Question 1: Examples

Can you think of other examples (companies, services) using the "Pay what you want model"?

Just about six months ago, a Japanese food restaurant in Taiwan applied the PWYW pricing mechanism. The restaurant owner might think it a good way of propaganda. However, this pricing mechanism resulted in a 700-thousand financial loss because most of the patrons chose to pay less than the cost of the dishes.

Another example is the "Pay-As-You-Wish Parking Lot" in Taiwan. This parking lot doesn't hire any administrative employees. Drivers can decide how much they want to pay based on their conscience. The owner of this parking lot believes in the bright side of human nature. Even so, he met with some difficulties. For example, someone parked his/her car without paying and even stole all the money in the parking meter.

My inference is that most of Taiwanese enjoy the feeling of obtaining a small advantage, that is, the "price consciousness" of Taiwanese is very strong. Since ancestors of many Taiwanese experienced hardship in the early days, they educated their offspring to be economical. For this reason, Taiwanese tend to save as much money as possible when purchasing. In addition, the greed for money may prevail over the so-called social norms in Taiwan, especailly in a bad economic situation nowadays.

I think anyone who wants to apply this pricing mechanism must take the avarice of human nature, the property of the product or service and national conditions into account. Or he or she might have a very high possibility of encountering financial losses.

The Ibis Hotel of Singapour used PWYW as a marketing strategy in the beginning, but only the very first bookers could pay what they wanted, and for one night only.

I think it was Radiohead or some other band that started their action of Pay What You Want for Music. you can buy their CD's or single tracks on the website, download the for free, but you are asked to make any kind of contribution for the musicians. seems fair and works for them, but so far there aren't too many musicians who want to join them...

In US there was a sale of a game The World of Goo based on this idea. It proves that if we can buy something for free (almost for free) we are more eager to take advantage of that... most people paid 1 cent, but an average price was 2.03$. Earlier you could have bought the game for 20$. you get the pattern here.

I can think of more examples of products with "Pay as You Want, but make it at least..." strategy:)

Magazines opted for a PWYW pricing model. Paste, for instance, a US music and entertainment magazine gave a 2 week period to people to sign up for a new subscription (or a renewal) during which they could choose the price they wanted to pay for a 1year subscription. The aim was to know how much a customer would have paid to read the magazine. They also wanted to attract new readers who would have maybe became loyal customers.

There is an interesting example within my circle of friends. Some of them are singers (classic, opera) and they sometimes have projects with a concert in the end of the rehearsals. Most of the time there is no entrance fee, but they ask for a donation at the exit. The amount people are willing to pay, when they are not forced to pay a certain amount. Especially when they were pleased by the concert. So I think there are three steps hidden behind this method:

1) Attract more people, because there is no entrance fee.
2) Raising their willingness to pay, by giving the feeling that they have saved money.
3) Asking for donations/payment when guests are in a good humor.


And now you may ask, why they became singers and no economic students...

As Bartek said, music is a really good example.

Radiohead use this model for their last album, but the case will be discussed in class on Wednesday...

New bands use it as well to get known. For example, on the website http://paywhatyouwantonline.com/ you can download music paying for a song the price you want to. Customers can be happy to discover new styles and participate in the launch of a band. They can think : "If they become rich and famous, it will be a bit because of me..."

There are some "Pay What U Want" parties organized in Paris, which use the PWUW model. Customers determine the price of the entrance, drinks, food according to their budget and to to the quality of the services provided by the staff in the club.
It really works, and it's always crowed

In London, there is a fancy restaurant which chose to use the PWYW pricing mechanism once a week after the financial crisis. They called it "pay what you think it's worth". Customers just had to pay for drinks, and could have tap water for free
It attracted many many people, and even if some people just gave one cent, overall, the restaurant earned 20% more than it would have earned with its original prices

edith_bonnefond wrote:In London, there is a fancy restaurant which chose to use the PWYW pricing mechanism once a week after the financial crisis. They called it "pay what you think it's worth". Customers just had to pay for drinks, and could have tap water for free
It attracted many many people, and even if some people just gave one cent, overall, the restaurant earned 20% more than it would have earned with its original prices

In Paris there are some restaurants that use the same concept. You pay just for the drinks and you can get the COUSCOUS for free. It really works and this strategy has attracted a lot of new customers.

When I was in high school (once upon a time), I was studying modern arts and we used to sell our paintings on the street. Then again, can we say "sell" when it is the buyer who decide ? Indeed, my classmates and I were showing our paintings to everyone and some of them asked us how much for this or that drawing. But we ran our small business as a pay as you want one and they gave us what they wanted. And we earned quite a loot by the end of the year !

We can see that this concept is applied in many sectors such as hotel business,catering, advertising.. In France an innovative brand "Madame Vacances" (tourist homes) has chosen to offer its customers "Pay What You Want" concept. The residence is located in the Hautes Pyrenees. At the end of the stay in this home, customers will pay for their own assessment and any additional services they have reserved (linens, cleaning ...) and local tax.

Yes I've heard of Madame Vacances in the Pyrenees. The first people to register for a definite week could pay what they want at the end of their stay. For their first campaign, they said that people around 100 euros for a house originally rent at 300, but it made good campaign for the brand.

A lot of restaurant around the world tried the 'Pay what you want' model. In US a coffe shop experienced that in early 2007. As Bartek said, even the video game producer use this model, championship manager 2010, a popular football management game announced a similar price model.

You gave many present examples. Could you focus as well on some industries/companies/products which should use the PWYW according to you?

PWYW can be used for start-ups. Unknown to its potential customers but which can't afford to give away free samples. However, the products must be consumable goods. Something that has a short expiry date if I can put it like that. Libraries can't apply PWYW methods (unless it wants to clear its inventory). For example, some libraries do that for second-hand books so as to clear the shelves.

I think Bartek's example Radiohead is a good one to start off with. The music industry should try to use the PWYW method to attract a larger fan base. Even though they maybe giving music out for free, there are other things that are not free such as the products with the band or singers image and concert tickets cost. This can be used as a advertising tool allowing the bands and artists to be more exposed.

Here is an part from the article "Radiohead ‘Pay What You Want’ Strategy an Unconventional Success" Analysts at MCPS PRS have crunched the numbers and beg to differ. Sure, the album was ‘illegally’ shared more than 2.3 million times within the first 3 weeks of it’s release. And that’s a lot of email addresses and potential revenue the band lost. But the firm claims Radiohead’s strategy was a success nonetheless; winning the public’s attention to top the charts in both the UK and US and enable a hugely successful worldwide tour.


Yes it will take away from potential revenues that the music industry can make but yet allows a larger fan base and creating a huge marketing for the bands and artists.

What do you guys think? Will this be profitable for the music industry or will they be scrapping for loose change? (just a thought)

Yes, music industry has definitely something to get from this method.
The PWYW method is the last barrier to hacking. If it doesn't foot here, even the unexperienced guy will have to turn bad to get what he wants.

<BLOCKQUOTE>
Another pay what you want example:
As an antidote to rigid financial conditions, an English got his cab driver’s license and insurance and officially opened for business with the Recession Ride Taxi. He will take passengers anywhere they want to go for whatever they want to pay.
There are no set prices for transportation, and he also offers a cooler full of pay-what-you-want beverages to thirsty guests. He even offers special perks to frequent riders: he provides his passengers with hole punch cards, giving them a free ride after every six trips.
Of course, his customers could easily get a free ride anyway; after all, he’s not forcing them to open their wallets. Since his payment policy is so flexible, he’s taken some strange trades: one customer gave him a $10 grocery card, and a local musician gave him his group’s CD. He believed that people are going to be generous enough to make it worth.</BLOCKQUOTE>
I wouldn’t even be surprised if his PWYW scheme generates so much goodwill that he makes more money than if he had a fixed price. When you match PWYW with a face-to-face, conscience-inducing contact, I'm pretty shure that it’s not very risky.

Lately there has been a lot of "Donationware" around. It's software that you can download and use for free, but from time to time you will be asked to donate some money to the creator. It is a slightly different mode than the examples mentioned above. But the concept behind it is the same. The customer decides if and how much to pay for a product.

A (donation-)software which I use quite frequently is "Cyberduck", a SFTP client for Mac. So far I have not donated any money. But I plan to do so. I have used this program for a long time, it's stable and gets constantly updated. So now that I know the quality is alright, I don't mind donating some money to the creator to make sure he keeps developing this great program.

The way I can think of is a customized way. For example, that it is eco-friendly or that it is traditional. If you can touch the emotions of someone or get to something he defends, he will be okay to pay more. That's what I used in my pitch when I was doing fundraising. But... even if you customize it, it is not 100% sure to get more money.

I agree with you Florent. Same policy for humanitarian organizations...2 lessons from this example : you can pull the emotional lever but you can also personnalize as much as possible your product/service so that the customer thinks it is directly adresses to him

Street performers use PWYW pricing model... also many artists (like Florent) use this model.

A way that they encourage more payment is by either customise the product/sercive to an individual/group or to target a certain common cause that this group of costumers feel strongly about, for example a fund raiser for hunger victims, etc.

***damn you Florent for typing the same thing right before me!***

Street performers usually get more money from people by directly asking/begging/yelling you to pay more, maybe this can be put to practice in the service industry too..."PAY MORE FOR YOUR HAIR CUT...OR I'LL CUT IT ALL OFF!" Haha. I'd pay more.

To answer your questions Edwige, I think we should convince customers to pay thanks to customer's brand loyalty like any other firm does. To illustrate that process, the company can, for example, create an online membership (Facebook membership) : only customers who paid receive on their e-mails boxes the new "pay what you want" products with limited editions that the firm just launched. Customers who paid will be the first ones who will know about new products. Make people addict to the brand thanks to the pay what you want model and provide them afterwards an added perceived value in comparison with other brands.