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MASTER OF MANAGEMENT
GADJAH MADA UNIVERSITY




MARKETING MANAGEMENT
DEVELOPING PRICING STRATEGIES AND PROGRAMS
CASE STUDY...
“IN RAINBOWS PRICING STRATEGY”




                          In Rainbows [2007] Radiohead’s 7th Albums [double disc]




 ...
“Assume that there are thousands of potential buyers who are willing to pay for a copy, ranging from $0
to $10, and costs ...
ANALYSIS

There are positive and also negative comment toward this new marketing strategy2 :


      RADIOHEAD RELEASE’S O...
Radiohead, in allowing everyone to pay zero or whatever they please up to £99.99 for the
                     album in mp3...
This anti-marketing strategy adopted by the band in fact makes perfect business sense under
                           cur...
Future demand of the album will be low

                 For                                            Against

  most fa...
Records, CDs or downloads now have all become transformed to the status of promotional
                   tools for the sa...
This strategy helps to band/its future label to evaluate the band's popularity and gives a
                better idea of ...
Internet research group ComScore found that more than 60% of fans pay nothing at all for the
                     album, a...
James Blunt thinks that Radiohead’s approach could undermine the principle that
                        artists should be ...
the self-release of In Rainbows signifies the breaking down of the long established rlationship
                      betw...
RECOMMENDATION

 Setting starting price instead of letting people set zero dollar price.

 Giving additional bonus every...
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Radiohead Priceing In Rainbows

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Transcript of "Radiohead Priceing In Rainbows"

  1. 1. MASTER OF MANAGEMENT GADJAH MADA UNIVERSITY MARKETING MANAGEMENT DEVELOPING PRICING STRATEGIES AND PROGRAMS CASE STUDY : RADIOHEAD – IN RAINBOWS Lecture : Prof. Dr. Basu Swastha Dharmmesta, M.B.A Group 4 Anne Stam [Student Exchange] Febrini Wulandari 08/277511/PEK/12841 Irwan Arfandi Bachtiar 08/277521/PEK/12851
  2. 2. “IN RAINBOWS PRICING STRATEGY” In Rainbows [2007] Radiohead’s 7th Albums [double disc] CASE SUMMARY Radiohead, a super famous band in the world, launched their new name- album, In Rainbows in unusual but attractive way. It is called your-own-price. The procedure is simple, yet unusual, but demanding. Potential buyers are given options to set their own desired price of a copy of album and buy the album in any price which is already being set. At first glance, this strategy seemed to be unprofitable. But if close calculation is lower-price-means- made, this strategy is emerging new jargon, higher-profit.1 1 Data is accessed from http://www.freedom-to-tinker.com/blog/felten/radioheads-low-price-might-mean-higher-profit
  3. 3. “Assume that there are thousands of potential buyers who are willing to pay for a copy, ranging from $0 to $10, and costs for producing a copy is very low. There are few possibilities : 1) Potential buyers will set price as low as possible, even equals to zero dollar. 2) Potential buyers will value price above its intrinsic value and pay more dollars. 3) Potential buyers will value price equally with its intrinsic value and pay required dollars. If points (2) and (3) do happen, the profit are extremely high when the demands keeps growing and growing. If point (1) happen frequently, it will create profit in the future when potential buyers who have bought the album without paying any dollar, become huge fans of Radiohead and afterward, decide to buy every album of Radiohead at any price.” MAIN ISSUES  Pricing strategy.  Its impacts in creating higher profit.  Its impacts in creating more demands. PROBLEM STATEMENT “Is it a good pricing strategy?”
  4. 4. ANALYSIS There are positive and also negative comment toward this new marketing strategy2 : RADIOHEAD RELEASE’S OF “IN RAINBOWS” WILL SIGNIFICANTLY CHANGE THE WHOLE BUSINESS MODEL OF THE MUSIC INDUSTRY For Against the sale strategy results also in positive downloading music for a fixed feebacks from artists amount/free online isn't entirely new as below-par, expensive but unworthy to the music industry music prevails nowadays; notable junior artists sometimes offer free Radiohead's 'free' album is certainly a samplers to attract attention bold action Radiohead, in allowing everyone to pay free from any deal with record label, In zero or whatever they please up to Rainbows proves also an artistic £99.99 for the album in mp3 format, indeed commit commercial suicide success, receivng widespread critical acclaim upon its release with little promotion the self-release of In Rainbows signifies the breaking down of the long established rlationship between big name artists and major recording labels Downloading music for a fixed amount/free online isn't entirely new to the music industry For Against placing a 'pay-as-you-wish' tag over the album doesn't change the nature of 'e- sales' 2 Data is accessed from http://goodpoint.elc.polyu.edu.hk/print_proscon.php?mapid=4899
  5. 5. Radiohead, in allowing everyone to pay zero or whatever they please up to £99.99 for the album in mp3 format, indeed commit commercial suicide For Against it proves only a financial disaster: it can this anti-marketing strategy adopted be imagined that profit from the sale of by the band in fact makes perfect album is significantly harmed by business sense under current situation adopting such a marketing strategy of the music industry Thom Yorke3 Says Pricing Optional Strategy Was 'a One-Off' As word traveled about Radiohead reinventing the music industry with its pricing-optional release of In Rainbows, the band's manager made it a point to clarify that strategy was not a reinvention of the music industry. Now, Thom Yorke says he doesn't see it as a reinvention of Radiohead's plan to distribute music in the future, either. Yorke told Hollywood Reporter that the band will not likely return to the widely-hailed pricing-optional strategy it used to release In Rainbows on subsequent albums. quot;It was a one-off response to a particular situation,quot; he said. quot;It was one of those things where we were in the position of everyone asking us what we were going to do. I don't think it would have the same significance now anyway, if we chose to give something away again. It was a moment in time.quot; However, one aspect of the In Rainbows campaign will remain: quot;We are about that direct relationship (now) because we are big enough to establish that.quot; He's right, of course, and we can't wait to see what they come up with next. The band is currently gearing up for a North American tour, and four years elapsed between Hail to the Thief and In Rainbows. We may have to wait a bit, but all signs indicate that it'll be interesting (as long as the music is as good as what's on In Rainbows).4 3 Thom Yorke is Radiohead’s lead vocalist and also playing guitars. 4 Data accessed on http://blog.wired.com/music/2008/04/thom-yorke-says.html, March 6, 2009.
  6. 6. This anti-marketing strategy adopted by the band in fact makes perfect business sense under current situation of the music industry For Against it can be viewed as the band's strategy such marketing strategy is not to experiment releasing an album in applicable to many other less famous artists this relatively new media: the Internet such free releasing strategy makes it easy for Radiohead to manage distribution the band's vocal Thom Yorke actually offered free download of several remixes of his individual album 'The Eraser' after the release of 'The Eraser'. in nowadays, it is in fact more rewarding for an artist to allow his or her album to be downloaded by anyone at a low price or even for free the band could even benefit from those who ignore the box set and choose to pay nothing to download the album from its online shop this strategy helps to band/its future label to evaluate the band's popularity and gives a better idea of future pricing of any merchandise by the band this novel pay-as-you wish or donation- style sale mechanism in fact draws attention from all over the world to the album, thus helps promote it Such free releasing strategy makes it easy for Radiohead to manage distribution For Against future demand of the album will be low
  7. 7. Future demand of the album will be low For Against most fans would have purchased either the box set or entire album online Such marketing strategy is not applicable to many other less famous artists For Against all the seeming advantage in adoping this novel donation-style style is possible only given Radiohead’s reputation and the size of their fanbase In nowadays, it is in fact more rewarding for an artist to allow his or her album to be downloaded by anyone at a low price or even for free For Against popularizing the album through free download gives audiences a chance to acquaint with the songs-- they may eventually purchase the CD for a better quality the profit from the sale of album is significantly lessened nowadays due to pirate copies and illegal sharing on the internet records, CDs or downloads now have all become transformed to the status of promotional tools for the sale of concert tickets and fan souvenirs
  8. 8. Records, CDs or downloads now have all become transformed to the status of promotional tools for the sale of concert tickets and fan souvenirs For Against The Charlatans gives their new album away as a free download through the XFM website, sold out their latest tour within an hour Prince, who in July gave away his album 3121 for free in the UK through the Daily Mail, has all his 21 tour dates in London subsequently sold out The band could even benefit from those who ignore the box set and choose to pay nothing to download the album from its online shop For Against those who have downloaded the album from the band's online store will become targets for future marketing campaigns Those who have downloaded the album from the band's online store will become targets for future marketing campaigns For Against they are required to register their personal information for downloading the album
  9. 9. This strategy helps to band/its future label to evaluate the band's popularity and gives a better idea of future pricing of any merchandise by the band For Against with the personal information fans registered for the download, the band can schedule its coming year's world tour to maximize the profit from tickets sale such strategy turns the sale of the album into a somewhat moral issue by giving the fans freedom to express honestly how much they are willing to pay for it Radiohead’s live performance during promotion “In Rainbow”, Medison Square Garden, New York, USA It proves only a financial disaster: it can be imagined that profit from the sale of album is significantly harmed by adopting such a marketing strategy For Against it's a common phenomenon: people tend to get things free if they are not asked to pay Internet research group ComScore found that more than 60% of fans pay nothing at all for the album, and the average amount paid was just £2.9
  10. 10. Internet research group ComScore found that more than 60% of fans pay nothing at all for the album, and the average amount paid was just £2.9 For Against without middlemen, and with zero material costs for a download, £2.9 per album would work out to Radiohead’s advantage Without middlemen, and with zero material costs for a download, £2.9 per album would work out to Radiohead’s advantage For Against but there are still costs for the making of the album, regardless of its release medium The sale strategy results also in positive feebacks from artists For Against Alex Turner of the Arctic Monkeys and James Blunt thinks that Radiohead’s David Bowie also show genuine approach could undermine the interest to Radiohead's novel strategy principle that artists should be rewarded for their work John Marr of the Modest Mouse thinks it's fantastic as it puts the responsibility back on people’s own consciences, deals with people as grown ups
  11. 11. James Blunt thinks that Radiohead’s approach could undermine the principle that artists should be rewarded for their work For Against I suppose Radiohead is still well- rewarded even if the 'reward' is in terms of money As below-par, expensive but unworthy music prevails nowadays; notable Radiohead's 'free' album is certainly a bold action For Against you just don't get it why a Twins' album can cost up to a hundred HKD Free from any deal with record label, In Rainbows proves also an artistic success, receivng widespread critical acclaim upon its release with little promotion For Against staying independent from big record deal even Thom Yorke admitted that, allows artist to make their works till it's without any deadline imposed by perfect, and allows them more freedom to a record label deal, artists will find pursue their own materials no motivation to materialize their works the Guardians wrote that In Rainbows quot;represent the strongest collection of songs Radiohead have assembled for a decadequot; In Rainbows is hailed as the band quot;most rapturous, touching, and human recordquot; since their acclaimed OK Computer
  12. 12. the self-release of In Rainbows signifies the breaking down of the long established rlationship between big name artists and major recording labels For Against Radiohead hadn't signed to any major- other famous artists, such as the label in making In Rainbows Eagles, Paul McCartney, Joni Mitchell and Madonna also abandoned major labels and moved to independent labels Can be concluded that : A. Pricing strategy5 This pricing strategy is definitely a good strategy because it gives psychological effect to customers that they are not sacrificing for anything, therefore they got an album, with much lower price but with equal quality. Because of this strategy, both producer and customer have the optimum level of bargaining power without violating each other. B. It impacts in creating higher profit Distributive profit : which means that the higher the customers with vary buying price, the higher the profit margin. Lower price means attracting more costumers, means more revenue, means more profit. C. It impacts in creating higher demands. Cheaper price means more consumers market willing to buy and pay. 5 th Phillip Kotler & Kevin Keller, “Developing Pricing Strategies and Programs”, Marketing Management 13 Edition¸ Prentice Hall.
  13. 13. RECOMMENDATION  Setting starting price instead of letting people set zero dollar price.  Giving additional bonus every time customer set higher price than other customers. - Fin - Radiohead are : Thom Yorke (lead vocal & guitars) Johnny Greenwood (lead guitars, keyboards & others) Colin Greenwood (bass guitar) Ed O’Brien (rhytm guitars & back. Vocals) Phil Selway (drums & percussion)

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