Could New Pricing Increase Album Sales?
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.
I think this would be wise thing to try out. Perceived value is key, and the physical + download would certainly provide it.
What pecentage of students read The Economist?!!?
Me, I just read it for the articles …
When I blogged a while back about what Amazon might do (before they launched the Amazon mP3 Store), I thought that Amazon should do something similar to this: Offer the downoadable version of an album at minimal incremental cost over the CD, so that users buying the CD could get download the album right away while waiting for the CD to arrive. The CD would be bought for the artwork, liner notes, ability to rip in a lossless format, and just as a collectible item.
I was thinking of pricing the CD + download a couple of bucks higher than the CD alone, but I think your idea of making the download effectively free is much better, and I think would encourage more CD sales. Of course, this is yet another good idea that would be totally impossible to implement due to rights issues and general greed on the part of labels and artists.
This was exactly the scenario I encountered a few weeks ago when I was trying to choose between a download or physical CD for the Duke Spirit’s new album Neptune: Go for the immediacy/instant gratification of the download or get the CD and rip it myself. (As a music fan/collector I still have certain affinities for physical product).
But then I came across a Lala.com promo Flash widget on the Duke Spirit’s MySpace page that allowed users to purchase the download AND CD as a bundle.
This was the price breakdown between my choices:
1. CD only (on Amazon): $12.99
2. MP3 only (on AmazonMP3): $8.99
3. CD + MP3: $9.99
I chose the third option. In the decision-making process, I basically considered that for $1 more than just a download, I got the CD w/my MP3’s which could be perceived as a premium bonus — or alternately, that I was more than willing to pay an extra buck for the bundle and avoid going through the trouble of ripping the CD myself. In either case, the extra $1 price point was convincing.