I have become a fan of The Curve. The Curve is a book by Nicholas Lovell, but it is also a business idea, a presentation, a website, and an opportunity to understand how to make money in a world where most things are free. Lovell has taken the ideas put forward in Chris Anderson’s book Free and shows how they can be leveraged as a business model. This book and its ideas are important for anybody involved in business planning, marketing and research.
In essence, Lovell makes the point that in many business categories (especially those that are digital) you need to master two elements:
- Allow people to pay more money if they are fans
- Give people something useful/fun/interesting for free to grow the user base, which in turn grows the number of people willing to pay.
To illustrate his point Lovell quotes a large number of examples in his book, one of which is the musician Trent Reznor and the way he launched Ghosts I-IV – a collection of four 9 track albums.
- He made Ghosts I available for free, including uploading it to sites like BitTorrent and The Pirate Bay (even though those sites would be offering ‘stolen’ copies of the full I-IV for free, within hours).
- He made the digital album Ghosts I-IV available for $5 – and created an honesty box for people who had downloaded a pirated version.
- He offered the CD for sale at $10.
- He offered a deluxe version of the CD for $75.
- He offered an Ultra-Deluxe version for $300. This version was limited to 2,500, included vinyl copies of the albums and books about the album, all hand signed.
In the first week, the revenue from sales (from the small minority of people who were willing to pay) were $1.6 million. Of that, $750,000 came from the Ultra-Deluxe – which sold out in just 30 hours. Reznor had simultaneously expanded his total base of listeners by offering a substantial amount for free (and by acknowledging that pirates would distribute the whole work for free), but he also greatly increased his revenue by letting superfans pay more to get more.
Lovell has identified that the customer base for products, brands, services, stars etc is typically a power law curve. A relatively small number of people have a very high level of preference, and this tails away to a long tail of limited preference. This is very similar to the work of Andrew Ehrenberg and which underpins Byron Sharp’s book ‘How brands grow’.
What Lovell (and before him Ehrenberg and Sharp) have shown is that the customer curve is very consistent across time and markets. The proportion who want to spend more is small, and the proportion who want to spend very little is much larger. What Ehrenberg and Sharp have shown is that in order to have more people who want to spend large amounts you need more people in total. What Lovell has shown is that in order to be profitable (or more profitable) you need to market your product in a way that allows people who want to spend more to be able to spend more, and you want to use free as a method of attracting more people in total.
The book is well written, sources are cited thoroughly and clearly, and Lovell builds the story well, moving from the initial idea to a wide range of examples, drawn from a wide range of industries and sectors.
You can buy the book via Amazon (and from lots of other sites too).
There is a short, free version of The Curve online.
And Lovell has his own website, www.nicholaslovell.com.