Small business pricing; The metrics behind Radiohead's marketing move

The numbers behind Radiohead's creative marketing approach to its pricing are in, and they're not encouraging. You'll recall that Radiohead adopted a "pay whatever you want" approach to its recently released album. Because the English band lacked a major record label, it decided to deliver its album on its own website and asked each consumer to pay what they wanted. What were the results?

According to data released by comSscore inc., of those consumers who downloaded the album:

• 62% paid nothing
• 17% paid less than $4
• 6% paid $4-$8
• 12% paid $8-$12 and
• 4% paid more than $12.

Disappointing to say the least if you're an artist contemplating doing this. A clear majority got something for nothing and 85% of all consumers paid less than $8. Clearly, given the chance to pay what they'd like, consumers will take this opportunity to pay less than the stated price.

There's an important lesson for small business marketing here: Arrive at your prices after a thorough analysis of your margins and your competitors' pricing, then assertively defend your price by explaining all the value in your offering. If you don't, buyers will immediately challenge your prices and expect a pricing concession. This kind of aggressive pricing negotiation will only become more common as record labels train the public to pay less than market value.

If you'd like to learn more about small business pricing, read my recently published article "4 Ways to Market and Sell your Services with Price" over at the RainToday.com site or subscribe to my Marketing Tips and Tools e-newsletter.