After reading Rex Woodbury’s excellent piece — What Taylor Swift Can Teach Us About Business, I knew I had to write a similar article about the K-pop industry.
PSA: Your inbox will probably cut off this email. I recommend opening it in a browser now or clicking here to avoid interruptions while reading!
What K-pop Can Teach Us About Business
I’m a fan of K-pop, not just the music but I’m in awe of the industry from a business perspective. The Korean music industry saw what the West was doing and decided to make it more creative, more competitive, and more capitalistic.
In this article, I'll connect the strategies used in the K-pop industry with those employed by tech companies like Ramp, Datadog, Microsoft, and Canva to highlight seven key business lessons:
Grow or quit
Power in numbers
Land and expand
Brand differentiation
Don’t just sell, generate demand
Two Is Better Than One
Create a community
Strap in and hold to your concert seats, by the end of this post, you’ll be waving your light sticks and doing fan chants. Don’t worry, I’ll explain what light sticks and fan chants are in section 7.
A quick history of K-pop
K-pop, short for Korean pop music, originated in South Korea in the early 1990s. Most experts agree that the first K-pop group was the trio Seo Taiji and Boys (pictured above). Their hit song "Nan Arayo (I Know)" likely introduced hip hop to South Korean youths for the first time. The group’s success marked the first generation of k-pop idols. Other idols of this generation include H.O.T. and S.E.S.
The early 2000s ushered in the second generation of K-pop, featuring artists like TVXQ, Girls' Generation (pictured above), IU, and PSY. During this era, most K-pop artists significantly expanded their fan base within Asia, leading to the term "The Korean Wave," or Hallyu. The notable exception was PSY, who achieved global fame with his viral hit "Gangnam Style.
The third generation of K-pop began in 2012, marked by the debut of today's most popular groups, including BTS, TWICE (pictured above), and Blackpink. During this period, K-pop's influence extended beyond Asia.
And finally, we have the current fourth generation with groups such as NewJeans, Aespa, Stray Kids (pictured above), Le Sserafim, that have all seen exponential growth globally.
Show me the money
Determining an accurate valuation of the entire K-pop industry has been tricky but a report found that:
K-pop events market alone was valued at $8.1 bn in 2021 and is estimated to reach $20 bn by 2031, growing with a CAGR of 7.3% from 2022 to 2031.
The three largest K-pop entertainment companies have the following market caps:
SM Entertainment - 1.93 trillion South Korean won (approx. $1.41 billion USD)
JYP Entertainment - 2.3 trillion South Korean won (approx. $1.68 billion USD)
HYPE Co. Ltd - 8.35 trillion South Korean won (approx. $6.1 billion USD)
And BTS, the most famous and successful k-pop group, accounted for a staggering $4.65 billion of South Korea’s GDP1
1) Grow or quit
For both K-pop artists and startups, the key factor to success is growth.
Unlike in the West, where artists are serendipitously discovered, those dreaming of debuting as a K-pop artist are moulded through a rigorous trainee program. Trainees typically practice singing, dancing, rapping, and performing for 8-15 hours a day, 6-7 days a week2. Not to mention there are monthly evaluations, where they are stack ranked on their abilities.
A handful of these trainees are able to debut in a group but their growth doesn’t slow down. K-pop artists are expected to compete on weekly music shows, where they are stack ranked with other groups and a winner is crowned. In the example below, the group NewJeans beat Aespa on the Music Bank show.
K-pop artists are also expected to make TV appearances, attend fan meetings, and of course continue their rigorous training.
A few trainees are given a second chance at stardom by competing in a survival show - think American Idol but much more ruthless. As you can see the K-pop artists who succeed are those who can grow the most rapidly.
In a similar vein, the startups that become successful are the ones that can ship quality products (emphasis on quality) in the shortest amount of time.
Ramp has become the poster child for this high velocity growth. The fintech startup is one of “the fastest-growing SaaS company of all time, hitting a $100 million run rate in two years”3. If you want to learn how they achieve this insane velocity, check out their blog post here.
Another example is Datadog. This chart from their May 2024 Investor presentation elegantly encapsulates their rapid growth.
I should also point out the high product velocity of K-pop groups. Instead of producing a full album with say 10 songs once a year, a lot of groups will ship several mini albums with 4-6 songs a year.
Paul Graham’s famous saying default alive and default dead not only applies to startups but also oddly to k-pop artists as well.
Entertainment companies will invest hundreds of thousands of dollars in trainees over many years, covering expenses such as lessons, housing, styling, and meals. This substantial cost is accumulated as a debt and if the K-pop idol debuts, the bulk of their earnings goes towards servicing this debt.
Only a handful of groups can truly break out in the hyper competitive industry, pay off their debt, and make millions. While others end up with crippling debt and are default dead.
2) Power in numbers
You might have noticed that the K-pop artists I’ve mentioned are all groups with multiple members. This is very much by design. Having multiple members in a K-pop group yields several benefits including increasing the total addressable market, generating additional revenue streams, and reducing churn.
Increasing total addressable market (TAM)
K-pop groups with multiple members can appeal to a wider audience. Each member often has a unique personality, style, and role (e.g. singer, rapper, dancer), allowing the group to attract a diverse fan base.
Similarly, startups that offer multiple products are able to increase their TAM. And through strategic pricing and packaging, you can appeal to a wide range of customers ranging from solo users to enterprise. In the example below, Canva has carefully tailored their packaging to suit individuals, teams, enterprise, and educators.
Additional revenue streams
Having multiple members in a group creates more opportunities for monetisation. Each member can engage in individual activities such as acting, solo music projects, endorsements, and TV show appearances. These individual ventures generate additional income while keeping the group's brand in the public eye.
Not to mention, merchandise sales can also be boosted as fans often purchase items featuring their favourite member (aka their bias), and having multiple members increases the variety and volume of merchandise available.
Startups with multiple products are able to generate additional revenue streams by offering additional services or add-ons for each product. An apt example of this is Salesforce success plans — see image below.
Reducing churn
Another benefit of having several members in a K-pop group is that it can help reduce fans churning and stabilises the group’s popularity over time. If a member leaves or takes a hiatus, the group can continue to perform without significant disruption.
Likewise, startups with more products often experience lower churn rates for several reasons such as higher switching costs, increased perceived value, and the ability to cross sell and upsell.
For example, Employment Hero started out as just an HR Software but has quickly transformed into a multi product platform with Payroll Software, Applicant Tracking, and even a job board offering.
3) Land and expand
Originally, K-pop groups were composed exclusively of members from South Korea. However, the entertainment companies have started to strategically select members from across the world in order to expand their reach.
Common nationalities of non Korean idols now include:
Japanese
American
Canadian
Australian
Thai
Taiwanese
Chinese
America and Japan are the two largest recorded music markets4. Having members who can speak English or Japanese is crucial to attract fans in the two countries.
For example, TWICE has:
3 Japanese members
1 Taiwanese member
5 Korean members.
Thanks to this diverse mix, the 9 member group enjoys immense popularity in both Japan and Taiwan.
For startups, especially those based outside the US, expanding to the United States is imperative for growth. Conversely, American startups will need to tap into international markets to reach their maximum TAM.
A fun fact I recently learned on the Acquired podcast was that Microsoft’s very first international expansion was actually Japan. See the transcript below, note the bold emphasis is mine.
Ben: Also, how crazy is it? You've got five people, you're operating out of Albuquerque, you just finally expanded from having one customer, and you're like, you know what we should do this year? Let's open in Japan and become an international company.
David: Yes. The way this happens is one day, Bill gets a call from a guy named Kazuhiko Nishi, or Kay Nishi, who's a computer enthusiast in Japan, has gotten a hold of Microsoft BASIC, and totally shares the same vision as Bill and Paul. He doesn't have a Paul nor is he technical himself.
He's like, I'm going to bring you guys to Japan. I'm going to bring you to all the big computer companies. They agree that Kay will become Microsoft's exclusive distribution partner in Japan. By the next year in 1979, half of Microsoft's revenue is coming from Japan, which is wild.
Tapping into local talent is a necessity for global expansion as it allows you to have boots on the ground, knowledge of work customs, and access to existing networks. It’s also important to consider seeding new markets with existing staff in order to preserve the company culture from Day 1.
For Aussie and Kiwi founders, I recommend reading this article on global expansion for ANZ startups.
4) Brand differentiation
In recent years, it’s estimated that between 50 to 100 K-pop groups debut each year. For a group to have even a minuscule chance of standing out, they need to build a brand to differentiate themselves.
Aespa, a four member group from SM Entertainment, have embraced a cyberpunk, metaverse concept - complete with virtual avatars and fictional backstories5. Their unique brand has paid off as they became the first k-pop girl group to surpass 1 million 1st week sales on three different occasions.
Legendary boy group BTS started out with a rebellious bad boy image and later transitioning to a mature look with songs exploring Jungian psychology and philosophy. Being able to refresh your brand as time passes is crucial to a group’s longevity and relevance.
Similarly, brand building is crucial for startups for several reasons.
Standing out in a crowded field
Unless you’re in an incredible niche industry, say technology for asteroid mining, you’re probably competing with a few established incumbents and a several agile startups. Without investing in your brand, your startup will be indistinguishable to your target market — see image below.
Building trust and winning hearts
Consumers buy from companies that they trust. For startups, one way to instil trust in their target audience is by building a strong brand identity.
Successful startups such as Stripe, Notion, and Figma have all invested heavily in their brands. This investment has built trust with their customers, which in turn translates into revenue.
I plan on writing an article about the importance of brand building for startups, so make sure you click the subscribe button below to receive that article.
5) Don’t just sell, generate demand
In 2023, physical album sales in South Korea surged to a staggering 115.1 million units. This dwarfs the total for the US market, with 36.83 million CD albums were sold in 2023.6
What’s even more revealing is that last year, 7 out of the Top 10 selling CD albums in the US were from k-pop artists. The remaining three were all Taylor Swift (👑).
So do K-pop fans happen to have a bizarre penchant for physical CDs? No, the Korean record labels have managed to generate incredible demand through photo cards, personalised albums, and pre-order benefits.
Photo cards
Undoubtedly, the driving force behind the demand for physical CDs are photo cards. As the name implies, its a photo in a card form. Each CD will usually contain a handful of randomised photo cards. The example below showcases all of the photo cards that fans could receive from Stray Kids’ album 5-Star.
As you can image fans will buy multiple CDs in order to obtain the photo card that they desire.
Consumer facing startups should consider how they can incorporate freebies or promotional items to maximise order values. While, B2B businesses can utilise lead gen magnets that provide meaningful value. Examples include:
Checklists
Templates
Case studies
Calendars
Email courses
Swipe files
Calculators
Dashboards and reports
Personalised albums
As I argued earlier, one of the benefits of having multiple members in a K-pop group is the ability to generate additional revenue streams through member specific items. Using the four member group Aespa as an example, instead of just selling one album, they can sell four different versions, one for each member - see image below.
But wait it gets even better.
There’s actually two additional versions for each member, meaning there’s a total of 12 versions of this album. And yes, each album has exclusive photo cards that fans want to collect.
In a similar fashion, startups can leverage personalization as a powerful tool throughout the entire customer journey, but especially during the awareness, conversion, and activation phases.
By tailoring relevant content to potential customers at both the awareness and conversion stages, you can nudge them towards making a purchase. One highly effective tactic is personalising landing pages, as exemplified by Mutiny.
During the activation phase, the best in class businesses are tailoring the onboarding process to each user's preferences, interests, and skill level. This personalisation translates into a positive user satisfaction, accelerates time-to-value, and reduces churn.
Pre-orders benefits (POB)
K-pop entertainment companies employ pre-order benefits (POB) to boost demand for physical CDs. This tactic involves offering special incentives, such as photo cards and posters, to fans who pre-order the CD within a specific time frame. These incentives ensure strong first-week sales, which are crucial for ranking high in the scoring systems of weekly music shows.
Similarly, SaaS startups could benefit from offering discounts or benefits for annual and multi-year plans. This strategy not only enhances cash flow but also lowers customer acquisition costs (CAC) and reduces churn.
6) Two Is Better Than One
In the K-pop industry, partnerships and collaborations are essential for expanding an artist's reach. From brand endorsements to musical collaborations, these joint efforts not only amplify the artists' visibility but help engage fans beyond just music.
Let’s use Blackpink as our case study. As a group, they have partnered with brands such as Starbucks, Oreo, PUBG, and Casetify, to name a few. Fans will eagerly purchase these products, which generates incremental revenue for the brands and exposes non fans to Blackpink.
Musically, the group has collaborated with the likes of Lady Gaga, Selena Gomez, Cardi B, and Dua Lipa.
Individually, all four members have partnerships with luxury fashion houses, see image below.
All of these partnerships are mutually beneficial for both Blackpink and the brands. Blackpink gets sponsorship dollars, while the brands gain significant brand awareness and PR. It’s a true win win scenario.
Partnerships can be a very powerful growth lever for startups to use and can be widely grouped into the following categories:
Strategic Partnerships
These are alliances formed between two companies with complementary strengths, where each partner brings unique resources, capabilities, or market access to the table.
Example: Uber and Spotify formed a strategic partnership which allowed Uber riders to connect their Spotify accounts and play their own music during rides, enhancing their ride experience.
Co-marketing/Co-branding Partnerships
This involve joint marketing efforts or the creation of co-branded products/services between two or more companies.
Example: HelloFresh, a meal-kit delivery startup, partnered with Beyond Meat, a leader in plant-based meat alternatives. Together, they created a co-branded meal kit line featuring Beyond Meat products.
Distribution Partnerships
These partnerships focus on expanding a startup's reach by leveraging the distribution channels of a partner company.
Example: Rackspace Technology integrates Cloudflare's services into its managed cloud offerings, providing customers with enhanced performance, security, and reliability.
Technology/Integration Partnerships
These partnerships involve the integration of technologies or systems from two companies to create enhanced solutions.
Example: Slack’s integration with Google Drive, enables users to seamlessly share and collaborate on files within Slack channels. This partnership streamlined collaboration and productivity by providing a more integrated experience for users.
Additional resources on partnerships:
7) Create a community
Perhaps the most impactful strategy deployed by the K-pop industry was creating a passionate community of fans. This was in part achieved through the creation of fan names, fan chants, and light sticks.
Fan names
Just like how Taylor Swift fans are named Swifties, K-pop groups have their own fandom names. By granting a name to their fans, K-pop groups immediately impart a sense of belonging and unity. Some names are selected by the fans themselves through a voting system, adding an additional layer of ownership and belonging.
Examples of fan names:
Blackpink - Blinks
TWICE - Once
BTS - Army
Stray Kids - STAY
Seventeen - CARAT
Fan chants
K-pop fan chants are coordinated vocal responses from fans during live performances, music show recordings, or concerts. These chants serve to engage fans, making them active participants in the show, and foster a sense of unity and community among them. Most entertainment companies will produce fan chant guides (see example from NewJeans below) to ensure fans know the correct wording and timing.
If you want to witness a fan chant in its full glory, take a look at the clip below.
Now, I’m not saying your startup should create your own fan chant but you should definitely craft a clear, consistent message that customers can easily recognise and recall.
Light sticks
Light sticks are essential accessories for any K-pop fan attending a concert. These hand held LED devices have Bluetooth functionality, allowing them to be synchronised to the concert's lighting and music. Once again, creating an instant sense of community among fans.
For startups, fostering a community of your most passionate customers is a long term investment that can produce a powerful flywheel effect.
Notion’s community led growth strategy has been well documented, so I won’t rehash that. Instead, I wanted to spotlight Canva’s impressive community program, which is driven by Canvassadors (fan name!) and encompasses seven different groups:
Canva Design Community
Canva Verified Experts
Creators
Education Creators
Canva for Teachers
Canva for Nonprofits
Developers Community
Canvassadors are gifted with a welcome pack filled with a variety of merchandise (missing a Canva light stick), see image below.
Canva doesn’t have a fan chant but you could count the infamous Canva rap as one.
Started in 2016, the Canva community has grown to over 1.9 million members and includes more than 550 Canvassadors. In 2023 alone, the community organized 790 events, including design workshops, community meet-ups, and teacher training sessions.
Every member and Canvassador not only helps generate organic awareness about Canva for new customers, but also increases the product usage of existing ones.
Closing Thoughts
K-pop artists have left an indelible impact on the global music industry. While their sudden surge in popularity and cultural impact may seem unexpected, a closer examination reveals that entertainment companies have meticulously developed and implemented effective strategies to capture people’s attention and wallets. Startups would be wise to consider testing these tactics themselves.
Thanks for reading this long, self indulgent piece. To any K-pop fans reading this, let me know your favourite group in the comments below!
Chris
Things that caught my attention
See me speak at the Generate Summit Sydney 2024 - The Australian B2B Tech Marketing Conference.
Latest book I’ve finished - Fourth Wing by Rebecca Yarros. A fantasy novel with dragons, magic, and politics.
Coke Studio partners with NewJeans - The ad disguised as a music video garnered 12 million views in one month.
https://www.fastcompany.com/90412360/bts-accounts-for-4-65-billion-of-south-koreas-gdp-and-other-jaw-dropping-stats-about-the-supergroup
https://www.scmp.com/magazines/style/news-trends/article/3048154/bts-blackpink-what-it-takes-become-k-pop-idol-south
https://www.lennyspodcast.com/velocity-over-everything-how-ramp-became-the-fastest-growing-saas-startup-of-all-time-geoff-charl/
https://www.ifpi.org/ifpi-global-music-report-global-recorded-music-revenues-grew-10-2-in-2023/
https://time.com/6174945/aespa-2/
https://www.billboard.com/music/chart-beat/2023-us-year-end-music-report-luminate-top-album-morgan-wallen-taylor-swift-1235579214/
An EXCELLENT breakdown!!