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How much should it cost to acquire a fan and how do you know when it’s too much?

July 27th, 2012 | Author: admin

 

What most call “promotion” is really just another way of talking about the time, effort, and money spent acquiring fans. Aside from making great music, building an engaged fan base is probably the single most important thing you need to do as an independent musician. Only then will you have true financial independence and artistic freedom. You should change the way you think about promotion and you must invest in developing a fan base. -Mike McCready

In order to know how much you should spend to acquire a new fan (I’m talking about engaged fans, not the random Twitter follower or Facebook “liker”), you should have a rough idea how much an engaged fan is worth to you over the first year, and perhaps over the course of your career.

 


(Get in on the Fan Match pre-launch)

I realize that can sound unrealistic. But, while not exact, you can make some fairly easy assumptions; like what if 30% of your engaged fans buys each of your new songs or begins listening to them on heavy rotation on Spotify (or the other streaming services)? Then, what if 50% of your fans show up to at least one gig per year. What if 10% of them buy a T-shirt or some other merch item you sell? If you hone your assumptions to the point where they are somewhat accurate (is it really 30% or is it a bit more/less?), you should be able to predict with at least a little precision how much revenue you’ll generate in a given year.

 

While you’re doing that, you can also estimate your costs that are directly the result of having the fans (amount to make and buy the merchandise, cost of your CDs, cost of distribution to the digital platforms etc.). The amount of money you have left is your margin. As a general rule, as long as you can acquire each fan for less money than you earn on average from each fan, you’re not paying too much. This may sound cold and unlike the warm and fuzzy relationships you actually build with your fans, but this is how you must think of it because it’s your business. You must think about it kind of like you would think about any investment. But the awesome thing about this investment is you have a high degree of control over how it pays off. If you keep making good music, sell creative and quality merch and hold events which your fans can attend (and all sorts of other things), you can create a much more valuable business with fewer fans than another artist might despite having more fans.

 

Now, imagine you could go into a record label, a publishing company, or a group of independent investors and you were able to tell them how much it costs you to acquire each newly engaged fan and how much an engaged fan is worth.

 

Imagine being able to say to yourself,

 

“My band has 100 engaged fans.

 

“We net about $70 per year on average from each of our fans.

 

“So, right now, we have revenue of $7,000 per year.

 

“But, in order to pay ourselves, record the new music, buy some new equipment, and rent a touring van, we need to have $300,000 of revenue in a year.”

 

If you do that math, you see that you need about 4,185 more engaged fans to generate that kind of money.  What should you do? I do realize this is a simplified equation, but you get my point…

 

Music Xray’s new service, Fan Match was built to help answer this question.

 

Let’s say you invest $100 in a new Fan Match campaign. The song of your choice will be sent to 300 potential fans – people who have already told us they like your style and your genre. Then, once they’ve heard your music, we give them the opportunity to become a direct fan of yours at the click of a button. When that happens, you receive their email address and can get directly in contact with that fan. You can manage that relationship however you generally manage your engaged fan relationships.

 

Now, let’s say that your music is compelling enough that 30% of those who hear it like it enough to become a direct fan. That means that for $100, you would acquire 30 engaged fans. In other words, each fan cost you $3.33 to acquire. That’s a really good deal if each engaged fan is worth $70 to you over the course of a year, not to mention the value of an engaged fan over the course of your career.

 

Remember though, in our scenario, you need 4,185 additional fans to reach your revenue goal. At $3.33 each, acquiring 4,185 fans will cost you $13,936 via Fan Match.

 

The point is, you’ll have a projected yearly income of $300,000 if all your assumptions hold true. So, that’s a really good deal!

 

Obviously, not many struggling musicians have an investible $13,936 on hand. But, if you are able to achieve that on your own, you should.


On the other hand, if you don’t have that kind of cash to invest up front, the good thing about Fan Match is that you can buy small campaigns and see how it goes. Build your base step by step. Learn what works and what doesn’t. You may decide after your first campaign that for the next one, you should use a different song which may acquire new fans more readily and that will drive down your acquisition costs (you’ll acquire more fans for less money). You can do this little by little.


Building an engaged fan base is probably the single most important thing you need as an independent musician. Only if you invest in acquiring one will you ever have true financial independence and artistic freedom. You must invest in developing a fan base. That investment can be made in time (often years), sweat, tears, and money or you can now make that investment via Music Xray. Let us do the heavy lifting and you go back to making great music!.

You can even run small campaigns to test (or prove) your band’s viability. A small Fan Match campaign can be used simply to learn what your fan acquisition costs are and then you can share that information with a label, a publisher, or a group of investors.

Being able to demonstrate your band’s viability in this way, with real numbers, is revolutionary. It’s never been done before and having this kind of information should make it a lot easier to test, identify and demonstrate the merit of investment in the careers of performing musicians and recording artists.

 

At the very minimum,run a Fan Match campaign simply to find out where you stand. Its is easy for you to acquire fans? If so, keep going. If not, you may need to make some changes or improvements until you’re ready to compete for the attention of music fans. Or maybe you just need to work a different song. We’ve been letting musicians into our pre-launch sessions slowly and to each of you who take advantage of this early offer, we’re giving $25 in credit to spend on submissions plus a lot of personalized attention from our staff as we usher you through your first Fan Match campaign.




Mike McCready
Co-founder & CEO
Music Xray



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  • Optionernest

    another jango

  • Inspectortaggart

    Or you could get off the internet, write, rehearse and chase gigs.

  • $70 per fan, per year? That's stupidly optimistic, If that was the case I would be a millionaire already.

  • The idea is correct, but the assumed figures are way off! Say you develop a fan base collecting email addresses in exchange for a free mp3. The percentage of fans who will eventually buy product from you will be extraordinarily high if it reaches 4%. And many of those that do will only spend .99 on that one song that caught their ear. A band that has to bring in $300,000 a year has to rely on live performance unless it has the resources to develop an online fan base in the hundreds of thousands.

  • Josh

    "we're going to be launching a campaign to increase the size of the pool."

    Good idea.  What's the size of the pool now for acoustic/folk/singer-songwriters?

  • I Hate to Be Judgemental, But This Sounds Like a Giant Scam Sorta Like -> www.numberonemusic.com where you have to pay for more people to listen too your music, The Goal In Any Business Today Including Music, Is to Make Money, Make Progress, I Don't See This "Fan Match" Helping Anybody Honestly because Market Wise, These People Today Like Listening to The Music, But They Don't Wanna Buy The Music, Which Is Extremely Sad, Its Like We Have to Convince The People to Buy Our Music, When Really, We Shouldn't, But I'm Willing to Give This "Fan Match" a Try When The Time Comes.

  • Hi Da Killah Genius...  I hear you. But selling a file or a CD is not the only way to monetize your fans base.  We can help you build the fan base but you must turn that into a business.  Many artists do. Ariel Hyatt says you can do it with 1000 true fans: http://arielpublicity.com/tag/...  In as far a Music Xray's legitimacy, please see this post: http://blog.musicxray.com/musi...

  • I Will Try This "Fan Match", and I already know that Music X-Ray is not a scam, but one question for you, do we have to pay $100 every month to keep an account with "Fan Match"?????

  • Azitiz

    Cool stuff!

  • I love this idea but I can already here the groans of "my music speaks for itself" and "I'm not going to pay for a fan" but then again those people "won't pay someone to listen to my music" and are not on Music Xray. Maybe you should offer "music business" classes. I am not being sarcastic either. I guess there are just too many artists out there that are not serious about making a living with their artistic talents. Everyone is not a "Rock star" but many make a really good living at it.

  • A few question: Exactly where do these fans come from, meaning how is it that they are exposed to the music -- how do they sign up?  Would we be able to message them directly, eg. get their email address or Facebook / Twitter info?  

  • The fans have been signing up on Music Xray and telling us their music preferences for the past two years or so and we are going to be launching a campaign to increase the size of the pool. You get their email address when they become direct fans of yours.

  • Twodoe7tre

    But say i want to run a $2000 campaign how do I as an artist know you can acquire enough ppl to listen to my song do to have 10,000 people that will listen to my music if needed

  • Carlos H. Marin "Padrino"

    I write and sing in Spanish. Are you working with this market yet?

  • Do you check to see if the potential fan is already a fan, already connected via Facebook, Twitter and the like?

  • No, we do not.  We will be making sure Music Xray does not acquire the same fan for you twice, but we do not do this check otherwise.  The chances of us acquiring a fan for you that you already have are very slim statistically.

  • If bands/artists have been referring fans to Music Xray wouldn't the odds be higher than you think? Not to argue just a point. Thanks for the replies Mike. I am impressed with Music Xray. You have a WONDERFUL group of people working for/with you, but I am sure you already knew that. Best of luck!

  • Thanks Jeff.  We have to keep a close eye out for that. If we detect it as a problem, we will definitely address it. Thanks for your kind words.  We all work really hard and love that we get to go to work every day and help musicians, songwriters etc. Since we can't be on stage rocking out it's the next best thing we can do and it's very rewarding.

  • You buy the Fan Match for $100 they give $25 back for you to use on other submissions. Once you have spent the $25 you have spent $75 on the fan match and $25 on submissions. Sorry I did not hit the reply to your comment.

  • Alfred Shorter jr

    is this a opportunity to tailor a audience for your genre of music no matter how difficult it may seem ?   

  • I am thinking about trying this but I don't see where the $25 credit comes in. Can you help?

  • You're spending $100 on the Fan Match campaign. We're (Music Xray) just giving back a $25 credit and some personalized service to  the people who are involved in the pre-launch just for the heck of it since we're launching a new service.

  • Thanks for the clarification.

  • James Walsh

    HI Mike, 
    You know I think Music X-Ray is legit. But Cool as that is, the Fact is contests are only Popular because American Idol is popular, through OLD SCHOOL methods called TV...Youtube is our TV today for Indie. 
    Touring is how lifelong fans are built & that's us paying dues. Fan Match is another way of paying dues.We love music and at least one person in a Band must be the History Keeper, one must be the Accountant, One must be the Manager or Producer of Content, and One the Publicist/Salesperson, etc. This means they are all working equally hard. If you love this you play for the love music. 
    To get from Club Stage to World Stage is a long journey but since time flies it should be ok for most people. Enjoy the trip 'cause it beats flippin' burgers.

    Footnote: FYI: Paul McCartney said last year the Beatles never won any contests and gave that up! "Forget it" John Lennon famously  told him. Somehow they became even bigger than anyone thought possible.

  • Madill3000

    I support hip hop. And If you do follow us at www.crimecitysounds.net.
    We are on iTunes also
    Under
    Crimecity In and out.
    $1.00

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