It’s a basic economic principle: as price increases, demand decreases.
But that’s the beginner’s guide, and it doesn’t take psychological components into account. Because sometimes, when you raise the price – or simply attach a price tag at all – demand actually increases. And so does the perception of quality.
The music industry isn’t the best at studying pricing (that’s for sure), but there’s evidence that price tags actually increase overall interest and demand for your music – whether that results in a paid transaction or not. Here’s a comment from a seriously DIY artist in the trenches, Steady Fingers, who experienced something unexpected.
But it’s funny that even when I used to give away [my music] for free, there wasn’t much traffic nor many downloads, almost nothing. Then we decided that we should put it up for sale so that we might be able to recoup some of the money spent on making the music videos (when it’s your brother making the videos, I still consider it DIY.) Anyway, as soon as people saw that the music was up for sale, the website and other related social media gizmos received much more attention. Also, people began looking for ways to download it for free, which isn’t always a bad sign.”
But it’s funny that even when I used to give away [my music] for free, there wasn’t much traffic nor many downloads, almost nothing. Then we decided that we should put it up for sale so that we might be able to recoup some of the money spent on making the music videos (when it’s your brother making the videos, I still consider it DIY.) Anyway, as soon as people saw that the music was up for sale, the website and other related social media gizmos received much more attention. Also, people began looking for ways to download it for free, which isn’t always a bad sign.”Welcome to the strange world of ‘perceived value,’ a murky science that enables all sorts of obscene markups – whether at Starbucks, Gucci, or the Apple Store. But the basic idea is this: the simple presence of an elevated price tag – or a price tag at all – is often enough to convince someone that this product has worth.
The extreme example would involve something like a Rolls Royce – the ridiculous price actually attracts more interest. But this occurs amongst everyday people, with everyday items: in fact, a recent research effort conducted at Stanford and Caltech found that people actually experienced more physical pleasure response from supposedly more expensive wines – even if they were tasting exactly the same thing! In the classic ‘blind taste test’ involving a $5 and $45 wine (which were actually the same thing), the researchers found that pleasure synapses in the brain actually fired more strongly for the (supposedly) $45 wine.
The conclusion: higher prices can increase the perception of quality, and therefore, demand. “What we document is that price is not just about inferences of quality, but it can actually affect real quality,” said Stanford GSB professor Baba Shiv, who co-authored the study. “So, in essence, [price] is changing people’s experiences with a product and, therefore, the outcomes from consuming this product.”
The problem for artists – at least on the recording side – is that there’s always a free or near-free option (unlike wines or cars). But simply charging something may be the most effective ‘free music’ strategy. Because your fans will steal your music no matter what — the main thing (like it or not) is that they’re interested enough to do so.
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Stop writing stupid articles like this. Who has thought you economics? Price increases as demand increases, not the other way around!! What a joke!
What if your prodcut is teetering on decommodification, and the consumer can choose to buy it or acquire it otherwise?
Yeah, I know, sounds like a bad joke right?
I thought economics. I gave it up and thought music instead.
Paul,
You know im a fan. I cant dissagree with you, becaues didn’t I already write this article exactly a year ago?
http://mosesavalon.com/music’s-secret-to-competing-with-free-raise-the-price/
No need to be insulting. There is evidence that it works the other way, at least sometimes. This occurs even with college tuitions. I recall research from a decade ago or more that showed that colleges raising tuition without other significant changes let to dramatic increases in the number of applications, apparently because the college was now perceived as elite.
As a freelancer in various fields, including music, I have found the same to be true. The higher I raise my prices, the more business I get, the more serious the clients are, and the more respectfully I am treated. Colleages and friends of mine in the tech and music world have shared the same experience with me.
– Regards,
Versus
This article is correct.
Basic economics 101 states that:
— If you raise the price all of a sudden, demand for that will decreaese.
Imagine if the price of a chair doubles tomorrow. Less people will buy it.
The above “Outsider” is confusing this with the opposite chain of events:
— If demand suddenly increases (first), then yes, price increases. But not the other way around.
So yes, this is getting into the strange counter-intuitive practice of actually using price to increase demand.
This is like page 1 of economy manual. And it says nothing about sales.
Check elasticty of demand (just for an example related to what you talk about).
Check also margin and equilibrium.
Why sell something to 1000 people at 0.99 euro-dols, while you can sell 200 at 50 euros. Make the math for yourself.
People think that “cheap” sells better ? better than what ?it is only the medium prices that don’t sale. The extremes work very well.
People who think in terms of UNITS (quantity of offer/demand) need a good update on commerce. Forget about “economy”, that’s just good for high school, but doesn’t lead you anywhere in terms of job or in terms of commercial results.
Now if you think that music purchases have anything to do with prices, offer and demand, then think twice, and get prepared to a career in yogurt industry, where those principles might still be valid references.
Best regard
so what is the solution?
you are looking for a solution with the “offer/demand” BS ??
Just make a great product, and the demand will appear…..
In the book “More than Good Intentions” (by Jacob Appell), he discusses the adoption rate of using free mosquito nets versus charging a small fee. 70% of all recipients who got free nets didn’t use them. But, they found that usage increased when you charged a small fee. So by charging a little bit, they actually ended up with a greater number of people using the nets than by wastefully giving away many more nets. Here’s an excerpt:
“Easterly’s camp addresses the issue of waste by selling nets for a nominal price instead of giving them away. Requiring people to pay, they argue, achieves two goals. First, it filters out those who don’t want, or don’t need, the product; second, it creates a sense of investment for those who choose to purchase. Having sunk hard-earned cash into the nets, buyers should want to get their money’s worth.
Ever buy tickets to a show, and then when the night comes you don’t really want to go—but you still feel obligated? Behavioural economists call that the “sunk cost effect.” It is the phenomenon that makes you feel like you should go to the event, just because you paid for it, or that you should finish that lobster dinner you ordered, even if you’re already full.
Now, an economist would stop eating his lobster: He knows he’s already bought the meal, and that he’s going to pay for the whole thing, no matter how of it much he eats. So he’ll just eat the amount that makes him happiest. We Humans don’t always think that way. We force ourselves to get out of the house and go to the show. We try to finish our lobster dinners.”
Thanks for this free lesson in economics. Never to old to learn.
And I have to work on my spelling too. I thought I typed taught 😉
Interesting point.
Maybe you should charge for access to DMN then… At the very least the perceived quality may increase.
I was in a band on warped tour. We wanted to spread the wordso we gave out free 3song eps. People didn’t come to our booth. As soon as we charged a $1 for it. Our booth had much more traffic. This is the music business people, perception is everything.
Fact is always better than fiction. Thanks for the reality check.
This is the music business people, perception is everything.
Truer words have never been spoken here.
I will try this. When I had free mp3s on my website I had incredible traffic from people in the USSR- they seemed to be using a varient of Windows Media Player which I believe was a form of hacking somehow. SO regardless of my incredible # of downloads I removed all the free files. AT the same time I had about 30 songs for sale on a small independent “sell’ site where I had worthless results. Since then I created a 24 hour a day streaming music station for my music & have had 2000 listeners. So I assume some one hears me. Although there is never an email or even a smiley face. I then decided to put up a musuc page in facebook which led me to a reverbnation account. Thru experience with “music websites” it was no problem to become #1 in my genre albiet locally but when speaking to a perticularly cynical musican friend & telling him about my “success” he said so what. His answer is to play at great sacrifice in obscure venues at hours like 2 pm or 4am. I prefer to be a “recording musician”. So at this point I have about 220 new songs most recorded in the last 3 years that can be heard on the station. Reverbnation has offered my access to Itune via a 1 album for about $35 a year price. I understand the sheep mentality about Itunes -” Its not a MP3 its an IPud” So perhaps you are right. But I have been playing this game for many years. I make movies, annimations w/musci soundtracks am a recognized multimedia artist & simply believe like John Lennon said (in princple) “once you put your art into the cloud it belongs to the world. If you are not part of the corporate media system you are basically not there.
I want to kill myself slowly reading through all this horrid spelling..
he’s a musician, not a writer…
food for thought…
ALL ARTISTS READ THIS!
THE TRUTH!!!
I wish more musicians would realize this.
The debate continues.
My sentiments and years of experiences exactly. People who low ball, screw the players in any industry, and find themselves quickly out of business. Some of you ought to learn how to use a spell checker before you think your opinions matter.
I do not care if your music is available for free or for profit.
No demand = no interest and thus no sales if you are making money off your release.
The bigger issue is what to do after you have built a buzz, had the album release etc. It seems that most artists are content with first week sales and they become victims of the “curve.”
An artist should provide enough content to sustain sales or downloads after the album release. How is this done?
Artists need to do shows, video logs, music videos, interviews, remixes, contests, give aways, etc to keep the interest up. Once the interest wanes then the downloads or sales will suffer.
Remember that marketing builds interest and that interest can lead to sales or more downloads.
What do you think?
A simple solution to a common problem.
I’m working on a music CD project developing some very elegant music that people with money would appreciate. If your idea that a price tag creates interest and sales, then I should do very well.
If you want to get rid of an old washing machine, put it out by the street. Nobody will take it. Put a sign $20 on it. The next morning it will be gone.
Even if price increases demand, isnt it still incredibly problematic that the demand generated by the price can be fulfilled for free? This seems to work as a method of generating notoriety but not income, and I can’t see so much notoriety really producing a great amount of income except in rare cases, and music to make money has to go through other channels like performing live etc which inevitably effects the style of the music unless the music was already the sort of music that lends itself to a live setting (music played with or by a band), I can only see that having an incredibly negative effect on artistic innovation and leading to a retreat to the idea that a band being good live is what makes or breaks them, a dissapointing retreat back to rockist music when the most important music is studio generated and cannot be created without profits from record sales.