Does Price Matter? How To Turn Fans Into Consumers Again.
There are two bottles of wine on a menu. One is $9. The other $16.- There are three bottles of wine on the menu – $9, $16 and $34.
Which selection sells the most bottles of $16 wine? The second one, of course. What is considered a bargain is mostly a matter of perception. Marketer and author Seth Godin calls is triangulation. A political writer calls it the "decoy effect". Either way it’s a powerful marketing tool that the music industry all but ignores.
Not sure it really applies to "art"? Just remember how consumers reacted when the price of a hot new video dropped to lower than that of a new CD. Suddenly everyone wanted to own something they could rent and will likely only watch once.
Why can’t labels offer 3 tracks for $5, a full length album with a few extras like lyrics for $10 and a bundle of an album, bonus tracks, live videos and band interviews (all cheap to produce) for $18. Then on top add a highly limited edition with all the above packaged together with vinyl an an art quality print for $50. All DRM free.
Suddenly the $10 album seems much more reasonably priced.
The casual fan buys the $5 highlights. The cost conscious fans pays $10. And you get $18 or even $50 from the hard core fan who wants everything and is willing to pay for it.
The concert industry learned this a few years ago with high priced gold circle seating, regular reserved seats and very affordable spits on the lawn. This idea alone won’t solve the music industry’s woes, but as labels look for ways to remind consumers that music has a value worth paying for; this is one approach worth trying.
I think price does matter. Our label has been featuring new sales every week and this week, we posted a sale where customers can pick any 5 Suburban Home albums for $25.00. Our normal price for an individual full length is $8.99 which is a bargain, too, but since offering this sale on Tuesday, we have sold close to 100 sales which is much better than our mailorder normally does.
We also have a sale to clear out overstock where people can buy 25 cds for $25.00 or 50 cds for $50. We have been able to sell over 7,000 cds through these sales.
Customers are willing to pay for music if the price is right. That is why Emusic is successful and if you attended any of the Tower Records closeout sales, people were going crazy.
Quite a few albums are available in more expensive, limited edition versions. SACD versions could also be seen as the more expensive decoy.
I think the main problem is that labels have been unable to throw too many version onto brick-and-mortar retailers. Shelf space is hard enough to get. Retailers don’t want too many versions of the same album. Labels will want every single version to be carried. Retailers may not want to carry every single one.
When the product is an album, the consumer may not know how one differs from another. It’s the same album (though with varying degrees of additional content of varying quality that may or may not matter much). With wine it’s much different. The consumer has a rational expectation of the quality — and therefore the difference between the three products — based just on the price.
I think labels should do more of this in the digital world. The “how?” part is more difficult, though. It’s a tough one.
So…yes, price matters. Everybody loves low prices. People react to sale prices. People react to sales with well-defined end dates. People will certainly react strongly to exceedingly high prices. But low prices aren’t the only answer. If consumers want it enough, they’ll pay for it. If they don’t want it, the price won’t matter much.