Rock group Radiohead is now offering a digital download of its new CD, "In Rainbows," available for ordering only on its website.
What's the price? It's up to you to decide - consumers can pay whatever they want.
I must have missed the lecture that covered this pricing strategy in school.
I think you call it "publicity" like the "million dollar frittata" at a New York restaurant with the description "we DARE you to expense this."
ReplyDeleteI agree that it certainly generates a lot of publicity (this story seems to have hit all of the major news outlets), but what's the value in the publicity? Say it increases traffic to their site 1000x. All of the extra traffic isn't worth it if the "up to you" price these people set is zero.
ReplyDeleteWhy would someone rationally pay for something they could get for free?
I am not necessarily surprised. Infact, I believe this is a great idea!
ReplyDeleteThis is indirect price discrimination at its best! There is not even a single unconsummated transaction! The group also realize that majority of its costs are sunk now. I mean how much the marginal cost for an extra CD could be? So whatever the customers will give, is profit. And if you know rock fans well, they are not rational actors! money will be coming in heaps and loads.
These folks deserve a free copy of Luke's and Brian's book; so that they could realize what they have done! Go Radioheads!
Also, isn't it a possible solution to the piracy problem music industry is dealing with? They know suing 12 years old kids is not working. This option may well deserve a try? Comments?
The goal is to increase utility, not revenue. This must give them more happiness.
ReplyDeleteSo, are we saying when Sabeer Bhatia gave away hotmail free, that was about utility too? Atleast that's what people must have thought initially. Some even called him crazy. But, we all know the result.
ReplyDeleteRadiohead is not the first. A canadia singer/sorgwriter whose name I unfortunately am blanking on did this a couple of years ago. As I recall, the average that people paid for her CD was in excess of $10. So there's the real question--given the opportunity to pay nothing (or next to it), why do people voluntarily pay what might be really close to a market-based price?
ReplyDeleteDoc: I think the Canadian artist you're thinking of is Jane Siberry (who now goes by the name "Issa").
ReplyDeleteHer e-commerce website (www.sheeba.ca) has used a "self-determined" pricing policy since November 2005.
http://www.sheeba.ca/store/letterSDP.php
From an October 6, 2006 article in the Globe and Mail:
"So far, her fans are also proving to be an honourable bunch. At last count, only 17 per cent of customers were accepting the free gift (37 per cent paid on the spot, with the remaining 46 per cent returning to pay later). Of those handing over cash, the overwhelming majority, 79 per cent, were paying the suggested price (14 per cent paid more and only 8 paid less)."
Do we know how the Radiohead CD performing?
ReplyDelete