You’ve managed to pull it together and gotten an album in the can. Taking my (expert!) advice, you’ve got a stack of fans, friends, and followers eagerly awaiting your music. It feels good, doesn’t it?
Before we discuss ways to finance your musical endeavors, let’s back up a step and look at ROI. Hopefully these aren’t letters that frighten or confuse you.
ROI stands for “Return on Investment” and it’s often coupled with its friend COA (Cost of Acquisition). These two terms keep investors and marketers up at night; they represent the basis and justification for every decision made. And now, they’re going to be two of your best friends. Bring ‘em to parties, and buy ‘em a beer. Generally speaking, ROI and COA prefer to drink PBR. Makes acronymic sense, doesn’t it?
ROI is a basic indicator of how much money you’re putting out in relation to what’s coming back. For example, if you spend $100 to make your new EP, and you sell $500 worth of music, then the ROI on your EP is $400. Simple stuff, right? Not so fast.
In marketing land, there’s a lot of non-financial investment. Time leads that list. If you spend thousands of hours in the studio to release a single, you better hope to get a lot of return on it. If not, you might want to rethink the entire endeavor. Again, this may seem obvious to you, but let me tell you a story …
I once worked with a client who shall remain nameless for fear of litigation. This client spent nearly a decade writing and recording his/her debut album. Quitting their day job to focus exclusively on the project, I was brought on board to get the project to the endzone – finished product, website, online sales, etc.
This is something I’ve done countless times for clients at all levels of success. It’s a huge undertaking, a lot of work, and one of the most excruciating parts of the entire album release cycle.
But we’re discussing ROI. And this is precisely where the client started losing site of the goalpost. I learned that there were previous designs and designers, and that this process had taken years to evolve to this (currently unfinished) point. Red flags shot up. How much was being placed into this project financially and emotionally? What did we realistically expect to achieve?
The artist in question had zero desire to tour, and because of format, widespread radio play wasn’t a slam dunk. Above and beyond all of this was the fact that his/her main means of promotion, success, and primary measure of ROI was his/her online presence.
As we’re trying to quantify the investment, is it fair to place all the ROI eggs into the online basket? Of course not. When you’re thinking of ROI, first make sure that you’ve got multiple avenues of return. For the purposes of this book, we’re looking purely at online marketing. But with this particular artist, the over reliance on one facet of all marketing and promotional activities is a certain recipe for disaster – especially with an investment that can be measured not in months, but years!
Then there’s our other pal, COA. Cost of Acquisition is something that’s discussed in boardrooms around the world. Ultimately it’s the number arrived at when you figure out how much you’re spending to achieve one positive result for a particular target. Assume that your goal is getting more followers on Twitter. You spend $1,000 on a campaign that brings in 100 new Twitter followers. Your COA per fan is $10. A smart marketer should know what a reasonable COA is relative to the goal you’re trying to meet. If not, find a new marketing guy.
A while back, I worked with an amazing band. Without a doubt, they had incredible music, a massively engaging live show, and a dedicated fanbase. They started turning down certain gigs because the time and expense to do the show wasn’t worth the money they’d get paid to perform.
Lesson: The COA for new fans at these venues wasn’t justified. In turn, they directed the efforts in different directions where the return on investment was stronger. With more money to place in specific baskets, they yielded a better ROI for their activities. Later on we reached out to those earlier areas through various marketing activities and built demand. This way the COA was much lower and a reasonable ROI could be achieved by playing in those markets. Now it made sense to perform in these alternate venues. Sometimes though, it’s all about getting cash in the bank. For that, folks are turning to artistfunding sites.
The big industry buzz is all around sites like Kickstarter and PledgeMusic. They create a platform for fans to sponsor and support your projects. These represent a great opportunity for fan engagement, but there’re lots of potential pitfalls that artists fall into.
Before thinking “great, my fans will pay for me to make this album,” dial it down a step or two. Previously you were told you need $10,000 to get a band off the (online) ground. Here’s where that comes into play.
First things first, you go through the effort to set up the campaign, and it’s awesome. But who’re you gonna tell? You need to have some audience to soak up your message before even thinking about something like this. Otherwise the tree’s falling in the woods, but nobody care$. That’s exactly why the $10,000 table is so crucial. Now that you’ve got something to talk about and someone to talk to, you’re set up for success!
Speaking of success, set the bar low. When I started working in email marketing, I was told that a acceptable success rate is 2%. Email 1,000 people and having 20 of ‘em open the email was cause for celebration. Personally, I always felt that “2% success” is rather oxymoronic, but that’s for another time.
The point is if you need to raise $5,000, and you’ve got 20,000 people to talk to, a 2% success rate means that 400 (2% of 20,000) people need to sponsor the $5,000 at an average rate of $12.50 per person. That’s not entirely ridiculous. But if you were trying to raise $50,000, there might be problems.
If you’ve had any previous experience with releasing music or running artistfunding campaigns, then you’re a step ahead of things. Presumably you’ve captured the data and done the analysis to know what worked, what didn’t, and what to avoid the next time around. If not, be prepared to do a lot of learning and adapting very quickly!
To start, have you accurately calculated how much you need to raise? Platforms like Kickstarter will only fund your project if you reach 100% of your goal. The lesson: don’t be greedy. Your fans want to fund the project, not your “business” trip to Paris.
Now, here’s the hardest part. Keep in mind that your fans are not some multi-headed ATM card that you withdraw cash from every time you decide to record a new album. If you go to the well too many times, they’ll stop helping you. How successful could you be if you constantly need them to record new music? And each time you make a withdrawal from the Bank of Fan, you need to provide ROI for them. What do they get in return for handing you their hard earned cash?
If you’ve ever watched any PBS special during pledge week, you’ll see what I mean. Typically you receive some low cost, mass produced souvenir in return for donating $250. Maybe others aren’t as cynical as I am, but I find it insulting that my $250 donation only merits a hemp tote bag. I could buy that same bag for $12 outside any Phish concert in America.
I know it’s about supporting PBS, but at a basic level it still feels like a bad exchange. $250 does not equate to the bag even if you add in extra episodes of “Downton Abbey” and “Ask This Old House.” Think of any lame “My friend went to Florida and all I got was this lousy t-shirt” souvenir you’ve ever received.
Your campaigns should offer something exciting and exclusive to warrant the support of your fans. Remember, if all goes well, they’re going to pay for you to make an album that will result in money for you. You’re making money off of their money. If that’s not reason enough to ban the “tote bag mentality,” I don’t know what is.
Here are a few easy suggestions for cool sponsorship opportunities to get your brains going:
Not available to the general public
- Exclusive meet-and-greet opportunities
- Pre-Show/Private “Sponsors Only” performances
- Exclusive/custom merch items
- Sponsor and receive my upcoming release and any previously released recordings
- Receive the new disc and a ticket to the CD Release party!
- I’ll record a cover song of your choice and send you an mp3!
- I’ll record a track/part on your upcoming release
- Open for us at our next gig!
- We’ll cook you breakfast!
 As of this writing (Winter 2011), the deadline got extended yet again from October 2010 to March 2011 to February 2012.