Academic analyzes Magnatune's variable-pricing scheme

Tobias Regner, an economics researcher at Imperial College London, is researching what occurs when people are offered to control how much to pay for a product, which is what Magnatune offers. We shared our purchase data with him (anonymized, of course) and he came up with these preliminary insights:

- The average purchase amount is $8.20

- Customers who buy an album, but then never again, tend to spend much on that: $8.29 On the contrary returning customers have spent only $7.64 on their first purchase on average. Some people might have just tried out the service and spent little. Once they got convinced with it they started to spend more. Some first time customers might have overspent and now stay away.

- The average amount increases with the number of purchase of a customer. First purchase averages $8.06 vs Purchases number 7+ average $8.66.

- The average amount decreases with the total of purchases a customer made. Average amount of one-time purchases is $8.29, which means returning customers' first purchase averages $7.64

- 2 genre are significant in affecting average price: Genre 'Ambient' has a negative impact on amount, while 'Rock' has a positive impact.

- Customers who leave an email tend to spend more on a purchase. With email: $8.24 vs without email: $7.40

These are initial results. Tobias plans on having further results once he's conducted further analysis.

Comments

[Preston L. Bannister]

Your sample may yet be too small, but I wonder how the purchase price paid changes when buying the successive albums from from the same artist over time (counting the average price of multiple albums bought at the same time as a single purchase).

I wonder if the "worth" of an artist to the consumer rises over time.

The first album you buy from a new (unfamiliar) artist is a gamble. Later you might not care as much that for that artist's work.

On the other hand, by the time you buy an artist's third album, you have a pretty good idea if you are going to continue to like the artist's work. At that point the music is (perhaps) worth more. Paying more in the hope of seeing future albums from the same artist might well make sense to the customer.

( And on a personal note, I would very much like to see *more* albums from the artists I bought & liked ... which leads to the above question. )

[John Buckman]

"I wonder if the "worth" of an artist to the consumer rises over time."

This is a really good point, and I could figure this out by looking at the artists who have more than one album with Magnatune, and seeing what people who come back to buy more spend. It'll take some programming, but it's interesting.

-john