What Taylor Swift’s business strategy can teach us about vertical integration

Swiftmania, a term coined for the popularity rush surrounding pop star Taylor Swift, captured UK headlines this summer.

I was one of the 73,000 at her concert at Murrayfield Stadium. We partied, sang, danced and, according to the seismic report for Edinburgh that night, allegedly made the earth move!

But other than having a good time, the experience got me thinking about the similarities Swift’s business strategy shares with an increasing number of businesses in our profession – vertical integration.

Swift provides a fascinating case study. According to The Times, her company not only owns her as an artist but also her booking agency, management team, copyright, tour production company, dancers and crew. She also earns approximately 80% of the $2m revenue generated each night of the tour from merchandise.

Once she covers the tour costs, her estimated take-home pay amounts to around $1.5bn

The only piece in the value chain she doesn’t own is the venues. This model is different from the norm where the artist would outsource everything – Swift owns almost the entire tour ecosystem.

Once she covers the tour costs, her estimated take-home pay amounts to around $1.5bn.

Apart from Swift herself, who else benefits? Allegedly, she paid the truckers a six-figure bonus after the US leg, with similar bonuses paid to the band, dancers, lighting and sound technicians. This suggests her staff are happy.

It’s also known she donated to food banks in every city she performed in. Social-media posts indicate this made her audience feel better as consumers.

The Swift effect on local economies is also well-documented, with world leaders asking her to bring the tour to their countries. But what about the customer in her vertically integrated world?

Apparently, the average concert ticket price of £257 is the highest in the UK this year (Elton John was number two at £137, for anyone wondering)

Ticket prices ranged from £58.65 to £662 for London dates (she can’t control the secondary market). Apparently, the average concert ticket price of £257 is the highest in the UK this year (Elton John was number two at £137, for anyone wondering).

So, with no positive impact on price for customers, did the biggest pop star on the planet deliver value? There are different ways to measure this, but there was certainly no feedback form to complete as I was leaving.

Vertical integration is a long-debated subject in our profession, with many high-profile players increasingly owning much of the value chain, advice, platform and product. But a key question is this: does this add value to the client experience and deliver a better outcome?

If clients believe the other factors of value are being delivered, then fees, while still important, are actually the least relevant

Referrals, ratings and net promoter scores can be important when assessing value. Robust measurement is vital, and we partnered with consumer research firm Boring Money to build a framework for consistent and transparent data-driven evidence of value.

Following extensive consumer research, 27 elements of the advice experience, both technical and emotional, were distilled into five pillars of value, each with a different weight of impact in driving value for the end client in the following order:

1. Trust and peace of mind
2. Planning
3. Information
4. Performance
5. Fees

Difficult to apply these to a Taylor Swift concert or her overall business strategy but interesting that, if clients believe the other factors of value are being delivered, then fees, while still important, are actually the least relevant.

In conclusion, while the ticket price for Swift was not the cheapest concert available this summer, despite her vertically integrated model, for at least one attendee, value was certainly delivered.

Gillian Hepburn is commercial director at Benchmark Capital