When the Customer Sets the Price

As you have no doubt heard, Radiohead skipped the middleman with their latest release, offering the album online for download. This resulted in an estimated $10 Million in profits from 1.5 million downloads over the past week, more than the first week sales of their last three albums combined. Not too shabby, particularly when users could set their own price for the download, including being able to set the price of nothing. Radiohead's VRM-like experiment did trigger a flood of promotion, but at the end of the day, fans still volunteered to cough-up an average of $8 per album. Gets one thinking, don't it?

We will undoubtedly see more stunts like this to promote online sales, along with an increasing willingness to go cheaper and wider by offering digital downloads for free. But I want to know, will we see more customer-driven price setting? It feels a little like a public radio pledge drive, essentially asking the customer at transaction time - what is this worth to you? Applying this sort of purchasing model to product transactions is one approach that the VRM project is exploring - where the customer takes a more proactive stance in setting the relationship terms with vendors. Doc Searls introduces this idea in the context of public broadcasting at the tail-end of a Berkman.tv video on the future of public media. Don't miss the first part of the video either, as Jake Shaprio takes on predicting the future.