. Conducting a Mann-Whitney test did not result in a significant difference (p=.568) in the Mean Ranks concerning gender and the first statement.

32 Additionally, a Mann-Whitney test did result in a significant difference (p=.000) in the Mean Ranks concerning gender and the second statement. Analyzing the output from the Crosstabs, it is noticeable that the percentage of women (78,4%) discovering new music through friends/relatives is higher compared to men (62,4%), thereby partially accepting hypothesis 1b.

4.1.7 Music Discovery Most new music is mainly being discovered through friends and relatives (67,7%), followed by Internet (65%) and record stores (53,9%). To find out if there is a significant difference concerning music discovery and gender, a Mann-Whitney test is conducted. Analyzing the output from the Mann-Whitney test concerning gender and the way music is discovered, it is noticeable that there is a significant difference concerning the discovery of music through Record Stores (p=.030), Magazines (p=.000), Friends/Relatives (p=.000), Radio (p=.000) and TV (p=.000). Interestingly, men indicate that they discover music more through Record Stores and Magazines compared to women. Conversely, women indicate that they discover music more through Friends/Relatives, Radio and TV compared to men. These findings were also underlined by comparing the means of the statements measuring music discovery for both men and women (figure 6).

Figure 6: Comparison of the means concerning gender, and the scores on the statements measuring music discovery

Music Discovery - Gender

Internet

Record Store

Magazines Male Friends/Relatives Female Concerts/Festivals

Radio

TV

0 1 2 3 4 5

Besides gender, a Kruskal-Wallis was conducted to test if there is a difference concerning music discovery and the various age categories. Analyzing the Test Statistics from the Kruskal-Wallis test, it should be noted that a significant difference is found for Internet (p=.000), Friends/Relatives (p=.000), Concerts/Festivals (p=.000) and TV (p=.000). In all four cases it is evident that as age increases, the Mean Ranks of the various ways music is discovered decreases. This analysis is also emphasized by the results of the Nonparametric Correlations test and comparisons of the mean. Significant correlations between Age and Music Discovery were again solely found for Internet (r = -.383, p <0.01), Friends/Relatives (r = -.320, p <0.01), Concerts/Festivals (r = -.168, p <0.01) and TV (r = -.358, p <0.01). The significant correlations were found to be negative therefore underlining the before mentioned results from the Kruskal-Wallis test, thus accepting hypothesis 6a and 6b.

33 Additionally, music discovery through the Internet yielded a much higher mean among those respondents aged <20 (mean = 4.33) and 20-29 (mean = 3.97) compared to those respondents aged 40-49 (mean = 2.88) and >50 (mean = 2.64). Music discovery through Friends/Relatives also yielded a much higher mean among those respondents aged <20 (mean = 4.14) and 20-29 (mean = 3.93) compared to those respondents aged 40-49 (mean = 3.12) and >50 (mean = 2.80).

To test if there is a significant difference between Music Discovery and Loyalty, a Kruskal-Wallis test has been conducted. The test statistics result in a significant difference in Loyalty and the discovery of music through Internet (p=.008), Record Stores (p=.003), Magazines (p=.000), Concerts/Festivals (p=.004) and Radio (p=.005). Besides investigating if there is a difference in the Mean Rank, it is also tested is there is a relation between Music Discovery and Loyalty using a Nonparametric Correlation test. To test if the correlation is significant, a Spearman test is conducted. Analyzing the output it can be noted that Internet (r = .141, r <0.01), Record Stores (r = .161, p <0.01), Magazines (r = .243, p <0.01), Concerts/Festivals (r = .164, p <0.01) all have a positive correlation with Loyalty, whereas Magazines report to have the highest significant correlation with Loyalty. Furthermore, both Radio (r = -.106, p <0.05) and TV (r = -.096, p <0.05) have a negative correlation with Loyalty.

Interestingly, a Nonparametric Correlations test found a significant positive correlation (p=.000) concerning downloading music without paying for it in addition to purchasing music in the record store and music discovery through Internet (r = .455, p <0.01) and Friends/Relatives (r = .242, p <0.01), whereas the first obviously is stronger. A Kruskal-Wallis test acknowledges these results by finding significant differences (both p=.000) in the Mean Ranks concerning the aforementioned variables.

4.1.8 Purchase Destination Besides purchasing music from the record stores, 23,5% indicated that they also purchase music legally from the Internet. Furthermore, 43,7% agreed to the statement that they download music from the Internet without paying for it. In an attempt to capture the motivations for buying music in the record store instead off buying music online, four statements were proposed to the respondents. The statement yielding the highest mean on a five point scale is —I can immediately see what I buy“ (Mean = 3.78). This is in line with the arguments made by Sveningsson (2002), who claims that the motivations for buying music offline are related to the utilitarian shopping behavior. Additionally, only 16,9% of the respondents agreed with the statement measuring their future intention of purchasing music (digital tracks) online.

4.1.9 Music Format To test if there is a difference between gender and loyalty to the used Music Format, a Mann-Whitney was conducted. From the output it can be concluded that there is no significant difference (p=.557) between men and women and if they purchase music from the Internet (digital tracks) in addition to purchasing albums from the retail store. Also, no significant difference (p=.956) was found between men and women and if they downloaded music without paying for it in addition to purchasing albums from the retail store. Furthermore, to test is there is a difference between the various age categories and loyalty to the used Music Format, a Kruskal-Wallis test was conducted. Again, no significant difference (p=.302) was found concerning Age and if consumers purchase music from the Internet besides purchasing albums from the retail store.

34 Conversely, a significant difference (p=.000) in the Mean Ranks is found between Age and if consumers indicated that they downloaded music without paying for it besides purchasing albums from the record store. As could be expected, the Mean Ranks decreases as age increases, indicating that younger consumers report to download music without paying for it more often than older consumers. To emphasize this conclusion, a Nonparametric Correlation was conducted. According to the Spearmen test, a significant negative correlation (r = -.443, p <0.01) was found for Age and downloading music without paying for it. Further analyzing this significant correlation, it is evident that 74,8% of the respondents aged <20 indicate that they download music without paying for it, in addition to purchasing albums from the record store. This percentage is significantly lower for those respondents aged 20-29 (61,5%), and the respondents aged 30-39 (48,4%). This trend continues among the other two age groups, whereas only 23,5% of the respondents aged 40-49 indicate that in addition to purchasing albums from the retail store they also download music without paying for it. This percentage is the lowest for those respondents aged >50 (14,1%). Finally, comparing the means of all five age categories, it is again evident that the mean decreases as age simultaneously increases (figure 7).

Figure 7: Comparison of the means concerning the five age categories, and the scores on the statement measuring the occurrence of downloading in addition to purchasing

Downloading in addition to purchasing - Age

5

4

3 2

1

0 <19 20-29 30-39 40-49 >50

To see if there is a difference in the Mean Ranks for men and women concerning their consideration to legally download limitlessly for a fixed monthly sum of money (subscription model), two statements were constructed. The first statement measures their interest, whereas the second statement measures their consideration and future intention. The results from the Mann-Whitney test indicate a higher Mean Rank for women for both statements, whereas for both statements the difference is significant (p=.047) and (p=.014). The Cross Tabulations report that 32,5% of men report to consider using the subscription model compared to 45,9% among women. Additionally, the statement measuring the respondents consideration to use the subscription model, reported a mean of 3.16 among women compared to 2.89 among men.

Besides a difference in gender and their receptiveness of the subscription model, a significant difference was also found between the various age categories. The Kruskal-Wallis test found a significant difference in the Mean Rank for both statements (both p=.000). Analyzing the output from the Crosstabs it is evident that the percentage of respondents showing interest in the subscription model is lower for those consumers aged 40-49 (24,5%) compared to those consumers aged 20-29 (47,1%) or 30-39 (53,8%).

35 Comparing the means of all five age categories, it is noticeable that those respondents aged 40-49 (mean = 2.60) and >50 (mean = 2.66) have lower means than those respondents aged <19 (mean = 3.25), 20- 29 (mean = 3.10) and 30-39 (mean = 3.34).

Besides analyzing the respondents interest in legal downloading on a subscription basis, it was also investigated what aspects were considered important in reference to legal downloading. Again, statements were given to the respondents with which they could agree or disagree. According to the Mann-Whitney test, one out of five statements indicated a significant difference in the Mean Ranks among men and women. Concerning legal downloading, the statement measuring if the respondents found it important that they could legally download all the music they preferred from one single site yielded a significantly higher Mean Rank (p=.011) with women compared to men.

Whereas one statement concerning the aspects of legal downloading was found significantly different related to gender, four out of five statements were found significantly different related to the various age categories. The Mean Ranks of the following statements were found significantly different according to the Kruskal-Wallis test: —I can buy all the music I prefer from one single site“ (p=.000), —A large amount of music is provided“ (p=.000), —A secure payment method is guaranteed“ (p=.000) and —A high audio quality is guaranteed“ (p=.006). All four statements indicated that the Mean Ranks decreased as age increased. Again, comparing the means of all five age categories indicates that the mean decreases as age simultaneously increases for all five statements. For example, the statement —A large amount of music is provided“ yielded a much higher mean among those respondents aged <20 (mean = 4.16) and 20-29 (mean = 3.86) compared to those respondents aged >50 (mean = 3.16). Additionally, the guarantee of a safe payment method, yielded the highest mean among all the respondents (mean = 3.97).

To test if there is a difference in the Mean Ranks of the age categories related to the statement —I am informed about the use of legal downloading“, a Kruskal-Wallis test was conducted. Analyzing the Test Statistics it is apparent that there is a significant difference (p=.000) between the various age categories, whereas the Mean Ranks decreases as age increases. A Nonparametric Correlations test and comparison of the means emphasizes this conclusion, because a significant negative correlation (p=.000) has been found between Age and if the respondent is informed about the use of legal downloading (r = -.221, p <0.01). Digging deeper into the significant relation between Age and Legal Downloading, 15,9% from the age group 14-19 indicate that they are not informed about how to legally download music compared to 23,6% among those respondents aged 20-29.

The statement —I am informed about the use of legal downloading“, yielded the highest mean among those respondents aged <20 (mean = 3.92) and the lowest among those respondents aged 40-49 (mean = 2.89). Additionally, no significant difference was found concerning gender, although the percentage of women (31.8%) agreeing that they are not informed about the legal downloading model is slightly higher compared to men (27.8%). A Nonparametric Correlations test indicates that the statement —I am informed about the use of legal downloading“ significantly positively correlates (p=.000) with whether the respondents are interested in the subscription model (r = .189, p <0.01) and consider (r = .185, p <0.01) using the subscription model.

36 Concerning the possession of the physical album compared to the possession of digital tracks, four statements were presented to the respondents. The following statement yielded the highest percentage of agreement (80,6%) among the respondents: —I can add the album to my personal collection“, closely followed by a statement stressing the physicality of the compact disc (78,8%). These two aforementioned statements also yielded the highest means among all the respondents. The first statement reported a mean of 4.12, whereas the second statement reported a mean of 4.07.

Interestingly, a Kruskal-Wallis test indicates that there is no difference (p=.609) in the Mean Ranks concerning the statement measuring Loyalty and whether respondents indicated that, in addition to purchasing music from the record store, they download music without paying for it. Additionally, no significant difference (p=.174) is found concerning Multi-Loyalty and downloading music without paying for it in addition to purchasing music from the record store, according to the One-Way Anova test. However, a significant (p=.000) negative correlation (r = -.176, p <0.01) has been found concerning the number of albums which are purchased per month on average and downloading music without paying for it, in addition to purchasing music in the record store.

4.1.10 Media Behavior A Kruskal-Wallis test was conducted to test if there is a difference in the Mean Ranks for the different age categories concerning the three statements related to media behavior. The Test Statistics from the Kruskal-Wallis test indicate that there is a significant difference in the Mean Ranks for the different age categories concerning the following statements: —The use of Internet decreases the amount of music bought from the record store“ (p=.000) and —The use of Internet decreases the number of hours spend listening to the radio“ (p=.021). The Mean Ranks for both statements decreases as age increases. The third statement —The use of Internet decreases the number of hours spend watching TV“, yielded no significant difference concerning the various age categories. Additionally, all three statements did not result in a significant difference concerning gender. Furthermore, a Nonparametric Correlations test indicates that there is a significant negative correlation between Age and —The use of Internet decreases the amount of music bought from the record store“ (r = -.188, p <0.01) and —The use of Internet decreases the number hours spend listening to the radio“ (r = -.136, p <0.01). It is reported that 23,5% of the respondents indicate that their use of the Internet has caused them to decrease their hours spent listening to the radio. Furthermore, 19,2% report that the occurrence of the Internet has caused them to decrease their hours spend watching the TV. Additionally, 28,6% of the respondents agreed with the following statement —The use of Internet decreases the amount of music bought from the record store“.

According to the Test Statistics from the Kruskal-Wallis test, there is a significant difference (p=.039) in the Mean Ranks concerning Loyalty and whether the respondents indicated that their amount of music purchases in the record store has decreased due to the Internet. This significant difference is underlined by the Nonparametric Correlation test, which found a significant negative correlation (r = -.130, p <0.01). Furthermore, those respondents indicating that their music purchases has decreased since the occurrence of the Internet purchase 1.97 albums per month on average, compared to 3.24 among those respondents reporting that their amount of music purchases has not decreased since the occurrence of the Internet.

37 The Kruskal-Wallis test also found a significant difference (p=.000) in the Mean Ranks concerning whether respondents indicated that their music purchases from the record stores has decreased due to the Internet, and their future intention of purchasing music online. Additionally, a Nonparametric Correlation found a significant positive correlation (r = .375, p <0.01), thereby acknowledging the results found by the Kruskal-Wallis test.

4.2 Cluster Analysis The agglomeration schedule shows that the value in the —Coefficients“ column increases substantially between stages 411 (3 clusters) and 412 (2 clusters). Subsequently, three clusters are used to conduct the k-means clustering procedure. Analyzing the number of respondents assigned to each cluster, it appears that the first cluster includes 254 respondents, whereas the second and the third cluster include 99 and 61 respectively. The means from these three clusters concerning the four variables used in the cluster analysis are shown in table 3. A One-Way Anova test indicates that at least two clusters significantly (p=.000) differ from each other concerning all four variables (table 3). Additionally, a Scheffe test has been conducted to indicate which clusters differ significantly.

Table 3: the means of the three clusters concerning the four variables used in the cluster analysis Cluster 1 2 3 There are one or more artists from which I buy all the 3,05ª 4,32ª 3,98ª released albums (loyalty) b b b I recommend the music I like to my friends/relatives 3,52 3,86 4,10

c c c The amount of albums bought per month on average 1,39 2,70 5,28

The number of artist from which I buy all the released d d d 1,46 7,30 3,21 albums (multi-loyalty)

ª = cluster 1 negatively significantly differs from cluster 2 and cluster 3 b = cluster 1 negatively significantly differs from cluster 2 and cluster 3 c = cluster 1 negatively significantly differs from cluster 2 and cluster 3, cluster 2 negatively significantly differs from cluster 3 d = cluster 1 negatively significantly differs from cluster 2 and cluster 3, cluster 2 positively significantly differs from cluster 3

Those respondents assigned to Cluster 2 are purchasing fewer albums per month on average compared to those respondents assigned to Cluster 3. However, the number of artists from which all the released albums are bought is significantly higher in Cluster 2 compared to Cluster 3. Those respondents assigned to Cluster 2 may not purchase the highest amount of albums, but the albums they do buy are released by artists to which they are committed. Conversely, the respondents assigned to Cluster 3 purchase the highest amount of albums but have a lower set of artists to which they are committed. Therefore, it is assumed that they also have a set of artists from which they occasionally purchase albums. Reviewing the scores has subsequently caused Cluster 1 to be labeled ”Least Loyal‘, Cluster 2 ”Loyal towards artists“ and Cluster 3 ”Loyal towards purchasing albums‘. Assigning the respondents to the three different clusters is obviously interesting, but what is even more interesting is to analyze the characteristics of those respondents belonging to the three clusters and the discrepancies between them, and the entire group of respondents used in the cluster analysis.

38 The percentage of men in Cluster 1 is substantially lower than the percentage of men among all the respondents in the cluster analysis, whereas the percentage of women in Cluster 1 is higher. Interestingly, the percentage of men in Cluster 2 (80,8%) and Cluster 3 (78,7%) are almost equal and both substantially higher. Conversely, the percentage of women in Cluster 2 and Cluster 3 are much lower. Remember that Cluster 2 and Cluster 3 are considered most loyal, either towards a set of artist or purchasing albums. This of course is in line with earlier findings that men are reported to be significantly more loyal, multi-loyal and purchase more albums than women do.

Concerning the age of the respondents belonging to the three clusters, it is noticeable that in Cluster 1 57,4% are aged below 30. The percentages of those respondents aged <30 are lower in Cluster 2 and Cluster 3, 39,4% and 34,5% respectively. Again, this coincides with earlier findings reporting that older consumers buy more albums on average and are considered more multi-loyal. Focusing on the differences between the three clusters concerning the way they discover music, it is evident that 72,2% of the respondents assigned to Cluster 3 discover music through the record store which is substantially higher than Cluster 1 and Cluster 2. However, only 19,7% of the respondents assigned to Cluster 3 indicate that they discover new music through TV, which is much lower compared to Cluster 1 (34,7%). Earlier analysis shows that music discovery through record stores positively correlates with Loyalty, whereas music discovery through TV negatively correlates with Loyalty. Cluster 1 is labeled ”Least Loyal‘, which makes it interesting to notice that Cluster 1 contains the highest percentage of respondents (44,5%) agreeing to be interested in the subscription model. Not surprisingly, Cluster 3 ”Loyal towards purchasing albums‘ has the lowest percentage of respondents showing interest in the subscription model (34,5%), therefore it can be assumed that the respondents assigned to Cluster 3 consider the physical album as their main music format. A summary of the characteristics of the three different clusters are displayed in table 4.

Table 4: Summary of characteristics of the three clusters and the total respondents used in the cluster analysis

Cluster 1 Cluster 2 Cluster 3 Total Gender % % % % Male 55,1 80,8 78,7 64,7 Female 44,9 19,2 21,3 35,3

Age ≤19 16,5 11,1 11,5 14,5 20-29 40,9 28,3 23 35,3 30-39 14,2 16,2 14,8 14,7 40-49 13,8 32,3 31,1 20,8 ≥50 14,6 12,1 19,7 14,7

Music Discovery Magazines 31,5 58,6 55,8 41,5 Record Stores 46,5 57,6 72,1 51,2 TV 34,7 27,3 19,7 30,6

Music Format Interested in Subscription Model 44,5 40,4 34,5 42,1

39 5. Discussion

The current debate concerning the decline in physical album sales continues to dominate recent publications regarding the music industry. As has been argued in the theoretical framework, sales figures can be used to either support or reject the idea of the fall of the physical album mainly due to illegal downloading. Although album sales overall have decreased since the occurrence of peer-to-peer networks, analyzing various theories and sales figures subsequently leads to the argument that the current decrease in album sales are due to a variety of reasons. Besides focusing solely on the effects of illegal downloading, Fader (2000) mentions other reasons including the increased competition for consumer time. Additionally, Strauss (2003) argues that the current decrease in album sales are due to a combination of poor economy, shifts in purchase priorities of younger consumers and file sharing. Analyzing various sales figures leads to the argument that weak release schedules also influence the current decrease in overall album sales. However, overall albums sales are decreasing whereas first week sales and the average debut rank have increased (Bhattacharjee, 2005). Especially the fact that many artists are witnessing the highest first week sales of their career, has lead to the argument that consumers have not deserted the legal purchase of music, despite other author‘s arguments (Seabrook, 2003; Zentner, 2003). It is believed that those consumers who are loyal and committed towards an artist or a set of artists will continue to purchase music legally and subsequently many lessons can be learned from them.

Contrary to popular belief and findings from other authors (Fournier, 1998; Rhein, 2003), men are found to be more loyal than women concerning the consumption of music. Not only are men found to be more loyal, they also purchase more albums per month on average. Furthermore, men have a broader set of artists from which they purchase all the released albums. Fournier (1998) argues that women have stronger interpersonal brand relationships than men concerning consumer products. What this study has shown, is that men are capable of having stronger relationships than women when it concerns the consumption of music. It could therefore be argued that the strength of a relationship men and women have with a brand, is related to the specific type of consumer product. Additionally, Rhein (2003) mentions that girls characterize themselves as fans more often than boys, leading to the assumption that girls are more likely to be fans than boys. It could be argued that although men are found to be more loyal than women, they do not characterize themselves as fans the way women do. Subsequently, it can be concluded that the actions men undertake in real life, concerning music consumption, have proved that they are more loyal than women actually claim to be.

In an attempt to explain why men are found to be more loyal, several theories can be constructed. Analyzing the results concerning gender and music discovery, it is found that men discover new music by browsing through the record stores and reading music magazines. Conversely, women report that they discover new music more through friends/relatives, radio and TV. This discrepancy between gender and music discovery could partially explain the significant difference in loyalty. First, it is found that the discovery of music through record stores and magazines positively correlates with loyalty, whereas discovering music through radio and TV negatively correlates with loyalty. Second, it could be argued that discovering music through the record store and magazines are both active ways of discovering music.

40 To discover music this way, consumers must first go to the record store and browse through various records, conducting a certain amount of effort. This is also acknowledged by Tai & Fung (1997), who argue that the record store stimulates exploratory behavior. In addition, discovering music through reading various music magazines not only takes a certain amount of effort, but also requires cognitive involvement. When discovering music through music magazines, the consumer is exposed to more information than just the name of the artist and the album. Crain & Tollison (2002) found that the more a consumer knows about a product, the more he or she enjoys consuming it. This underlines the positive correlation between music magazines and loyalty. Conversely, discovering music through friends/relatives (word-of-mouth), radio and TV can be interpreted as a more passive way of discovering music, which does not require much effort. The different ways men and women discover music could thus arguably explain the discrepancy in loyalty concerning gender. Furthermore, men also report that they search for information about the preferred artist significantly more than women do. This could also have consequences for the formation of loyalty, since Adler (1985) mentions that an appreciation for a particular artist increases as the knowledge of the particular artist simultaneously increases.

Earlier in the introduction it was mentioned that only 35% of all music purchases in the Dutch market are conducted by women. The results also show that women are significantly less (multi)loyal compared to men, and that they also purchase significantly less albums per month on average. However, women also indicate that they are significantly more interested in using the subscription model compared to men. It could be argued that the record store may not be the channel best suited for women to purchase their music. Their reported interest in the subscription model could be seen as an opportunity to increase the percentage of women purchasing music as well as the number of albums they purchase. Concerning the online purchase of music, it was also found that women indicate that they prefer to purchase all their music from one single site. This obviously relates to the earlier discussed ”search convenience‘ of the online channel. Remember that the study from Verhoef et al. (2005) found that consumers were motivated to use the Internet particularly for its ”search convenience‘. Conversely, Verhoef et al. (2005) also found that the store channel is reported to be weak concerning the attribute ”search convenience‘. The reported interest of women in the subscription model could therefore be related to their preference for ”search convenience‘, whereas men prefer to browse through the record stores.

Although younger consumers report to be better informed about legal downloading, they also download significantly more music without paying for it. The percentage of respondents indicating that they download music online without paying for it is relatively high, certainly for those respondents aged <30. Focusing on the results concerning the age factor and their possible consequences, there is some room for concern. Those consumers aged >20 have been growing up with the idea that albums can solely be acquired legally in the record store for a certain monetary value. Consequently, they link music to a certain perception of monetary value. Conversely, those consumers aged <20 and those generations following are currently and will be growing up with the idea that music can also be easily obtained for free. Their perception of value will arguably be influenced by this. Remember that this study has been conducted among consumers purchasing music from the record store. It is argued that these consumers will continue to have a certain perception of value, concerning music, related to the price they have to pay when purchasing an album in the record store, unlike those solely downloading music without paying for it.

41 Continuing this discussion, it is also found that there is a significant positive correlation concerning music discovery through Internet and whether respondents indicate that they download music without paying for it. Recall that 88,9% from the respondents aged <20, and 77,8% aged 20-29, agreed with the statement that they discovered new music through the Internet. This is a considerable difference compared to those respondents aged >30, from which 49,7% agreed with the aforementioned statement. Furthermore, those respondents aged >30 report to purchase 3,29 albums per month on average compared to 2,08 among those respondents aged <30. It could therefore be argued that especially for those consumers aged <30, the risk of searching and discovering music online is that it could more easily result in downloading music without paying for it.

Although there seems to be no indication that downloading in addition to purchasing music in the record stores affects the loyalty or multi-loyalty of consumers, it is demonstrated that downloading has a significant negative correlation with the amount of albums purchased per month on average. Although earlier studies (Oberhuntzer & Strumpf, 2004; Zentner, 2003) concerning the effects of file sharing on sales report contradictory results, the results from this study seems to coincide with Blackburn (2004), who argues that file sharing hurts overall album sales. Nevertheless, the explanations Blackburn (2004) gives for the current decrease in album sales are not agreed upon. Blackburn (2004) makes the distinction between well-known artists and unknown artists, and further argues that the decrease in overall album sales is caused by the negative effect file sharing has on album sales from well-known artists. However, this study argues that the current decrease in overall album sales is linked to whether or not a consumer is committed to a particular musical artist or a set of artists, regardless of the artist‘s popularity. The fact that downloading negatively correlates with the number of albums purchased per month, but does not negatively influence loyalty or multi-loyalty, shows that downloading does have consequences for the amount of albums purchased from artists a consumer is not committed to. This is in line with the analysis made in the introduction that currently there is a decrease in the number of weeks an album survives on the chart. Bhattacharjee (2005) reports that the number of weeks an album remains on the charts reflects its receptiveness by the non-hardcore consumers. Therefore, it is suggested that a decrease in the number of weeks an albums survives on the chart is caused by a decrease in the number of albums bought by non-hardcore consumers, who are not committed to a particular artist or set of artists. Recapitulating, it can be argued that downloading music without paying for it does not seem to negatively influence the amount of albums bought from the artist or set of artists a consumer is committed to, thus stressing the importance of developing customer loyalty towards musical artists.

In the theoretical framework, it was stated that recently there has been a discussion concerning the price of a physical album. It is reported that in order to convince non-hardcore consumers to purchase the physical album, the price is lowered substantially a few months after its initial release. In this study, it is also found that consumers aged <30 purchase significantly less albums compared to those consumers aged >30. It could be argued that lowering the price of an album, a few months after its release date, could also convince younger consumers to purchase more albums. Although recent cases of albums experimenting with prices appear to be successful in attracting non- hardcore consumers, certain risks are involved. It is generally acknowledged that committed consumers purchase the album from their favorite artist(s) mostly within the first weeks of its release (Yamada & Kato, 2002).

42 Committed consumers, purchasing the album in the first weeks at the full price, could start to wonder why they should pay more than those consumers who are not committed to the particular artist. Should these committed consumers not be rewarded for their commitment, instead of being punished by paying more? With the availability of the album on the Internet, these committed consumers could choose to download the album first and then purchase it when the price is lower. This could subsequently lead to lower first week sales, which in turn could have consequences for the total amount of album sold. Remember that Strobl & Tucker (2000) indicate that the initial debut rank is one of the most important characteristics in guaranteeing survival on the charts, and therefore stresses the existence of the bandwagon effect.

Returning to the problem statement —which variables influence the formation of customer loyalty concerning the consumption of music?“ the following can be argued. Focusing solely on the statement measuring loyalty in this study —there are one or more artists/groups from which I buy all the albums“, it is reported that the variables gender, genre music, music involvement, music discovery and media behavior significantly influence the formation of customer loyalty. When it concerns the amount of albums consumers purchase, then age and music format are also reported to be significantly influential. It seems surprising that age does not influence loyalty since many authors (Evanschitzky & Wunderlich, 2006; Smith, 1991) argue that older consumers report to be more loyal compared to younger consumers. Additionally, Moskovitch (1982) mentions that younger consumers search for more information compared to older consumers. Remember that Adler (1985) argues that appreciation increases with knowledge. Moskovitch (1982) linked the continued search for information by younger consumers to a lower level of loyalty. However, when it concerns the consumption of music, the continued search for information could possibly strengthen the relationship. Therefore it could be argued that, concerning the consumption of music, a committed consumer will continue to demonstrate its loyalty regardless of his or hers age.

Alongside the problem statement, four additional questions were constructed. The first question was proposed to test if the variables, influencing customer loyalty, differ in strength. Concerning the influence of music involvement on loyalty, the strongest correlations were found for —I obtain all the released albums from the preferred artist“ and —I attend one or more concerts from the preferred artist“. Focusing on which music genres influence loyalty, it was found that rock music has the strongest correlation with loyalty. Additionally, music discovery through magazines has the strongest correlation with loyalty concerning the various ways new music is discovered. The second question focused on the possible segmentation of the respondents concerning their loyalty. A cluster analysis found three different clusters, whereas the first cluster was found to be the least loyal. The second cluster is found to be loyal towards the artist or set of artists they prefer, whereas the third cluster is found to be loyal towards purchasing albums. The third question was constructed to measure if consumers are loyal to the used music format. Concerning the physical versus the digital music format, it was found that women are significantly more interested in the subscription model. Analyzing the motivations for purchasing physical albums instead of purchasing digital tracks, it was found that adding the physical albums to a collection is considered crucial, which is in line with the arguments made by Brown et al. (2001). Remember that Brown et al. (2001) suggests a possible connection between collecting and identity. Therefore, Brown et al. (2001) argue that owning a collection of albums, is an important reason for purchasing the original album instead of copying. Additionally, it can also be argued that it is an important reason for purchasing the physical albums instead of purchasing digital tracks.

43 Finally, the fourth question focuses on the illegal downloading aspect among those consumers purchasing albums from the record store. The extent to which consumers download music without paying for in addition to purchasing albums, is highly influenced by the age of the consumer. It was found that 74,8% among the respondents aged <20 indicated that they downloaded music without paying for, it in addition to purchasing music, compared to 14,1% among those respondents aged >50.

6. Recommendations and Future Research Directions

Why is it that the discrepancy between men and women is so high, concerning their music purchases in the Dutch market? Certainly compared to other markets, the relatively low percentage of women buying music in the record stores is striking. Earlier it is mentioned that women are only responsible for 35% of all music purchases in the Dutch market. In the US and the UK market this percentage is considerably higher, namely 49,6% and 47,8% respectively. Comparing the demographics of all three countries, no substantial difference concerning the percentage of women is found, whereas all percentages are around 50%11. A thorough research could expose the reasons why women are not attracted to purchase music the same way that men are.

Results of this study show that women are significantly more interested in the subscription model, therefore is could be argued that the record store is not perceived to be the best channel for women to conduct their music purchases. Although the reported interest by women in the subscription model could possibly lead to a higher percentage of women purchasing music, it is also recommended that efforts should be made to attract more women to the record stores. The results from this study thus show that women are not willing to purchase music in the record store the same way that men are. An attempt to increase overall album sales conducted by women results into three various outcomes. First, the reported interest of women in the subscription model is used to increase the percentage of women purchasing music. Second, the record store is made more attractive for women to conduct their music purchases. Third, music thought to be well received by women is made available in other retail channels, usually characterized by a high percentage of women conducting their purchases. It is possible that if music is made more easily available for women, the percentage of women as well as the amount of purchases they make could increase. Concerning the reported interest of women in the subscription model, it is also interesting to mention that almost one third of women are not informed about the use of legal downloading. Recapitulating, the low percentage of women purchasing music is, as much as it is surprising, also an opportunity to increase overall music sales whether through offline or online channels.

Although younger consumers report to be better informed about the use of legal downloading compared to older consumers, they still download significantly more without paying for it and purchase significantly less. Therefore, it is suggested that they are not convinced or informed about the benefits of legal downloading and its value compared to illegal downloading (higher quality, safety, additional features). The results show that 23,6% among those consumers aged 20-29 are not informed about legal downloading. Legal downloading should be made and, more importantly, perceived to be as simple and accessible as illegal downloading.

11 CIA World Factbook 2007

44 It is also interesting to notice that although younger consumers report to download significantly more, they are also significantly more interested in using the subscription model. This suggests that they are more willing to venture out to new music formats. As has been mentioned earlier, it is evident that younger consumers report to significantly download more music in addition to purchasing music in the record store. It is suggested that their perception of monetary value for music is negatively influenced by obtaining music for free, but continues to be constant due to their willingness to purchase music in the record store. However, it could be interesting to research the perception of monetary value concerning music, among those solely downloading music without paying for it. Additionally, is there a chance that these consumers will possibly crossover to a legal subscription model, and what could be motivating them to make this decision?

Concerning the various ways music can be discovered, it is reported that Magazines have the strongest correlation with loyalty. This suggests that reading information about a particular artist or album in turn could influence and strengthen the formation of loyalty. Adler (1985) acknowledges this by stating that an increase in knowledge about a particular artist subsequently leads to an increase in appreciation. Therefore, it is suggested that it is important for music consumers to be exposed to additional information about the particular artist and the albums released. Reading and learning information about a particular artist requires cognitive effort and could positively influence the level of loyalty. The fact that reading information influences loyalty should be used for both the offline as the online channel. For example, when purchasing music in the record store, it is not unusual to also receive a music magazine for free containing information about particular artists and the latest releases. Additionally, it is suggested that the same could possibly work for the offline channel as well. Files containing information about particular artists or releases could be attached to the digital download a consumer purchases, thereby exposing the consumer to additional information. A high percentage (61,4%) of all the respondents in this study considers themselves to be loyal towards one or more artists. It could be suggested that consumers showcasing loyalty use the record store as their main channel for their music purchases. Future research could focus on the level of loyalty among those consumers using the online channel, in order to determine if there is a discrepancy concerning loyalty and whether consumers primarily use the offline or online channel to conduct their music purchases.

Finally, a small percentage of all the 443 respondents agrees (11,3%) or completely agrees (5,6%) with the statement measuring the intention of purchasing music (digital tracks) from the Internet in the near future. This suggests that those consumers currently purchasing physical albums are not likely to switch to the digital music format and will remain loyal to the physical album format. This obviously corresponds with the study conducted by the NARM, aforementioned in the introduction, reporting that consumers continue to appreciate physical music products. This, along with the various differences found concerning the factors influencing loyalty, unambiguously stresses the importance of this study and the continued focus on the formation of customer loyalty concerning the consumption of music.

45 References

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50 Annex I Questionnaire

Enquete

1 What is your gender? Male Female

2 What is your age?

3 What is your highest educational level? VMBO HAVO VWO MBO HBO WO

4 How many albums do you purchase per month on average?

To what extent do you agree/disagree with the following 1= strongly disagree statements: 2= disagree 3= undecided 4= agree 5= strongly agree 1 2 3 4 5 5 There are one or more artists/bands from which I always purchase the latest album

6 The music purchases I conduct usually encompass 1 2 3 4 5 multiple musical genres

7 The music purchases I conduct usually belong to the following musical genre: 1 2 3 4 5 Rock R&B Soul Alternative Pop Jazz Dance Urban/Rap Country/Americana Classic Dutch

8 I discover new music through………………… 1 2 3 4 5 Internet Record Stores Music Magazines Friends/Relatives Concerts/Festivals

51 Radio TV (MTV, TMF, The Box) Mobile

9 When I prefer a certain musical artist, I: 1 2 3 4 5 Obtain all the released albums from the preferred artist Visit one or more concerts from the preferred artist Discuss the music with friends/relatives Recommend the music to my friends/relatives Search for information about the preferred artist

10 The number of artists from which I always purchase the albums is:

11 When I visit a record store I: 1 2 3 4 5 Know exactly what I want to buy and that is all I end up buying Know exactly what I want to buy, but also purchase other albums I discover on the spot Do not know exactly what I want to buy

The following questions are related to purchasing music online. These questions focus on the purchasing of digital tracks instead of ordering albums online

12 Compared to purchasing music online, purchasing an album in the record store has the following advantages: 1 2 3 4 5 I can immediately see what I buy I can ask for help from the staff Personal contact with other consumers I find the record store more orderly

13 Compared to owning digital music, owning a physical album has the following advantages: 1 2 3 4 5 A physical CD is tangible I can add the physical CD to my collection The physical CD obtains a booklet The physical CD offers higher audio quality

14 Besides purchasing music from the record store 1 2 3 4 5 I also purchase music from the Internet

15 Besides purchasing music from the record store 1 2 3 4 5 I also obtain music from the Internet without paying for it

52 16 Concerning the purchase of music online (what you could be doing right now, or maybe in the near future), it is important that: 1 2 3 4 5 I am able to purchase all the music from one single site A huge amount of music is offered A safe payment method is guaranteed A high audio quality is guaranteed Additional features are offered to the music file, for example lyrics and pictures

17 The use of the Internet has subsequently caused me to: 1 2 3 4 5 Decrease the amount of albums purchased from the record store Decrease the hours spend listening to the radio Decrease the hours spend watching the TV

18 In the near future my intention is to: 1 2 3 4 5 Purchase more music through the Internet

19 I am informed about how to download tracks legally 1 2 3 4 5 through the use of for example Itunes

20 Limitlessly downloading music legally for a monthly fixed sum of money: 1 2 3 4 5 Seems interesting to me Is something I would consider to do

Thanks for filling in the questionnaire!!!

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