Minimum Viable Patronage
If you want more people to buy your products, make them free.
As an artist or brand, your online following is probably much larger than your customer base. Your business leverages free-to-consume content to capture attention and sell products. Fans love brands. We are willing to pay significantly more for branded goods than generic alternatives, but many fans are priced out. There’s value here for the taking, for both of you. You want to make more money, and your supporters want to support brands they love. Here’s how you capture it.
Price your products at the Minimum Viable Patronage (MVP). The MVP is the smallest amount you can charge for a good so that your profit in aggregate remains meaningful. By pricing at this lower bound, the MVP model captures value that exists in the relationships between your brand and the majority of your fans and maximizes your number of paying customers.
After fighting with GAP over the price of the clothes in their collaboration, Kanye West dropped the price of all the items on his website to $20. Sales skyrocketed.
Anecdotally, I saw many people posting that they were buying from the collection, not because they liked the clothes, but because they wanted to support Kanye. The minimum cost to see Ye in concert is ~$150 and the hoodies he made with GAP retail for $200. He lowered his MVP to $20 and the results speak for themselves.
The same goes for restaurants. I love Noma. I’ve never eaten there, but Rene Redzepee’s content; cooking videos, books, and interviews makes me love the brand. I’m not flying to Copenhagen for a $1k dinner soon, but they’ve lowered the cost of building a transactional relationship with their brand by selling packaged goods from their test kitchen. I recently purchased their Mushroom Garum to cook with at home. For $40, I now get to own something produced by the best restaurant in the world. I used it already but I cleaned out the bottle to keep because owning an object from a brand that I love is meaningful to me.
Goods sold at high prices demonstrate their value and financially support an artist or brand. The flip side is that they increase the financial barrier of support, and price out much of their audience.
Please look at this scary graph from economics class.
As the price rises, fewer people are willing to pay for the goods in question. As the price falls, the opposite happens. At $0 the maximum number of people purchase the goods in question.
Physical goods (T-shirts, paintings, photographs, etc.) must be manufactured, packaged, and shipped, so the price can never be $0.
Digital goods have a superpower, no marginal cost. If you upload a video to Youtube there is no additional cost if 2 people watch it or 2M people watch it.
So, should you publish your work for free to reach the largest audience?
You already do. Instagram is a great platform for distribution because it’s free to consume content, but their only tools for monetizing your audience require selling physical goods, which have inherent costs.
The production and distribution of physical goods comes with other issues too. While Kanye’s drop was innovative, it faced much criticism. To many, the clothes felt inconsistent in quality and there were lengthy shipping delays. Digital goods face no quality issues, ship instantly to anywhere in the world, and require a fraction of the upfront production cost.
So what are digital goods and how do you make them?
Digital goods are anything you can purchase that lives on your computer; songs, subscriptions, apps, etc. Until recently, these goods came with a lot of restrictions. For example, you can’t send a Kindle book to another person even though you “own” it. Tokens, NFTs specifically, are a new kind of digital good that gives owners more control over their property. Zora is a platform where anyone can create and sell NFTs. They pioneered low-cost, high quantity NFTs with their “free mint” + protocol fees model. In this model, buyers always pay at least 0.000777 ETH, about $3, per NFT. Even if you set the price of your NFT to 0, buyers are still charged $3 by the platform, which sends most of that back to the creator. Zora implemented a mandatory MVP for purchasing digital goods on their platform.
While innovative and the inspiration for this essay, Zora’s model is flawed. Because the price of Ethereum is volatile, when I wrote the outline for this post last fall, the price to mint an NFT was $1.50. It’s now twice that. As the MVP changes, so do the creators we’re willing to support. The NFTs I would buy for $1.50 differ from what I would buy at $3 and will be much different at $10. I believe the optimal MVP for NFTs is $0.99, a price that served iTunes, a prolific seller of digital goods, well in the past.
Tokens are crypto’s killer app, and they come in an infinite number of forms. Tokens have gotten attention thus-far primarily because of high prices. People are captivated by the dollar value of tokens like Beeple’s $70M NFT or the Bored Ape NFTs whose price rose to $100k+ years ago. While these were interesting experiments in scarcity and luxury digital goods, they don’t represent how most people want to interact with tokens. Tokens are digital objects. People love objects. We collect objects our entire lives; books, clothes, art, photographs, etc. For most of us, those objects are not exorbitantly expensive. So, the cost of the majority of our digital objects doesn’t need to be extraordinary either. We have no less emotional connection to inexpensive items. While our collection of physical goods is limited to the size of our physical space, tokens take up no space and can travel with us wherever there is wifi. Even though our connection to digital goods may not be as strong, it still exists, and the fact that we can own so many more of them means that one day we’ll have more total connection to our digital goods and online identities than their physical counterparts.
I mentioned the term “transactional relationship” in the Noma example above. It carries a negative connotation, often referring to a social relationship with an individual that is strictly transactional. For example, you don’t like someone but you remain friends because they throw great parties. You are exchanging your friendship for parties, which leads to a shallow relationship. But transacting is a meaningful part of healthy relationships, especially the relationships you have with artists and brands. You can admire an artist's work in museums or keep up with them online for free, but buying a painting from them creates something deeper. Not only do you have a physical object that they made with their bare hands hanging in your home, but you also get to support them to continue creating. Digital objects lack properties like being handmade, but the transactions still create a much stronger connection between artist and fan than consuming free online content does. Because digital objects have a low MVP, those small connections are multiplied by the enormous amounts of people who can now afford to create them. Minting an NFT for $3 is far more powerful than liking an Instagram post and orders of magnitude more people will do it than buying a $500 painting.
The internet democratized content distribution. The radio waves once gatekept by record labels have turned into Soundcloud and the breaking news exclusive to legacy media hits Twitter first. Blockchains are now democratizing the ability to own digital goods and the financial rails to transact them freely. The confluence of these two revolutions means that creators and brands are more powerful than ever before. But, it is not enough to bring models from the old world, like luxury goods, and put them on new infrastructure. To harness this new power, we must leverage the unique benefits that these technologies offer. Minimum Viable Patronage models superpowered by digital goods are just one example of how we can improve our economic systems to support creatives and build more positive connections in the world.