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Wednesday
May042011

Generate Demand for Your Music By Rightly Using A Loss Leader

A general rule of commerce is this: You cannot demand money until you have generated demand, or at the very least, the perception of demand. And a sure way to generate demand is by using a loss leader. 

Your music is your business. And in business, in order to spike sales and increase the bottom line, you have to pick and put into play a loss leader. A loss leader is a part of your whole product offering that you will lose money on (or not make money on) in order to get potential customers through the door. Once they are in, their experience with your “brand” should cause them to buy other products you also offer as well as become repeat customers. This adds to your bottom line. This is what a loss leader does. 

In our industry, there’s been a great deal of debate regarding the giving away of music for free. Many emerging acts have opted to give away their entire body of work for free through services like Bandcamp (with some using the pay-what-you-want or donate option). Most of us do this in hopes that it will generate more demand for our music and that, eventually, we’d get paid somehow. Whatever we decide to do, I think it’s important that we understand how a loss leader works and how to rightly choose one. We should make decisions with a clear understanding of a matter and not because it’s trending or something everyone is doing. Think for yourself. Think objectively. Because if we don’t, we wont have a sustainable career in music. Here are some thoughts for your consideration. Please eat the fish and spit out the bones. 

The loss leader should only be a part of your entire offering. This is common sense. There’s an old adage: Business is common sense. If you give everything away for free or if you lose money on everything, you wont have a business. You cannot build a business nor can you sustain a business that way. You risk devaluing yourself when you give everything away. It’s a serious risk. Also consider that the only way that you can succeed these days is by standing out. People share things they’re excited about. And their perception of you is what drives that excitement. It’s not just your music. It’s an idea about you that they have to buy into. And when you give everything away, you set up for yourself two public perceptions that will hurt you:

1. You look like you’re not worth anything and desperate for attention. This is not romantic for the music lover/buyer. This doesn’t make you stand out. They want to buy into something cool, not something perceived as worthless and desperate. Giving away everything for free says on a subconscious level that no one wants you. 

2. You look like you don’t have much demand at all. Hence, you’re giving everything away. This doesn’t help generate demand because it doesn’t excite people. People are excited about things they think others are excited about (or even the possibility that others are excited about it). You need to look like you have some demand while generating demand. Giving away everything for free doesn’t help that at all. 

Making your entire product offering a loss leader can only lead to one thing - devaluation. And devaluation leads to demise. However, when your loss leader is only a part of your entire offering, it simply says to potential customers that you want them to give you a try without creating the perception that you are worthless, unwanted, and desperate. You can build a business on that.  Remember that the point of a loss leader isn’t to lose money, but to gain money through controlled loss.  Try offering a song or two in exchange for an email address. I recommend using ReverbNation, who recently added a “join with Facebook” feature to their download-for-email widget (which actually boost sign-ups and get you more useful data of those who sign up).  You may not sell your other songs at first, but that’s not the point. The point is to maintain a certain positive perception while you’re working to generate demand. Be patient and keep working. 

The loss leader has to be worth it to potential customers. This goes without saying. Give away something good and valuable. Don’t pull a fast one on potential customers. It may seem counter-intuitive to let go of what you think is your best song. But, it’ll challenge you to create other amazing songs they’ll want to get. Plus, in my experience, they usually find something else as their favorite that you have. 

The loss leader always exists, but is never constant. In retail, there is always a special sale. There are discounts throughout the year, but under different names/campaigns. Consider this effective approach. What it does is maintain excitement, which is key to generating demand. They also rotate products as the loss leader. I used to work for a large jewelry store chain. The sales ran into each other and each one would offer a different inexpensive piece of jewelry as the center of that sales campaign. They didn’t really make money on these pieces, but they almost always sell more things to the client. If nothing, they’ll have repeat customers for their stores and deepened market share. Try having a special name for the duration of time you are offering a certain song for free download, like a campaign. Or, try offering the old album for free right before you offer the new album for sale. This is done in retail all the time and it works. 

Lastly, the loss leader needs to bring potential customers into a brand experience. For stores, the point of a loss leader is to get customers through the door, where they’ll end up buying more products and come back because they enjoyed their experience. For music, the point of a loss leader is to get people to experience you personally so you can build a connection with them, after which they’ll begin to buy your music and actually pay to see you play. This is debatable. But, aside from giving a song or two for free in exchange for an email online, I think that doing free shows is the most effective loss leader for emerging artists. The reason being is that people are brought into a real world experience with you. And nothing generates demand for music better than real world engagement. Everyone’s online! So, to stand out, do something special in the real world. It seems to me that in this new music era, we’ll be forced to revert back to the old days when acts have to work hard and build a real-world following in order to have a sustainable and influential career. 

It goes without saying that you need to open for other acts for free as you are starting out. Play everywhere you can, but only in a specific market (city/region). But not too much as to become common. Remember, you must maintain excitement for your music. Once you’ve built a following and generated enough demand for your music, you’ll find more people willing to pay for your music and to see you perform. 

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Minh is an artist, producer, and entrepreneur based in the DC area. His official site is www.reachminh.com

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Reader Comments (8)

This is an excellent article. Extremely insightful, and I will definitely agree with what you have said. Well written. Well said!

May 4 | Unregistered CommenterM.E.

Great article!! I will definitely try this out when releasing my next album.

I'm deeply skeptical of using live performance as a loss leader, at least in the sense of making the shows free to the fans. Remember, live performance is just about the only situation where we can exclude the non-payers. It could work pretty well when fans had to pay for the recordings they wanted. These days, as soon as you've got enough traction to attract piracy, you'll be giving away your only true sellable product.

However, there's a different form of loss-leading live performance that might make sense. It is when you are playing an unpaid supporting slot to an established artist in the same genre.

It's a loss leader, since you aren't getting paid, but it helps you reach a much wider audience than you could have typically attracted yourself. It's worth noting here that "established" need not mean "superstar level", even a top band in your local scene that is regularly selling out shows is a good act to support. If you can get a slot with a touring band when they come to your hometown, so much the better.

The other thing to bear in mind is that price isn't really that much of a factor in demand for underground shows. The tickets are generally cheap enough not to pose a great burden. The bigger challenge is convincing someone to actually take the time to come to your show. For that to happen, they must first have heard about you and heard good stuff, too.

May 4 | Unregistered CommenterFaza (TCM)

The "loss leader" is a healthy and clever practice and I think intention has the power to make it work. I think if you make this practice part of your way because you understand that giving is how you'll be getting, you'll be in the right spot. It's a healthy habit to give some of yourself (whatever your profession is) to the Universe for what you've been given.

yes I do think there is a case for this although also be aware that there is a balance to be had, the internet is place where there is "free" stuff. But you must also retain a value to what you do. It is a balancing act in what you give away vs the benefits achieved.

This article gave me a whole new perspective on making sales and generating leads for my business..THANKS!!!

Great post, Minh.

I like what you say about the dangers of devaluing your music, through the perceptions this engenders:

"You look like you’re not worth anything and desperate for attention" and "You look like you don’t have much demand at all".

It's refreshing to hear that stated, instead of the usual stuff about how you have to give your music away to get noticed. Giving away free music is not enough to get noticed in itself, it has to be part of a campaign, as you so rightly point out.

The 'loss leader' idea is a good way of framing it. It should be a promotional activity that enhances the value of the rest of your music.

Musicians shouldn't just surrender to this ridiculous idea of just giving all their music away for nothing - especially when there's more demand for recorded music than ever before.

This is a great article & makes me re-think some of my loss leader ideas. Traditionally I've made free items be the items for more hardcore fans - remixes or high quality live recordings - & have made them permanently free. The idea of free & rotated out might work well.

I also really like the idea of putting the back catalog on deep discount to promote a new album; which should be obvious, but I didn't think about it.

The free live show thing can be tricky. If you play a free show & only six people are there & they don't have an amazing time, you just helped destroy your brand/band. So let's take it to the next loss leader step live, is it worth it to pay to play a show where there's already a crowd of people having a good time? Like some festival where you lose a lot of money traveling to play? Maybe?

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