File Under: Raising Money and Crowdfunding, Making Money With Music
The casino industry has been keeping a profit and loss statement on each of their high rollers — their most profitable customers — since the 1990s. Each high roller was considered so important to the revenue of the casino that they structured their business around these individuals. They still serve the everyday customer of course, but most of their business is based around what is called the 80/20 rule: 80% of the profit comes from 20% of their customers. The biggest spenders.
This is true for more than just casinos. Nearly every profitable business concentrates on the key customers, including the music business. You can see this in backers for Kickstarter and Patreon, as well as in music and merch sales.
The online gaming industry, an industry obsessed with making lightning-quick changes to their business based on analytical data, breaks down their customers into “minnows, dolphins, and whales”. These terms designate the small, medium, and large online players in terms of revenue. It’s the whales who get the attention, because it provides the foundation of their income.
So what does this mean for you, as a musician? The “whale” superfans who support you and provide the most revenue deserve your attention. After all, they’ve given you the most, so they should get a lot back. You can do this by giving them extra access to your music, backstage passes, and similar perks. Here are some additional ways that you can accommodate your whale superfans:
- High-end Crowdfunding Rewards
When structuring rewards on crowdfunding, tempt superfans with substantial high-end options and one-of-a-kind items such as special access to your music, house concerts, and backstage passes. Even offering rewards as simple as a personal dinner and conversation have worked successfully for artists.
- Top Level Patronage Rewards
High-end rewards on patronage sites like Patreon should include a diverse mix of enticing items because these rewards happen every month, or every time that you release something new. Bigger contributors mean real income. For instance, Amanda Palmer has five $1000-per-release slot openings at Patreon -- and all of them are filled. Good options include access to material ahead of time, adding their names to your album credits, giving them shout-outs, or other unique rewards.
- Exclusive Merchandise
If you generate regular sales at your merch tables, you can expand your inventory to include more expensive merch like coats or one-of-a-kind items. You can also make short-run, signed, high-quality versions of your albums or merch.
Although you should make special efforts to make your whales happy, this doesn’t mean you should ignore your dolphins or minnows. The goal is to build your fanbase. This means you need to provide an on-ramp for minnows such as $1 merch at your gigs like stickers or other low-cost items. But then, let them graduate to the dolphin level by offering mid-level merch to try to get more support from fans that begin to contribute.
Finally, even when you're starting out, you should believe you’ll have whale superfans. If you create a space for high-level supporters in your rewards and merchandise you broadcast to the world that you deserve this level of support. This can attract your highest-level customers and even create a desire for people to want to support you at this level. Your music deserves it.
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Photo credit: Ted Murphy