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Ringtones & Full Track Download Pricing: No Conflict Here!

Question: What do these numbers have in common: $0.00, $0.99, $1.75, $2.50, $3.25?

Answer: They are all price points that drive the frequently asked question, “is there a pricing conflict between ringtones and full song downloads?”

Recent data from The NPD Group suggests that the answer is a categorical, “no.” The reasons all boil down to consumers’ purchasing, usage and needs fulfilled by the two different products.

Pricing Sensitivities

To reach this conclusion, NPD analyzed pricing sensitivities among both current buyers and those who plan to purchase in the near future for full track over-the-air (OTA) downloads directly to mobile phones and ringtones.The goal of the analysis was to determine the optimal price point for each activity in order to improve revenue and increase the volume of consumers willing to purchase either product at any given price point. The optimal price points for individual ringtones and songs uncovered by the analysis are summarized in the table below:

	Current Buyers	Intenders
Ringtones	$3.25	$1.75
Full Songs OTA	N/A	$1.75

Source: The NPD Group, Sept. 2005

The results support several key points:

Consumers are willing to pay more for a 30-second snippet of a song track to be used as a ringtone than for the entire track;
The average ringtone price of $2.50 is under-valued for current buyers, yet still too high for those who plan to purchase in the future; and,
Consumers are willing to pay a premium (above $0.99 or free) for the convenience of downloading a full song directly to their mobile phone wherever and whenever they want.

To determine why this is the case, we must look first at the consumer, rather than at the products themselves. If we focus on the products we fall into the trap of believing that since they are both music, consumers should not be willing to pay more for a portion of the song than the full song. In addition, consumers are already conditioned to pay $0.99 (or pirate them for free) for a full song, so they cannot possibly continue to pay $2.50 for a ringtone; however, when we look at consumers’ purchasing, usage and needs fulfilled by these products, a very different conclusion is reached.

Purchasing Patterns

Consumers tend to primarily purchase music to add to and build their music collections, which is an ongoing process. This process requires a high volume of songs for the consumer to be fulfilled, because they do not just listen to the most recent song or album purchased, but often dig through the deep catalog archives for their favorite music from the past, as well. Even the act of purchasing a song OTA from their wireless carrier is a part of this process. While likely not the main source of purchasing music, it is will be an increasingly important supplement to consumer music purchasing behavior.

By comparison, consumers do not tend to collect ringtones. In fact, the majority of US carriers make it very difficult or impossible to take your ringtones with you when you change phones from one model or carrier to the next. Consumers buy and use ringtones one or two at a time, buy replacements, discard the old ones and move on. They do not tend to dig through their archives for old ringtones to use again.

Consumers purchase these two music products to fulfill different needs, which means the value they receive for each kind of purchase is different. Consumers purchase and listen to music almost exclusively for their own personal pleasure. Similar to other forms of entertainment, such as going to the movies, the value is in enjoying the experience. On the other hand, ringtones fulfill consumers’ need for personal expression. They are an outward statement to those around us about who we are: quirky, retro, hip, or funny. Ringtones are more like a personalized license plate. In a subtle way, ringtones enable consumers to tell the people around them something about themselves.

This distinction is important. The fact that consumers purchase and use ringtones and full songs for different reasons, leads them to place each type of track into different “buckets” in their minds – and use their wallets accordingly. They do not directly compare prices of each type of download when evaluating purchases. This consumer truism results in optimal price points for ringtones equal to, or higher than, full song downloads. While there is no question that ringtones and full songs have common DNA, the relationship is more like distant cousins than siblings.

— Drew Hull, Research Director, Mobile Content