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Pay What you Want- A case study of Radiohead

Updated: Oct 8, 2020

Be wherever you’re, in NYC or the City of London or the streets of Paris, you’ll see someone singing, with their musical instrument and a hat in front of them. A hat for collecting money. Well, that’s exactly where the Pay What You Want strategy starts. Whether you like the singer's song or you were mesmerized by it, or completely hated it, whatever rating you give, you can drop in a $1 coin or $100 crisp note. It’s pay what you like depending on how that singer made your day.

But is it only limited to street singers trying to find their voice? Well, the case study of rock groups Radiohead and Wheatus say otherwise. Both the groups have released albums in the past for which they charged the fans only what they wanted.

Although released in October 2007, when the drop-down menu of downloading the album for free came, Radiohead’s fans jumped at the opportunity and according to Rolling stones Magazine, more people had downloaded the album for free than they had paid for it, but it had still generated $3m in sales. The deed was risky no doubt, but it was highly innovative and it managed to create a buzz in the media when the band decided to release the album ‘In Rainbows’ exclusively on their website.

About 1.2 million fans had visited the website in the first 29 days itself.

Seeing it from a Record label’s point of view, if Radiohead would have sold their album through the original path, the price would have been $14.99 and out of which Radiohead would have received only 15% of the total that is $2.25.

Yes, iTunes was there as a streaming platform, but there share through them would have been even lesser which is up to $1.40.

What was the result of them putting for free on their website? 38% of the people who downloaded the album paid an average of about $6.2 and 62% downloaded it for free which makes their average $2.26 across everyone who downloaded the album. Their profit margin also increased since there were no middlemen. They also mentioned that they had made more money as compared to their past albums put together.

Well, this was the result with Radiohead who was already charting on the world’s popular chart records and had a loyal fan base. But they also got to use one more famous psychological marketing tactic and that was FOMO. Fear of missing out is created when there is a sense of urgency and the brand invites its audience to avail the offer or a limited period. Radiohead, used the same tactic and rolled out the album for a limited period on their exclusive website. Also, they did not replicate the same strategy for their other subsequent albums.

Well, the obvious part of it was that even if Radiohead would have made less money through this, it won't have affected them as much. Which brings us to the question that can others apply this tactic to their marketing strategy?

Well as always, a business school professor says, it depends.

The pay what you want strategy fits well for a low-cost item and certainly not for a luxury one. Imagine carrying Gucci Bags at just $1 that too because you felt pity on the shopkeeper. There have been other cases like this.

Once football also got a chance to dip its toe into the PWYW strategy. National league North side Gloucester AFC have played several games in the past for the fans who only pay what they feel was entertaining to them. And for this case as well, the club ended up making more money as usual.

But it becomes somewhat difficult for a business that is not known to gather the money based on this strategy. You will be able to garner more attention and click on your website, but what's the result, depends all on who is your consumer and what is the value that you're providing them.

At the very end, it's your call to decide what strategy would you like to opt for but do it with extra care, you have to weigh all the odds and the factors, including the timing, what is the offer and what is its extent at which you’re offering and who is your target consumer? Once you apply it then don’t forget to measure the outcomes closely. After all it’s a business that you’re running even if it’s to put a smile on people’s s face.

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