The Ultimate In Customer-Driven Pricing

Rock band Radiohead have just announced that their new album will be released as a digital download with the fans being able to decide how much they pay for it. The band currently have no record label and as such, have no overheads in releasing the album – therefore every penny paid by the buyer goes straight to the band.

So far the NME website reports that people having been paying an average of £5 per album, meaning that the consumer is paying much less than they would normally pay in a traditional release. In addition to this, the fans know that all the money is going straight to the recording artist as opposed to the majority of it going to the record label big-wigs.

Have Radiohead kick-started a new trend? Can this kind of pricing be applied to other industries other than the music industry? Leave a comment below and let us know what you think.

An article on the Church of the Customer blog looks at this story in more detail – see below. For more information on pricing take a loook at our white paper – “The Problem With Price”.

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.

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