Pimp Your Music Business Plan – Pricing Strategy 101

What is the price of your music?

There comes a time after recording your album that you may actually want to sell it. It’s part of the Music Business Plan, dude! What? Do you logically assume everybody wants to sell their music? That’s so not true! Here’s why.

Your Music Is Your Product

You may already know that in order to launch a new product, you need to develop certain strategies. So just as there is a strategy for creating new products, marketing, distribution, etc., there is also a strategy for the pricing of a product. It’s Business 101.

Think of your music as a product/service you’re offering. What would you price it at? Would you just go with the standard pricing you see on iTunes, Amazon and Co? Most musicians do. But here’s a thought, why don’t you just ask your fans to buy your music at whatever price they feel like paying?

Sunk Costs You Can’t Take Back

What’s the reasoning behind this you may ask? Well, when I wrote my bachelor’s thesis on the subject of Pricing Strategy and Customer Segmentation for an Alternative Rock Band, I figured that the costs associated with creating the album are actually sunk costs.

Sunk costs are past costs that have been incurred that cannot be undone. They shouldn’t affect your rational decision-making process. For example, you pay for a day of studio time and record a song that was a total flop. It’s not a cost you can take back. It’s a sunk cost. Also you were probably going to spend that money on recording it anyway, we’re just that picky about our sound, aren’t we?! Perfectionism!

The Real Cost Of Your Music

So if we don’t consider these costs in creating our pricing strategy, then what fixed cost does our album have? Well, I’m glad you asked. If we’re targeting online sales, then our costs amount to… let me do the math… x2+2x+4, y=x^0, f(x)… bla bla bla. Your album costs zero, nada, and that’s the end of it. You may argue that you spent I don’t know what on this and that, but truth is, those are sunk costs, my friend, deal with it.

If you want to sell physical albums on the other hand, then you will have a different cost structure, that’s for sure. But that is beyond the scope of this post. Maybe I’ll write about this in the future, just maybe… Ok, in a future post it is.

Now going back to our online example, how much does it cost to replicate an mp3-file? You must be thinking I’m kidding you. Well, I’m not. You just go copy, then paste, and boom; you have replicated your album in a matter of seconds and without any additional costs.

Charging Nothing Is Ok

So, according to economic theory, our album didn’t cost us a dime (although we did pay for the damn thing), and the replication doesn’t cost you anything either. Then what price can you charge? Well, try anything you want.

There you have it, you can charge whatever you feel like, because you will be making a profit at any price above zero. So this might actually be an incentive for you to give your music away for free online. Remember, you are breaking even anyway.

Stay tuned for future posts on pricing strategy! We will get to know other cost structures, and see why a lot of musicians fail to create something compelling for their fans.

What would you charge for your music? See you in the comments.

If you liked the post, please share it below and make sure to subscribe to the feed.