Coin a Phrase: The “Downsell”

We all know about the upsell: Mass Merchants, etc. lure you into their store with a low-cost item (too often, CDs) in the hopes that you leave with some high-margin item like a washing machine.

The “Downsell” is different. As I’ve discussed, the music business is now the merch business, and the way to go is to create a vast and sometimes over-the-top (like the awesome Josh Freese campaign) product array with some big-ticket (and high-margin) items that create awareness and drive people to the artist’s Site.

The reality, of course, is that most customers will look at the big-ticket item, but won’t buy. The psychology is sort of interesting. A customer is made aware of the site via the big-ticket item (Mr. Freese got a bit of press about his campaign, if you recall), looks at it, but can’t afford it/doesn’t want to spend so much. However, all of a sudden a CD/download priced at $10 seems like a bargain when compared with the big-ticket item priced in the hundreds (or thousands) of dollars.

It’s what economists call “the importance of being unimportant.”

The good news, of course, is that in addition to (for the time being, until everyone does this) creating awareness and driving traffic to an artist’s site, these big-ticket items have a high margin; you don’t have to sell too many of them to make material $. All the while, the majority of people who can’t/won’t pay for the big ticket item now are not only aware of the core product (the CD/download), but are predisposed to buy something because it appears to be a bargain.

Hence, the “Downsell.”

We’re doing this with Carly Simon’s new CD, and it’s working. It ain’t perfect, and we’ve got a long way to go (and it very much is an effort in refining), but the proof of concept is there.

It’s so important to think this way. The whole notion of just selling a CD/download is increasingly quaint (remember, the music business is the merch business).

Also, it’s crucial to not leave money on the table with respect to your core fans. The people — whether it’s 100 or 10,000 — who will buy whatever you throw at them, should not just be thrown a CD/download.

Doing so leaves a fortune on the table.

If you’re a true fan, and your favorite artist presents you with an offering that is personal/deluxe/etc., you’re not going to think twice about paying more for it. Yet, too often we as content providers don’t give these fans the opportunity to pay more.

As my three-year old says just before being chastised for doing so: “Stupid.”

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  1. aaronjl1’s avatar

    I like where this is going… and i opted for the CD/MP3 combo pack from NIN when did this. And from what I've researched they faired extremely well with their big ticket items as well. The question I have is what is the net profit of such tactics? As with NIN I presume, that the production was quite costly, so I'm wondering – despite the apparent success of the project – how things would have compared in terms of net profit if a label would have handled things?
    Second point… have you seen how Pearl Jam did things with Backspacer? Just by buying the CD, exclusively available at target, or by download online… you're offered a world options via a special website… one of which includes the choice of 2 live concert downloads from a list of about 20. For a $10 purchase… I got over 5 hours of music… plus I had a good time on the “special” website. It was probably the best experience I've ever from a CD purchase.

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  2. George Howard’s avatar

    as for margins, they can be very good. remember, what people want more than anything is something personal/scarce. so, there's really no cost for an artist to sign a limited number of something, but the cost of this (and thus the margin) is massive.

    I deeply encourage artists/managers to think this way, particularly when starting out, and unsure of the number items you might actually sell. That is: stay out of the manu business. Try to find special/unique/personal/scarce things that can be done without having to contract out for manufacturing. Everything from private gigs to hand-made stuff works.

    I will not speak about Pearl Jam; that Target fucking abomination (and I'm speaking of the “grunge” Target logo at the end of the commercial; it's like, “OK sell your fucking records with Target – couple hundred thousand at $6 or so a unit, one-way, gotcha. but, you know, part of the quid pro quo was them (Target) getting to throw their jive ass “grunge version” of their logo back behind the band while they played, AND THE BAND AGREED! – c'mon) was so shameful and unaligned with their purported “values” that I can never again listen to their music (not like I listened to it much before), and certainly want to expend no further thoughts on them than I just have.

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  3. aaronjl1’s avatar

    So I was similarly enraged when I saw the commercial, but like you said in the article… i'm one of those people who will buy anything they put out… so, begrudgingly, i picked it up. and it was a pretty terrible album at that. but pj, target, and all that other crap aside… remove all the labels from the scenario and look at it from afar:

    band x ploys me into buying a horrible album. i hate it. but they provided me with the most innovative and interactive options i've ever seen. with the options i am able to get everything i ever wanted from them. so despite a moral conflict and in spite of a poor product, i'm left felling rewarded… the overall value proposition held up (i give you $… you give me something in return.. i'm left satisfied) only because i was able to shape the experience on my terms (due to downselling quotient). conversely, say the transaction would have occurred on some tiered system, and that i would have paid any sum of money from $.01 to $100000 for a limited edition vinyl, signed poster, and a chance to shave the lead singer's head… i would have been pissed if the main product sucked… because i was unable to negotiate the experience on my terms. i realize that i may be splitting hairs, but i feel that the degree of choice and interactivity you have in a transaction determines value and quality… not so much exclusivity and availability/accessibility… and perhaps including these options on the front and back end of the transaction is the way to go.

    what i'm getting at, and what i think we both can agree on is that when looking at a transaction… the validation of the inherent value proposition is key… and that it's necessary that we turn things on its head.

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  4. Lhasa Tours’s avatar

    That Sounds interesting, I agree with you.Please keep at your good work, I would come back often.*

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  5. ChristopherGWard’s avatar

    100% agree with this approach for 2009, maybe 2010. The Freese offer worked because he did it first and it was novel. I'm wondering how long it is before fans start recognizing the 'downsell' as another online loss-leader tactic. “Oh another musician wants to come party at my house and buy me dinner in Cabo.” Good news is I think we have awhile before the masses catch on ;> Staying ahead of the product curve is what makes the online space interesting to me as a musician.

    – Christopher

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  6. George Howard’s avatar

    Thanks for this! It's discourse like this that makes me keep the blog going. I really appreciate it.

    best,

    George

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  7. George Howard’s avatar

    Yeah, it won't work forever (I qualified that it was working for the time being). I agree that there's still time. More importantly, it's the attitude of innovation that raises the possibility that we'll be at the leading edge of whatever is next; if not defining it.

    Thanks for the comment.

    best,

    George

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  8. aaronjl1’s avatar

    I'm definitely interested in (deconstructing) the idea of the value proposition. I feel that much, too much emphasis is currently being placed on the recreating the economics of the “transaction” while much too little is being place on the psycho-social aspects of the “transaction.” I think it's necessary to reverse this construct in order to truly harness the power of social media. Interaction is the the variable which transforms perception into conception. In essence, the objective qualities of a product may factor very little in terms of the consumer's final construct it he is able to form a collective identity between himself, the producer, and the market (conditions). But that's nothing new… it's just finding a new way to go about it.

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  9. Lhasa Tours’s avatar

    That Sounds interesting, I agree with you.Please keep at your good work, I would come back often.*

    Reply

  10. mikeking’s avatar

    Nice summary. I think there are a couple of other interesting parts to this:

    1. Selling direct provides artists with the ability to provide their fans with something traditional retail cannot.
    2. I like the concept of the “downsell.” I think it's also important to think about how you can incentivise fans upward (upsell) towards higher priced bundles with specific bundles using direct to fan. For example, if you were bundling video in with physical goods, make the highest quality video only available with a high end bundle that might include other physical goods.
    3. It's crucial to include physical goods into your overall campaign, or as you say, you are leaving money on the table. Many fans still want a physical item.

    Mike

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  11. Mathew Bodie’s avatar

    The best strategy for the “Downsell” seems to be ensuring that the high dollar attractive product is as intangible as possible. Most of Josh Freese's high-dollar items were ludicrous (but brilliant) services, and not much in the way of requiring overhead. This was the mistake of Radiohead's In Rainbows “Box.”

    The intangible asset that most fans want from a band is access, which rarely costs a dime.

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