In 2007, ‘music-to-slit-your-wrists-to’ exponents, Radiohead, carried out a massive marketing experiment. They released their latest album via Internet download – but with a twist… 

Buyers were invited to pay as much or as little as they liked for the album. They were asked to pay what they thought it was worth. 

There seems to be a fair amount of controversy over the results, but the best estimate I can come up with is that about 1.2 million people downloaded the album, 62% paid nothing at all, and the average price paid was around $6. 

Given that their product cost was virtually nothing (although there would have been administrative costs) and they didn’t have to share the money with distributors, record companies or retailers, that surely must go down as a big success…Even though only 38% of customers paid anything at all. 

Fast forward to last week, and I heard about another marketing experiment along similar lines – but with a very different outcome. 

A restaurant in London attempted pretty much the same thing. There were no prices on the menu, and diners were invited to pay what they thought the meal was worth. Customers hated the whole concept, and spent the entire meal worrying about how much they should pay. They were fearful of paying too little, and looking mean ~ or too much, and looking stupid. Nobody wanted to go back. 

This is a classic case of taking a marketing idea from one environment and dumping it in another, without thinking through how the new environment will impact on the effectiveness of the technique. It’s worth looking at the two factors that turned a winner into a loser here: 

1.  Proximity. With a music download, the transaction
     is remote. There’s no human interaction, and hence no
     embarrassment factor. If buyers had to hand over the
     money to a band member (as they do to a restaurant
     employee), the result would have been very different. 

2.  Costs. With the music download, there are no cost
     implications to attracting freeloaders and skinflint
     customers. In a restaurant, the implications are serious
     because there’s considerable product and service costs to
     cover. If Radiohead were committed to delivering a
     tangible product (rather than a virtual one) they’d have
     been in serious trouble.

I’ve made this sort of mistake on many occasions. A marketing idea has worked brilliantly, and so I’ve blindly used it with another product or market, without giving enough thought to why it actually worked in the original situation. And it’s bombed.

When I’ve looked at the situation retrospectively, it’s usually been obvious that the idea worked in the first situation because of factors that weren’t present in the second. This could easily have been foreseen by anyone humble enough to realise that they don’t know everything, and patient enough to sit down and think everything through carefully first. But it’s me we’re talking about here… 

Neither patient nor humble – but very good at making mistakes. It’s not a great skill. 

 John Harrison

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