Church of the Customer Blog
« Name your price as a sales and marketing strategy | Main | The galvanizing power of evidence »
October 02, 2007
Name your price as a sales and marketing strategy
A few years ago, we wrote an essay for Seth's "Big Moo" on what the world might be like if technology and globalization overwhelmingly drove a significant number of prices to their ultimate price point: free.
Our scenario: what if "suggested retail price" disappeared, along with your ability to set prices?
Or, what if you allowed the marketplace to name its own price without negotiation?
The British band Radiohead is trying scenario two with its new album. On this website, you add the album to your cart; when you check out, you type in how much you'll pay. That's it. No argument, no negotiation.
You pay a buck to handle the credit card fee (alas, intermediaries always get paid), but it's a cool experiment in economics for a band known for risk-taking.
For producers of digital content, I argue this isn't much of an economic risk at all. The replication cost of digital files is basically zero. Radiohead has spent years cultivating a cult following, so the band has already reaped a handsome return based on the worldwide attention they've accumulated with this product-release strategy.
Of more benefit to them now is building a database of buyers, bypassing the information black hole of so many retail channels. That's the value exchange.
And in a few months, Radiohead will partner with a label, which will manufacture a CD of the album. If the album is great (always a non-quantitative variable when it comes to art), it will have already created demand for the totem version of the album.
If scarcity isn't your primary method for generating demand, then getting your product or service into as many hands, mouths and minds possible is. The ideas, products or services that spread the most usually win.
Today and more so tomorrow, that means letting go of the control you're accustomed to.
Other blogs that reference Name your price as a sales and marketing strategy:
» Customizing to Commodify or Commoditize? from Solutions Talk
Notable Quote: If scarcity isn't your primary method for generating demand, then getting your product or service into as many hands, mouths and minds possible is. The ideas, products or services that spread the most usually win. Today and more [Read More]
I was blown away when I saw what Radiohead is doing. So cool and clever from so many perspectives.
[Disclaimer: I met my husband standing outside a Radiohead gig in 1997 - we both trying to get in but didn't have tickets nor friends who would come with us. So Radiohead has a big place in my heart already.]
And Prince also did this a few months ago. It's because they have a huge following and have sold a few CDs that allows them to try this. Ironic that this model is already SOP on MySpace and YouTube, where a band spends all its time trying to get attention by giving away its music and videos for free.
So they can one day get signed by a major record label, and then one day, give away their music. For free.
;-p
Hi Ben,
I particularly agree with this point:
"For producers of digital content, I argue this isn't much of an economic risk at all. The replication cost of digital files is basically zero."
I am still waiting for the day that labels decide to sell digital files with the CD or vice versa.. YOu have two versions. Let's say 15 (or 10) bucks for just the CD (or digitial download), and 18 bucks for the CD+digital download. People like me for example, who hesitate to buy digital downloads because of the sound quality and the feeling of having the package in your hand. At the same time, it's annoying to buy the CD and then having to spend the time ripping it (some CDs you can't because of copy protection!) So many creative things that labels could do with this approach, they could pre-release the digital downloads and send you the CD a few days later, etc.
Instead of fighting the piracy and digital downloads, embrace them!
iTunes? Amazon? I'm waiting...
You're absolutely right that the value of building the customer relationship and being able to have that documented and tracked is way more valuable than the money they would have seen releasing it through a record label.
They've taken away the barrier to entry on their music and relationship.
The most interesting thing about this is that 1) There are already a number of artists who do this and make MORE than they would on iTunes and 2) In a survey the average price users said they would pay was $10 (the same as an iTunes album).
The real key to making this strategy work is creating brands and products that people truly LOVE (brand bulding anyone?). This really is Free Market Economics in action - and it seems to work - when you build strong relationships with customers and brands people love.
Laura -- You met your husband at a Radiohead gig that neither of you attended... sounds like a Thom Yorke song.
BG -- Yup, digital files are the bite-size chunk to a bigger piece of pie.
Ryan -- Reminds me of that great 80s anthem... "fight the power, fight the powers that be!"
Adam -- My guess is that current generation of recording artists recognize that the traditional infrastructure of labels and distributors is the biggest barrier to long-term success. Unless your first record is a monster out of the gate, there's not really much else for today's labels to get excited about.
Krista -- Amen, sistah! SO many bands and artists fail to recognize the importance of making it easy to become a fan.
Unfortunately they seem to have managed to make it backfire and upset some of their best customers i.e. dedicated fans...
John, I think that's because people expect that music downloads will always be CD quality. The way songs are mastered for CD is different than for mp3s though. (One of the little things the industry doesn’t shout from the rooftops. ;-p)
