The Curve: How Smart Companies Find High-Value Customers

by Nicholas Lovell

It’s the ultimate business question of our time: How do real companies make money when customers expect (and often get) products for free?

There are millions of potential customers in the world. Most of them won’t pay anything for your product. But some will pay almost anything. The challenge is to find the latter without wasting time and money on the former.
In The Curve, Nicholas Lovell weaves together stories from disparate industries to show how smart companies are solving this puzzle. From video games to pop music to model trains, the Internet helps businesses forge direct relationships with a vast global audience by building communities and offering bespoke products and experiences.
In many cases, businesses can win by sharing their product (or a version of their product) for free, allowing it to spread as widely as possible. Eventually, a huge number of freeloaders spread the word to the superfans who value that product the most. And a small number of superfans will love a product so much that they will spend substantial sums of money on it—given the chance. These high-value customers are enough to fuel a profitable business. For example:
Nine Inch Nails front man Trent Reznor gave away his album for free to find the 2,500 hardcore fans who wanted the $300 limited ultradeluxe edition. Bigpoint, an independent game developer, released three adventure games to 130 million users—and made 80 percent of its $80 million revenue from just 23,000 users, who spent money to upgrade their game-playing arsenal. King Arthur Flour shares useful recipes and tips on its Web site, enchanting a cult of devoted bakers, many of whom happily travel to its Vermont headquarters for expensive specialty baking classes.
This approach doesn’t apply just to digital products anymore. With the advent of 3D printing, customization of physical goods is easier and cheap, and companies can truly tailor their offerings to their customers. A doll company can personalize everything from hair color to eye shape, and automakers and technicians can create laser-scanned replacement parts for classic cars. Although the potential for piracy will spread to industries that believed they were immune to such disruption, businesses have an opportunity to make money in this new paradigm by offering variety, complexity, and flexibility at little to no extra cost.
What Lovell calls the Curve is a ranking of your company’s potential customers from those most likely to least likely to pay for your product or service. It charts their interest against the amount they are prepared to spend—be it nothing at all or thousands of dollars. The curve itself separates your revenue opportunity (willing big spenders, your superfans) on the left from your marketing opportunity (freeloaders, whose only acceptable price point is $0) on the right. The area under the curve is the total amount of money you might be able to get from your customers or fans.
Lovell offers a strategy to draw more people into your orbit than was possible when physical costs limited your ability to expand. The Curve heralds a new era of creativity and business freedom.

Genres: Business, Nonfiction, Economics, Psychology, Buisness, Games, Gaming

241 pages, Kindle Edition

First published October 3, 2013

Reviews

[Andrew · Rating 4 out of 5]

I've read a lot of business books in the past two years, some for pleasure and some for work. And I'm pretty bored with the build-your-business-in-these-463-useful-steps genre or the I-did-it-you-can-too type full of "helpful" summary boxes at the end of each chapter.

The Curve doesn't do these things, which automatically makes it a star above the rest. And then it takes a very simple idea and expands clearly on it without much wandering. In the digital age, free is the baseline. Within your thousands of free customers their are gradations of fans and superfans who want to give you money for premium products. This is the future of revenue. Add in a few variations and logical extensions, and presto - the curve as business model. A clever, perhaps essential, book for business. Especially the online world.

Follow me on Twitter: @Dr_A_Taubman

[Andrew Saul · Rating 5 out of 5]

Simply excellent book about the changing reality of pretty much all business models, but especially those which are seeing a large shift to digital means, or are digital entirely.

Lovell fills this book full of entertaining and informative examples of both sides of the coin: businesses embracing "the curve" and those being attacked by it.
He imparts to the reader a fully formed idea of the common theory behind what is happening in all these cases and gives starting points for a wide cross section of industries as regards what they might do to best take advantage of "the curve" in their own market.

I came away with a selection of books to read to further my understanding and a heap of ideas about how I can try to help my own company embrace the full potential of "the curve".

I'd recommend this book to anyone, but I think if you work in any industry that is heavily affected by digital, then it's a must read.

[Saeed Ramazany · Rating 4 out of 5]

از اون کتابایی نیست که هر صفحه و هر فصلش به درد بخور باشه و بگم که اگه کامل و با جزئیات نخونی از دست میدی. مثال و داستان هم نسبت زیاد داره.
اما، اما ایده‌ای که میده واقعا به درد بخوره و من حداقل جای دیگه این ایده رو ندیدم. به قدری به درد بخوره که من حس می‌کنم در حداقل ۱۰ ۱۵ سال آینده بخش مهمی از بازاریابی و تبلیغات و جمع کردن مخاطب برای پروژه‌های نرم‌افزاری(موزیک/فیلم/کتاب/نرم‌افزار) ‌ام خواهد بود.
ایده‌ی کلیش رو اینه که اتفاقا از دنیایی که به راحتی میشه کپی هر چیز نرم‌افزاری رو به دیگران داد استقبال کرد و نترسید. چون میشه مشتری‌ها رو روی یک منحنی(Curve) کشید که اولین آشنایی و استفاده‌شون از محصول رایگان بوده، و بخش اعظمی بعدا هم پولی خرج نمی‌کنند، اما یه عده‌ای که پول خرج می‌کنند، باید بهشون اجازه داد هرچقدر محصول رو دوست دارند پول خرج کنند.
همین ایده رو تو کتاب کلی بسط میده و نکاتی رو میگه که باید تو طراحی همچین معماری مسیر راه مشتری(بازاریابی؟) یادمون باشه.

[Dmitry · Rating 5 out of 5]

(The English review is placed beneath Russian one)

Великолепная книга. А заслужила она это благодаря тому, что автор нашёл очень точные и понятные слова для объяснения такой сложной темы как ценообразование и сегментация. Плюс, автор пишет в контексте периода XX века о нынешнем, сегодняшнем дне. Эти три факта выводят, лично для меня, эту книгу в настоящие лидеры.
Во-первых, нужно понимать, что среда, в которой рассматриваются примеры, это мир с его новыми средствами коммуникациями XXI века, т.е. это мир интернета. Автор пишет, что именно благодаря ему появилась возможность использовать ту стратегию ценообразования, которую он предлагает. Без этого, т.е. когда в мире бизнеса балом правила тирания физического, применить его методы было хоть и возможно, но сложно. Хотя нечто подобное всё же было.
Во-вторых, автор приводит в пример некую музыкальную группу, которая решила распространять свою музыку совершенно бесплатно. С одно стороны, это кажется безумием, но с другой, это важный тактический ход. Если мы распространяем свой продукт бесплатно, мы получаем все 100% клиентов, которые были заинтересованы нашим товаром или услугой по определению, т.к. «бесплатно же». Получив эти 100%, мы дальше предлагаем этой группе те же самые товары, но уже в другом контексте и несколько изменённые. Например, бесплатно закачивать музыку, но предлагать платные билеты на концерт. В итоге мы получаем огромное количество людей, которые могут стать потенциально прибыльными клиентами, т.е. перейти из разряда любителей бесплатного в тех, кто платит. Да-да, фактически, это правило Парето 80/20 в действии, где 80% прибыли приносит 20% покупателей. В итоге, мы получаем большую группу любителей бесплатного из которой 20% решаются пойти на концерт или/и купить лицензионный диск/музыку в Apple Store. Но на этом мы не останавливаемся. Далее, говорит автор, мы делаем различные предложения, как то: купить музыку в Apple Store за $1, купить диск за $15, купить подарочную упаковку с диском с возможностью бесплатно скачать высококачественный файл с сайта группы за $50, купить лимитированный комплект с диском, постером, майкой, подписью музыкантов и пр. за $100, купить билет на концерт за $1000, купить сольное выступление у себя дома - $5000. Как видим, ценообразование прямо зависит от предлагаемой ценности. И вот так автор рассматривает многие примеры из мира бизнеса. Я предложил лишь огрублённый пример, без мелких деталей.
В-третьих, мир XXI века породил следующую проблему: больше выбора, но меньше времени. Это очень важное замечание, т.к. мир века XX состоял в точности наоборот, т.е. мало выбора (товаров и услуг), но много времени. И вот теперь, когда появился интернет и в особенности социальные сети, когда в одном городе выходит огромное количество самых различных СМИ и в котором десятки различных кафе, мы должны констатировать, что нам требуется некий фильтр, который бы отфильтровывал такое огромное количество вариантов. Поэтому мы столкнулись не с вопросом «что предложить потребителям», а с вопросом, «что предложить конкретной группе потребителей, очень узкой её части». Нынешний мир бизнеса, это мир ниш. И именно на эти ниши и стоит направить все усилия. Ибо именно они будут платить за то, что другие, но в других условиях, получают бесплатно (скачать музыку бесплатно или сходить на концерт за 30,000 рублей).
В-четвёртых, в контексте вышенаписанного стоит напомнить о важном эксперименте, когда людям предложили в одном случаи 8 вариантов джема, а потом дали возможность приобрести понравившийся, и когда им дали 24 вариантов джема, а потом также предложили скидку для приобретения понравившегося джема. В итоге обнаружилось, что меньший вариант выбора дал больше продаж, чем широкий. Это приводит нас к тому, что мир XXI века с его огромным массивом информации породил проблему отказа от приобретения товаров и услуг.
В-пятых, автор пишет, что раньше, в XX веке всё решалось контролёрами, т.е. лицами которые решали, опубликовать вашу книгу или нет. И так во многих отраслях. Сейчас же, благодаря интернету, контролёры ушли на второй план. Сейчас каждый может опубликовать свою книгу, каждый может создать некий товар. И каждый может создать свой собственный бизнес. И главное, без использования услуг контролёров. Всё это, благодаря возможностям интернета. В таких случаях люди становятся одновременно и руководителями и финансистами и маркетологами и всеми остальными сотрудниками одновременно в одном лице.
Но главная идея книги, это всё же использование интернета для предложения разной ценности одного и того же товара или услуги той целевой аудитории которая заинтересована в данном товаре или услуги. Да, не все они являются прибыльными покупателями. Некоторые будут приносить если не убытки, то нулевую прибыль. И таких будет много. Но остальные, вот те 50%, могут принести в разы больше прибыли, чем, если бы вы вели бизнес по старинке, т.е. всем покупателям предлагали одну и ту же цену (один диск по цене $15). Такой тип бизнеса, как я понял автора, уже в прошлом. Этот тип бизнеса используется фирмами, которые продолжают жить в веке XX, а не в XXI. А это в свою очередь значит, что они не готовы к встрече с будущем. Они не готовы к конкуренции в XXI веке. И выживание их бизнес под очень большим вопросом. Да, возможно сейчас они себя чувствуют достаточно хорошо. Однако нет никаких гарантий, что однажды не появится новый конкурент, который станет играть по правилам бизнеса века XXI, а не XX. И вот тогда и у вчерашних гигантов возникнут очень серьёзные проблемы, которые могу уже в краткосрочной перспективе привести к банкротству.

Great book. And it deserved it because the author has found very accurate and clear words to explain such a complex topic as pricing and segmentation. Plus, the author writes in the context of the XX century about the present day. These three facts are driving, for me personally, this book into real top positions.
First, it is necessary to understand that the environment in which the examples are considered is the world with its new means of communication of the XXI century, i.e. the world of the Internet. The author writes that it is due to the Internet that it is possible to use the pricing strategy he proposes. Without this, i.e. when the business world had rules of physical tyranny, it was very difficult to apply these methods. Although there was something similar.
Secondly, the author gives an example of a music band, which decided to distribute its music for free. On the one hand, it seems crazy, but on the other hand, it is an important tactical move. If we distribute our product for free, we get all 100% of the customers who were interested in our product or service by definition, because "free of charge". Having received this 100 %, we then offer the same products to this group, but in a different context and slightly modified. For example, to download music for free, but to offer paid concert tickets. As a result, we get a huge number of people who can become potentially lucrative customers, i.e. move from the category of free fans to those who pay. Yes, this is the Pareto rule of 80/20 in practice, where 80% of the profit is generated from 20% of customers. As a result, we get a large group of free fans of which 20% decide to go to a concert or/and buy a licensed CD/music in the Apple Store. But we don't stop there. Further, the author says, we make various proposals, such as: to buy music in the Apple Store for $1, to buy a disk for $ 15, to buy for $ 50 disk in gift wrapping with the possibility of free download high-quality music file from the site of the band, to buy a limited edition set with a disk, poster, T-shirt, signature of musicians for $100, to buy a ticket to the concert for $1000, to buy a solo performance at home for $5000. As we can see, pricing directly depends on the offered value. And this is how the author considers many examples from the business world. I offered only a rough example, without any small details.
Thirdly, the world of the 21st century has given rise to the following problem: more choice, but less time. This is a very important remark because the world of the 20th century was exactly the opposite, i.e. there was little choice (goods and services), but a lot of time. And now that the Internet and especially social networks have appeared, when in one city there is a huge number of different media and dozens of different cafes, we must state that we need a certain filter that would filter out such a huge number of options. Therefore, we faced not the question of "what to offer to consumers", but the question of "what to offer to a specific group of consumers, a very narrow part of it. The current business world is a niche world. And it is these niches that should be the focus of all efforts. Because they will pay for what others, but in other conditions, get for free (download music for free or go to a concert for 30,000 rubles).
Fourth, in the context of the above, it is worth recalling an important experiment in which people were offered 8 variants of jam in one case and then given the opportunity to buy what they liked, and when they were given 24 variants of jam, and then also offered a discount to buy their favorite jam. As a result, it turned out that a smaller choice gave more sales than a wider choice. This leads us to the fact that the world of the XXI century, with its vast amount of information, gave rise to the problem of refusing to purchase goods and services.
Fifth, the author writes that in the past, in the 20th century, everything was decided by the controllers, i.e. persons who decided whether or not to publish your book. And so in many industries. Now, thanks to the Internet, the controllers have gone into the background. Now everyone can publish their own book, everyone can create a certain product. And everyone can create their own business. And most importantly, without using the services of controllers. All this, thanks to the possibilities of the Internet. In such cases, people become both managers and financiers and marketers and all other employees simultaneously in one person.
But the main idea of the book is still the use of the Internet to offer different values of the same product or service to the target audience who are interested in the product or service. Yes, not all of them are profitable buyers. Some people will bring, if not losses, then zero profit. And there will be many of them. But the rest, that 50 %, can bring many times more profit than if you were doing business the old-fashioned way, i.e. all buyers were offered the same price (one disk at $15). This type of business, as I understood the author, is already in the past. This type of business is used by firms that continue to live in the twentieth century, not the twenty-first. And this, in turn, means that they are not ready to meet with the future. They are not ready for competition in the 21st century. And the survival of their business is a very big question. Yes, perhaps they feel quite well. However, there is no guarantee that one day there will be no new competitor who will play by the rules of business of the XXI century, not the XX century. And then yesterday's giants will have very serious problems, which may lead to bankruptcy in the short term.

[Nurul · Rating 2 out of 5]

Bought the ebook from google play, read a bit of it and then forgot about it for three years before coming back to finish it. I can say now, in 2019, most of the points has been widely used, nothing much is new anymore. In fact this is one of those kind of books where it can be written in a 2k words article rather than a book of 242 pages. You can get most of the points by reading the free sample, the rest are redundant points.

[Chris Budgen · Rating 3 out of 5]

The basic concept is to have something free (preferably) or very cheap to start your relationship with customers, use technology to deepen that relationship, to understand your customers and to communicate with them on a one-to-one basis, and then offer those who become superfans the opportunity to spend lots of money on things they truly value.

This book is based heavily on Chris Andersons's work (Free and The Long Tail), my key take-aways are:

Offering something for free may not be a choice: according to a concept called "Bertrand competition" competing organizations will reduce the price of an offering to the marginal cost of production. So if the product/service is digital or if there is a viable digital alternative, those marginal costs will be zero.

The freemium business model has come under fire for creating a huge audience of freeloaders that cannot be sustained by a small proportion of users who do pay. It didn't work not because too many people paid no money but because the biggest fans couldn't spend enough money. They could spend only a fixed amount.

Don't limit customers on how much they spend: more nuanced pricing tiers should allow users to spend ten times, a hundred times or even a thousand times the average

Besides those insights the book could have been compressed to a couple of pages without losing any of its key messages or cases. Overall the ideas are too focused on (digital) content and the attempts to use the same patterns in different areas feel forced and unnatural.

[Samantha Fanaken · Rating 5 out of 5]

I've worked in publishing for years and we've long been facing in the digital threat/opportunity so it was an absolute joy to read a book about how exciting the future can be. Full of great stories from Trent Reznor to why 3D printing will mean the end of the mass market. Can't recommend this more if you work in media of any form and want to think about how we could do things differently and face the brave new world feeling inspired.

[Michael M. · Rating 5 out of 5]

I started reading this book after VidCon this year and think that it is a pretty good treatment of what's happening online. It will be interesting to see if other futurists pick up what Lovell is laying down here.

[Dain Hedgpeth · Rating 4 out of 5]

Dain's summary:

Moving from age defined by manufacturing and models optimised around duplicated products, market-set price points and mass marketing into age of information products, easy segmentation and customisation (even in physical), new business models seem to have an edge.

One price point and offering for everybody is crazy, you leave money on the table on both sides of every customer and businesses that successfully implement 'curve' business models, including for example most kickstarter projects make most of their money from a fairly small percentage of high spenders, and find success even in markets driven to $0 price points.

Nice collection of case studies, rationale demonstrating shifts in business focus to stratified pricing and product / 'experience' offerings and a direct relationship with the customer allowing for seemingly sustainable and profitable business models even with small and niche customer bases - and at a time when the old model of mass production and competing over price seems to be failing in one market after another.

[Aliya · Rating 2 out of 5]

Too long, could be a short article.

Tldr: offer your main mass-produceable product for free, because nowadays (well, the book was published like 10 years ago, so a disclaimer note on this) people expect most things for free.
Then offer different prices for different experiences tied to values that people want to associate when they use your product (for ex., a sense of achievement/self-dev if they sign up for your coaching classes etc). Let people pay what they can, i.e. some of your users might be super fans which usually bring a big chunk of profits.

[Ricardo Alan Mata Larios · Rating 3 out of 5]

Grandes ideas para aplicar de manera positiva lo gratuito.

[Juan Bosco · Rating 5 out of 5]

Vale la pena para empezar a entender el servicio a los clientes para convertirlos en fan!! Buenísimo

[Ada · Rating 3 out of 5]

I will start with a disclaimer- I don't think I'm the intended audience of the book. I'm a so-called millennial, part of the terrifying force of change that this book is trying to adapt businesses to.
First of all, one of the most interesting ideas behind the curve is that you should allow your fans to pay you however much they want to- subscription models are looked to as inferior (!) as they limit the amount of money the most devoted fans may spend on your service.
Secondly, the author emphasises the importance of giving away free content as advertising material for your company. Here's the issue- as a consumer I am flooded with free content, and I am tired of every juice, bank, law firm, or even kitchen towel telling me about its brand ethos. I really don't care what 95% of these companies write on their Facebook/ Twitter pages. Not unless, like 'The Economist' they happen to be in the business of journalism, are prepared to share some articles with me and happen to do very witty adverts. And sometimes, not even then.
Finally, the practical tips about using the curve are reserved for the last chapter of the book. And they're pretty sparse and far between.
It is quite interesting to hear about the author's idea for the future, but they remain absolute speculation. All in all, I am not as pleased with this book as I would like. Perhaps I am just a bit cynical...

[Mark Speed · Rating 4 out of 5]

Another one of the plethora of books about how to survive the changes to buying behaviour wrought by the digitalisation of the economy. Thankfully, it's not written in the style of my opening sentence :-)

Executive summary: stuff's becoming free. You need to get happy with the fact that most people are going to use your service for free, or download your stuff free. You have to figure out ways of getting your fans to buy stuff at higher prices by offering them something that really appeals to them.

Nearly gave it three stars, rather than four. It's thorough, but at the risk of labouring a point and being over-long. On the other hand, they guy's got to fill a book - rather than do a one-hour presentation - and he at least does a good job of providing examples from the real world, then finishing by telling various business sectors where he thinks they could do better.

[Leader Summaries · Rating 5 out of 5]

Desde Leader Summaries recomendamos la lectura del libro La curva, de Nicholas Lovell.
Las personas interesadas en las siguientes temáticas lo encontrarán práctico y útil: marketing y ventas, sistemas de fijación de precios, internet y nuevas tecnologías, nuevos mercados y sus oportunidades.
En el siguiente enlace tienes el resumen del libro La curva, El futuro de los negocios: de freeloaders a superfans: La curva

[André Bernhardt · Rating 4 out of 5]

Actually I tend to know know Nicholas briefly from some gaming events. I already knew that he is a good and entertaining speaker but after finishing the book I can also say that he is also an excellent writer.
So - finished the book in a few days as it was fun and also very insightful. If you are interested in business models and how to shape your business for the future so it may benefit from the disruptive digital changes we are enocuntering in these times - go and read it! You won´t be disappointed.

[Touko Tahkokallio · Rating 4 out of 5]

Nicholas Lovell (the writer of Gamesbrief blog, among other things) is a kind of a pioneer in understanding the economics of digital revolution and free (-to-play). The curve condenses many central ideas of making money in the world of free digital content and distribution into a nice package. As a book it is just OK, but the central idea behind the Curve is a must-to-know for all people working in the bussiness of free.

[Mark · Rating 4 out of 5]

I don't often read let alone recommend "work" books -- business books, books about the Internet, etc. But this is a good one; the essential points could probably be boiled down to 3-4 long blog posts, but it's a must-read if you work in digital media in some way.

[Jessie · Rating 4 out of 5]

Excellent distillation and expansion on the theory of direct-to-fan strategy: to simplify,
build a direct relationship with fans, and offer a range of price points to ensure no money is left on the table. Highly recommended for anyone in the business of marketing.

[Warren Gossett · Rating 4 out of 5]

This books discusses how we can accelerate along the curve from being Internet strangers to curious watchers to followers to super fans. And then the thrill of being super creatives. Humanity needs to come alive, unlock the brilliance, find the answers we are dying without. And really live.

[Vilhelms · Rating 4 out of 5]

Grāmata apraksta peļņas modeļu maiņu digitālajā laikmetā, detalizēti, ar piemēriem argumentējot, kādēļ ierastie peļņas modeļi ir lemti nāvei, un kā izmantot šīs pārmaiņas savā labā.

Gana aizraujoši sarakstīta, svaigi un vērtīgi piemēri. Vērts izlasīt.

[Becky · Rating 5 out of 5]

A comprehensive and easily understandable projection of an increasingly digital world. It's a really exciting idea of how the markets are changing, one which will have to be adapted in some form or another. Embracing "free" to create super-fans!

[Isao Otika · Rating 4 out of 5]

An insightful approach on combining the power of free with technology to capture an audience where one on one relationships are built as a means of converting mere onlookers into paying super fans of your product or service.

[Ádám Büte · Rating 2 out of 5]

This book was not great. Most of the time it's just regurgitating stuff from other, more popular pop psych books. Some of it barely related to the subject matter of the curve.

There was one useful idea in there, the Curve itself, what it is, and how it works. Should have been a blog post.

[Ray · Rating 5 out of 5]

Great book, especially useful for game developers working on Free to Play games.

[Jakub Malinowski · Rating 4 out of 5]

Good read. Contains all typical freemium online marketing strategies. Unnecessarily long for the amount of content it has.

[Ridzwan · Rating 5 out of 5]

A must read for digital marketers.

[Helen · Rating 5 out of 5]

Understand the market and consumer better

[Tim Dempsey · Rating 5 out of 5]

Fabulous book - very well written challenge to incumbent business models

[David · Rating 4 out of 5]

A thoughtful and innovative take on how to make money with content in the changing market enabled by the Internet.