Radiohead Case Study — Pay What You Want | PWYW Strategy

Radiohead adopted the PWYW(Pay What You Want/Wish/Will) strategy for their 2007 album — In Rainbows. We will look into the case study of this pricing strategy of Radiohead to conclude whether it was a good decision or a pricing failure.

Epic Pay What You Want Design. ©Bruh Tool Designs by Divyanshu Singh

1. Was the Pay What You Want (PWYW) strategy a good decision for Radiohead? Why or why not?

I think the adoption of PWYW pricing strategy was quite beneficial for the British band Radiohead. Radiohead released their album In Rainbows in 2007 and did not even set a price for it. They just put the album on their website to be downloaded for literally any price the customer wanted. That is precisely a very bold pricing strategy i.e. Pay What You Want/Wish/Will. I will now give some WHYs and HOWs about the success of this pricing strategy by the band in question.

• Radiohead made $3 million from their In Rainbows album and the largest portion of it was from digital downloads on its website, where the customers could pay any amount they wanted.
• Radiohead was able to make more earnings ($2.26) with this approach than what they could have made with a label company ($2.25) or iTunes ($1.40).
• Radiohead created a media buzz and gained a lot of attention from not only music fans and media companies but also economists, businesses, etc.
• They were able to successfully implement PWYW because they already had a huge fan following and their music release got more traction with the power of their loyal fans and word of mouth.

Radiohead members. Source: consequenceofsound.net

2. What could Radiohead have done to make this strategy more effective?

Although Radiohead, in my opinion, was quite successful with the PWYW strategy, there were a few things that could have improved their earnings by a greater margin, such as:

• A reference price. A reference or suggested price automatically creates an approximate and fair value of the product in the buyer’s mind. This is like saying You can pay anything you want, BUT you should pay this much.
• Minimum price. Another similar strategy would be to set a minimum value, preferably a minuscule one such as $1, that will not make the buyer enter their payment information and subsequently end up paying more towards the average or fair value of the product. I have seen this strategy being successfully applied on the website Bandcamp that is a marketplace and community of music.
• Radiohead ran this PWYW campaign on their website only for a limited period, which is preferable. But they could have informed their fans about the short span of this opportunity beforehand in order to create a sense of urgency/scarcity.
• Radiohead could partner up with an NGO or any other organisation that works for a cause and leverage that ‘charity appeal’ for higher earnings. People tend to pay more when PWYW is attached with a cause with it.
• Finally, Radiohead could have used a sponsorship and advertise their sponsor on their website where the download/purchase was available. Since PWYW usually creates more traction, ads could potentially earn a greater deal of passive income.

In Rainbows Album Cover (Wallpaper version by u/Retro_Striker on Reddit.)

3. Is the PWYW strategy something that could be employed by more traditional firms?

PWYW is a great pricing strategy and can be employed by traditional firms but there are some things to be considered before adopting such a strategy. This pricing is best for gaining traction, visibility and customer’s trust.

• This strategy should not be employed in the long run. This type of pricing strategy is optimal for limited runs only. The biggest phenomenon that occurs if this strategy’s span is lengthened is that the amount people pay for the product tends to get lower every time.
• This type of pricing works best if the marginal cost is low, as it is in the case of digital goods such as music, ebooks, videogames, etc.
• A PWYW campaign should always have a charity appeal to it in order to affect the customers’ psychology and support a good cause along the way.
• Products and/or brands that are new should not be sold on a PWYW basis as consumers tend not to pay anything when they want to try a product.
• PWYW can be leveraged for advertising through ads, email advertising and few other methods.

Other points that I have mentioned in the previous section should also be considered.