Street Performer Explains His Experience Connecting With Fans, Giving Them A Reason To Buy

from the experiments-in-progress dept

Onyx Ashanti, a street musician ("busker") who has apparently been reading Techdirt for some time, has been trying to put some of what we discuss here into practice, looking for better ways to connect with fans, while also providing them something worthwhile to buy (noting that "tips" aren't a very good business). He recently alerted us to a blog post he wrote detailing the results of some of the experiments, which appear to be ongoing. He's tried a few different things, even trying to set up a WiFi connection where he's performing to let people download music (didn't work, as it was too confusing) or giving them flyers with a code to download (again, not very effective). He did realize that performing directly on the street enabled him to connect and build up a mailing list, but what could he give as the "reason to buy." He settled on a CD, but with cool (homemade) origami packaging. But he still wasn't sure on the pricing. He tried $10 -- which was decent. He then dropped the price to $5, which actually caused him to sell fewer CDs. But then he tried the model Dave Allen has suggested for merch: pay what you want, and found it worked wonders. He ended up making a lot more more money, though it helped that he explained the whole thing clearly on a sign. Allen, too, has mentioned that it all depends in how you explain the offering.

I've said before that I'm not necessarily a fan of "pay what you want" pricing schemes, but I'm beginning to think there may be areas where they do make sense. The success stories of bands using it for merch over and over again are making me wonder what factors make "pay what you want" work. Any thoughts?

Either way, I'll be curious to find out more from Onyx as he continues to experiment.

Filed Under: cwf, onyx ashanti, rtb

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  1. icon
    Derek Kerton (profile), 19 Aug 2009 @ 2:50pm

    Capturing the Consumer Surplus

    Pay What You Want (PWYW) can often work as a model, and sometimes might even be the best model. Although, I agree with Mike that it comes with its own risks when costs lurk.

    The best argument for PWYW is that the busker employs three similar strategies that are good to a business' top line:

    - yield management
    - capture consumer surplus
    - price discrimination.

    Each of these three are good econ and biz buzzwords for much the same idea: getting each customer to pay as much as he is willing to pay (WTP).

    If you set the price at $20/CD, few would pay it so revenues would be low. If you set it at $1, many would pay it, but you may even lose money if your costs are >1. If you set it at $5, you may get many customers, but not get the margins of the $20 price. If you set PWYW, you might get paid $20 from the customers WTP $20, $5 from those willing to pay $5, and hopefully you won't find too many people who think your CD is only worth $1.

    See this chart showing consumer surplus in red:

    As a busker, you are face to face with your customers, so humans are much less likely to bilk you than some faceless corporation, or some distant internaut. Most people will actually pay you. That's good. Better still, they will pay a price between what they think is fair (at least cost), and biased by the amount THEY think the CD is worth. The fact that their price estimates are anchored* by both the retail price of a CD and their WTP amount works in favor of the busker.

    If you are selling something that is largely an infinitely reproducible good, you're in great shape. It's not like you're going to run out, and if you make money on every unit, volume is your next goal.

    *See here for "anchor point" info:

    The risk is when a PWYW model is applied to a product with significant costs of production, such as a major concert. There is a possibility that fans will pay nothing. That leaves the artist in the red for all the costs of the event. This may be rare, but it IS a risk.

    Consider the case of a PWYW concert, where the donations were requested upon exit. What if the lead singer has a cold and a lousy voice, the amps blow a fuse, and the power goes out in the first set. This kind of thing can happen. What would people pay?

    Remember Dave Chappelle's free gig in Portland? He kept his costs low and price free, but what *would* people have paid on exit for a show like that. My point is, a terrible show can happen sometimes, and the artist could end up losing money.

    If a busker has a PWYW CD pricing scheme, and the CDs cost $3 each to make (including time, disk, origami, all costs), then there is a risk that the PWYW customers will pay below $3. This situation is particularly bad for the artist, because if there is a high volume of sales, the artist loses MORE!

    Costs (variable costs in particular) are the nemesis of PWYW ideas. If the costs are negligible, then PWYW can't hurt as an experiment.

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