GUEST POST: Neil Cartwright of UK online marketing agency Million asks the question:
Could a simple change in pricing strategy increase album sales? I read an interesting experiment in Predictably Irrational, a new book by Dan Ariely. It runs like this:
A real advert in The Economist magazine promoting annual subscriptions offered three pricing levels, and in an experiment 100 students were asked which one they would choose (answers in brackets).
1. Internet only $59 (16)
2. Print only $125 (0)
3. Internet and print $125 (84)
Obviously no-one chose option 2 since the addition of the Internet version in option 3 was perceived as ‘Free’. However, crucially, option 2 provided an important psychological ‘decoy’, as evidenced when the experiment was repeated without it...
1. Internet only $59 {68}
2. Internet and print $125 (32)
Now, people chose the cheapest option while the print version was simply considered as more expensive without a significant enough perceived benefit.
It strikes me album pricing could benefit from following a similar path. How often have you seen this offer for an album?
1. Download album $7.99
2. Physical album $14.99
Why not price albums as follows?
1. Download album $7.99
2. Physical album $14.99
3. Download and physical album $14.99
Since the additional cost of allowing people to download the album is minimal (the cost of the bandwidth) then by using the physical album as a decoy, retailers may push more people towards buying the physical album since they perceive the download as ‘Free’. despite the fact they can naturally rip the album as soon as they receive it.
