The first two posts in this series outlined how to define your overall goals as well as determining what your product will be.
This post covers how to price your product.
To review:
Product – What are you going to sell?
Price – How much are you going to sell it for?
Place – Where are you going to sell it?
Promotion – How are you going to get the word out?
History
Price has changed drastically over the last 10 years for the music industry. Records used to sell millions of copies at $15 (or more) a pop, and 360° record deals were far less popular.
Musicians didn’t have as much power before as they do today. The dream of being signed to a big label and making millions was most often the quickest (and hardest) way to riches. Artists “doing their own thing” were few and far between, and for the most part, musicians were at the mercy of “big business” to make their fortunes (if that was their goal).
The world has changed.
Today, musicians have more power than ever. Companies now exist to let artists do much of the work they used to hire people to do themselves… if they choose that path. On top of the resources available, our lives as consumers have fragmented. Our attention spans have shortened and we expect the companies we do business with, including our favorite artists, to slice and dice their content and make it available where we want it, when we want it.
How Does This Affect My Prices?
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Photo provided under a Creative Commons license by marie-ll
Photo provided under a Creative Commons license by marie-ll
I’m going to go ahead and say that every business struggles with how to price their products.
A number of factors going into determining your price, and these factors can fluctuate, sometimes making pricing feel like trying to kill a pesky mosquito - chasing the annoying thing around the room, numerous close calls and escapes, and a rush of satisfaction when you finally nail it.
On top of outside influences from the market, there are many different pricing strategies to choose from, each with their own pros and cons.
What Is My Price?
I’ll stop sounding like a textbook, and instead give you two good questions to ask yourself when trying to decide “how much will I sell my products for?”:
- What do these products or services cost me to produce?
- What are the typical market rates for similar products or services?
A good place to start determining your price(s) is to take your answers from the “What is My Product” post and separate your answers into categories. I’ve taken the answers from our live hip hop band and done exactly that below:
Q: What do I pay money for now, music-wise?
A: Music, t-shirts/schwag, concert to tickets, limited/deluxe edition CD’s.
Q: What do I want to buy, but currently can’t, from my favorite bands?
A: Recording session, face-to-face interviews, concert tickets
Q: How can I add value to my fan’s lives?
A: Music lessons, recording sessions, meet-and-greets, online connections, charity events
Q: What makes me different?
A: Female band, themed shows
Q: Out of the answers above, which ones can I make money from?
A: My music, concert tickets, t-shirts/schwag, Limited Edition/Deluxe CD’s, auction off signed merch.
As you can see, a few patterns emerge. Our hip hop band sees their major revenue streams coming from:
- Selling their music
- Putting out Limited Edition/Deluxe CD’s
- Performing concerts
- Selling merch
- Selling their time and teaching lessons
- Selling their time and helping artists record
Now it’s time to apply those two questions above:
- What do these products or services cost me to produce?
- What are the typical market rates for similar products or services?
We asked these questions for merch as an example.
Q: What do these products or services cost me to produce?
A: For merch, we want to sell t-shirts, baseball caps and stickers. We’ll hire a designer to design each item, then send the designs off to the printing shop for creation. They’ll then be shipped to the final destination, which will vary per show.
We’ll have to pay the following costs: design costs, print costs, shipping costs and possibly storage costs.
Q: What are the typical market rates for similar products or services?
A: T-shirts typically retail for anywhere between $15-30. Baseball caps sell for $30-40. The stickers will come in different sizes, and be sold for anywhere between $5-7.50.
Now comes the math. You need to figure out what your total costs will be, and compare them to what the current prices are for similar items.
Before coming to your final number, or thinking this is all hopeless because your costs are larger than what people tend to buy the products for, consider a few points:
Quantity is a factor – Make sure to talk to the company doing your production work about price breaks for ordering higher quantities. Sometimes this is applicable (like with the stickers), and sometimes it’s not. Make sure to ask in any case, especially if this is new to you.
Demand is a factor – If there is a lot of demand for your items, either because everyone wants to have one and they’re willing to buy one, or everyone wants to have one and the item is scarce, you may be able to charge above the market price for that item – leaving more money in your pocket than normal. Keep an accurate log of how much your items are selling and how quickly and you’ll be able to more easily spot these trends.
Notes
I’m by no means a pricing expert, and within the music industry (well, the record industry actually), pricing is especially hard as the cost of the item and the amount people are willing to pay (these days, sometimes $0) may be drastically different.
It never hurts to ask around. What are similar artists doing? How are they pricing their products? Do you see things they’re doing right or wrong (in your opinion)?? Learn from the people around you and don’t be afraid to ask questions!
Here are some resources, some academic, and some just information that may be good to know when you’re reading this series:
- New Hope for Monthly Music Subscriptions
- The Global Decline of P2P
- USB Uzi’s – The “New Hot Thing”??
- Artist-Specific Social Networks
Have something to say? A story to share about how you figured out how to price your work or time? Leave them in the comments!
Next up… “Place – It’s More Than MySpace”