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Paul McCartney, Sting, Elton John and Avril Lavigne – questions about pricing November 14, 2013

Posted by Alan Yu in Music, Pop and Rock.
Tags: Avril Lavigne, Elton John, iTunes, Kisses On the Bottom, Marketing, Music, New, Paul McCartney, Pricing, Sting, The Diving Board, The Last Ship
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As a student of marketing, I am fascinated by how product pricing influences consumer behaviour, and my love of music led me to a search on iTunes over the weekend which prompted me to make a few interesting observations.

I was considering downloading five albums:

New and Kisses On the Bottom by Paul McCartney
The Last Ship by Sting
The Diving Board by Elton John
Avril Lavigne by Avril Lavigne

Paul McCartney, Sting and Elton John have been around for donkey’s years, and I’m excited that they have all released new material recently. Avril Lavigne shot to fame with her début album Let Go when she was only 17 in 2002, having appeared on stage with Shania Twain at only 15. Fresh from her marriage to Nickelback frontman Chad Kroeger in July, she has also released a new studio album. Since I have all her four previous albums, I’m keen to complete the collection.

It’s amazing that even after all these years, Paul McCartney is still able to churn out material that sounds relatively fresh, and his New album has received decent reviews. Kisses On the Bottom is a collection of old songs from the 30s and 40s that McCartney apparently grew up with, but he surprises us with a new song he wrote in the style of the oldies called “My Valentine”, in which Eric Clapton is said to have a hand.

Sting was the lead singer for The Police for many years, until he ventured on the solo path in 1981. His musical detours in recent years include an experiment with the music of English composer John Dowland, who predated baroque composers Henry Purcell and Vivaldi. In 2009, he released a studio album If On A Winter’s Night featuring 14^th century carols and tunes by Bach and Schubert. The Last Ship plumbs the depths of pain felt by those caught up in the demise of the local shipping industry. Yet my favourite is a real softie unrelated to the album’s theme called “Practical Arrangement”.

Avril Lavigne, on the other hand, has gone back to her rock ‘n’ roll roots with an attitude. I love the way she says “…What if you and I/Just put up a middle finger to the sky/Let them know we’re still rock ‘n roll…” in “Rock And Roll” from her latest album.

As I surveyed the albums by iTunes, I discovered that New, The Last Ship and The Diving Board are available in both deluxe and ordinary editions. Typically, the deluxe edition has a few bonus tracks and costs more. Yet, all deluxe editions are not created equal – some are at a higher premium to the ordinary edition than others. If you buy the entire album, deluxe New is 16.7% more expensive, but you do get 16.7% more tracks; similarly, deluxe The Diving Board is 25% more expensive for 26.7% more tracks. The Last Ship is a real bargain, as it gives you close to 42% more tracks, but costs only 25% more, which means that per track the discount is close to 12%.

All five albums offer two download options for both editions: by album or by selective track, with the latter being more expensive per track than the former. If you download the entire deluxe New album, you pay 22.5% less per track, but if you do the same for The Diving Board, the discount is almost 40%. In the ordinary edition, the discount in the album rather than by track download is steepest for Kisses On the Bottom – a whopping 61.3%; New and The Last Ship offer the smallest discount of 22.5%. Individual track downloads cost US$1.29 each, standard across all albums and editions.

Assuming you download the entire album, New is most expensive among the deluxe editions,, at US$1 per track, whereas The Last Ship is the cheapest, at US$0.79 only, as the latter has 19 tracks compared with the former’s 14, or almost 36% more. Does this mean Paul McCartney is able to command a higher price than Sting? Not really, as in the ordinary edition, Kisses On the Bottom is half of the price of New per track, but Sting is the next cheapest, at US$0.80.

If you look at the total amount of cash you have to fork out to download the albums, Kisses On The Bottom will set you back only US$7.99, but New, The Last Ship and The Diving Board cost a standard $11.99; Avril Lavigne is in between at US$10.99.

If you’re interested in the detailed comparisons, the following table gives you a snapshot:

The above comparison touches on many questions we often come across in pricing a product:

How much should we charge for a product – what is the cash outlay we believe a consumer is prepared to pay for it? Why does Paul McCartney charge a lot more for New than for Kisses On the Bottom? Why are Paul McCartney’s New, Sting’s The Last Ship and Elton John’s The Diving Board more expensive than Avril Lavigne’s eponymous work?

How many variants should we offer, and what sort of discount or premium should we charge for one versus another? Why does Avril Lavigne not offer a deluxe edition of her album, nor does Paul McCartney his Kisses On the Bottom?

Does our brand deserve a premium against another brand, or can do we need to sell ours at a discount? Why is Avril Lavigne’s album 8% cheaper than any of the others, but contains more tracks than some and less than others?

If we offer different sizes of a product how much more should we charge for the larger volume version? Can the incremental cost justify the incremental value? Should we offer a discount for the larger volume, and per unit of measure how big should the discount be? Why does Sting offer a bigger discount per track for the album download than Elton John? And why does Paul McCartney charge the same per track for both the deluxe and ordinary editions of New, irrespective of whether you download only a few tracks of the entire album?

In the end I downloaded the entire Kisses On the Bottom, The Last Ship and Avril Lavigne albums. It didn’t make sense to download a few tracks at a substantial premium, as I have a predilection for owning full albums anyway. I previewed New and The Diving Board and withheld purchase – I wanted to think more about whether I should pay 50% more for New than for Kisses On the Bottom. All my downloads were of the ordinary editions, as I didn’t believe the bonus tracks in the deluxe editions justified the additional spend. In other words, I didn’t believe the incremental value I would derive from the additional tracks was commensurate with the incremental outlay. I didn’t buy all five albums as the three I did buy cost US$31, about the amount I was comfortable spending that day.

I have now finished listening to all the albums I bought, and am very happy with my purchases. It’ll be interesting to see whether, in time, I decide to buy New and The Diving Board as well.

The links below will take you to the iTune pages for the various albums mentioned in this post:

Paul McCartney New