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10 years ago
In 2007, ‘music-to-slit-your-wrists-to’ exponents Radiohead, carried out a massive marketing experiment. They released their latest album to the general public via Internet download – but with a twist…
Because at the same time, buyers were invited to pay as much or as little as they liked for the album they downloaded. They were asked to pay only what they thought it was worth.
There seems to be a fair amount of controversy over the results, but the best estimate I can come up with is that about 1.2 million people downloaded the album, 62% paid nothing at all, and overall, the average price paid per download came in at around $6.
Now given that their product costs were virtually nothing (although there would have been some administrative costs), and they didn’t have to share the money with distributors, record companies, wholesalers or retailers, that surely must go down as a big fat success… Even though only 38% of customers paid actually anything at all.
Fast forward now to 2008, and I have a story about another marketing experiment along similar lines to the first one – but with a very different outcome.
A restaurant in London attempted pretty much the same thing.
There were no prices on their menu, and diners were invited to pay just what they thought the meal was worth.
Unfortunately the customers hated the whole concept, and spent the entire meal worrying no agonising about how much they should realistically pay. They were fearful of paying too little, and looking mean, or too much, and looking stupid.
Nobody ever wanted to go back.
This is a classic case of taking a marketing idea from one environment and dumping it in another less appropriate locale without thinking through how the factors in this new environment will impact on the effectiveness of the selling technique. And I think it’s worth looking at the two basic factors that turned a winner into a sure fire loser here:
Proximity.
With a music download the transaction is somewhat remote. There’s no form of human interaction, and hence no inbuilt embarrassment factor to worry about. If the music buyers had had to hand over their money to a band member (as they had do to a restaurant employee), the result would have most likely been very different.
Costs.
With the music download example, there are no real cost implications to attracting freeloaders and skinflint customers. But in a restaurant, the implications are quite serious because there are considerable product and service costs to be covered. If Radiohead had been committed to delivering a tangible product (rather than a virtual one) they’d have been in serious trouble too.
The reason I have chosen to highlight this, is because I’ve made this sort of mistake on many occasions.
For argument’s sake let's now say that a marketing idea for a product has worked brilliantly, and so I’ve blindly used it with another product in a different market, without giving enough thought as to why it actually worked in the original situation. And naturally it’s bombed.
Whenever I’ve looked at the situation retrospectively, it’s usually been all too obvious that the idea worked in the first situation because of factors that weren’t present in the second. This could easily have been foreseen by anyone humble enough to realise that they don’t know everything, and patient enough to sit down and think everything through carefully first.
But it’s me we’re talking about here…
You see I’m neither patient nor humble in most business scenarios – but at the same time, still very good at making mistakes.
It’s not a great skill to be honest, but I'm here making mistakes so you don't have to.
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