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Radiohead's Price Strategy Signals Changes for Direct Sales?


<p>Heavy coverage today on BBC and <a href="http://news.bostonherald.com/entertainment/music/general/view.bg?articleid=1037010">other sources</a> of <strong>Radiohead's</strong> decision to let fans pick a price for their latest album, available online. </p> <p>It's a good example of direct sales. The band are not signed to a record label. They have creative freedom, and an army of loyal fans (and some lapsed fans, like me). So they can market directly to their customer base. </p> <p>This strategy exhibits many of the classic points of the "9P" model of direct sales. They have <strong>Permission</strong> - no record company to upset, no channel to undercut (although predictably the established industry and channel is quick to criticise). <strong>Promotion</strong> is taken care of through emails to the fanbase (plus lots of bonus PR). The <strong>Proposition</strong> is right: It's a pre-release strategy. You can buy before it's in available in the shops, but not after. And the <strong>Price</strong> is based on what their fans would pay - probably between $5 - $10, as that is less than a shop of itunes bought album, but enough to feel that you are funding the band's craft. It's the ultimate test of value.</p> <p>It will be interesting to see if it's judged a success - I'm sure it will, but partly because it's the first. It may eventually erode price of music to a sensible level (hurrah!). </p> <p>Of course, Radiohead have some limit to their risk. Marginal costs are low as downloads cost little to process. But can the consumer electronics industry learn anything here? </p> <p>Suggested learnings:</p> <ul> <li>Pre-release strategy to minimise damage to channel relationships: Product available online first, then closed at certain date - this helps predict eventual channel sales. <li>Special product not available anywhere else - there is something special in the purchase. or real fans, they will see this as an extra bonus. They will buy the shop item anyway, <li>Available to fans only (keeps the brand special) - shows value of CRM strategy <li>Price set by fans - will work if in a limited edition run of a product. A premium price may even be established. Radiohead also offer a full-fat $40 version with CDs and artwork (probably the biggest source of profit here). </li></ul> <p>Apply these lessons to your business with boldness like Radiohead, or contact us at <a href="http://www.directness.net/"><strong>Directness</strong> </a>for some more help on your direct sales strategy. </p> <p></p></li></li></li>

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