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.”
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.