Sunday, February 14, 2010

Lessons from the Grateful Dead

The Grateful Dead are donating their abundant archive, which includes four decades’ worth of commercial recordings and videotapes, press clippings, stage sets, fan letters, business records, and even a handwritten thank-you note from President Obama, to the University of California at Santa Cruz. While this is a dream come true for fans, it is also a great opportunity to learn the management secrets behind one of the most profitable bands of all time.

The Dead were the first to focus intensely on their most loyal fans. They started a telephone hotline to alert their fans of their tour dates ahead of public announcements and reserved some of the best seats in venues for fans. They also capped ticket prices and distributed tickets through their own mail-order house so that fans didn’t have to travel or camp out to get tickets. According to Barry Barnes, a business professor at Nova Southeastern University in Florida, “The Dead were masters of creating and delivering superior customer value.”

The greatest lesson that the Dead can teach about business is called “strategic improvisation,” according to Barnes. An example of this is the Dead’s decision to allow fans to tape their shows. Their logic was that a ban on taping would be unenforceable, that the sharing of tapes would widen their audience, and that anyone who taped a show would probably spend money on merchandise or tickets. This same reasoning can be applied to today with downloading. As John Perry Barlow, the Dead’s lyricist, stated “the best way to raise demand for your product is to give it away. The important correlation is the one between familiarity and value, not scarcity and value. If I give my song away to 20 people, and they give it to 20 people, pretty soon everybody knows me, and my value as a creator is dramatically enhanced.”

The key to The Grateful Dead’s success seems to be in focusing on the loyal “true fans” and creating customer value in addition to constantly adapting to new technologies and trends in the industry. I think there are many artists and managers out there today who could benefit from studying The Grateful Dead’s business practices.

~Emilia Segatti

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