Question 2: PWYW determinants

The following determinant of PWYW prices where highlighted by the authors
-Fairness
-Altruism
-Satisfaction
-Loyalty
-Price consciouness
-Income
Which of the followings variables would affect your pricing decision the most ? Can you think of any other determinant of pricing?

National condition and human nature would be the other two determinants of PWYW prices.

Chinese are not encouraged to pay more even when they are aware of the fairness or satisfaction of the product or service. They are taught that smart people always have a way to save his/her money and everyone should get along with others with distrust in the beginning in case of deception. Therefore, when someone offers a PWYW products or services, people may think that the products or services might have some problems or are the deceptions. They will wait and see and choose to pay as less as possible at first to avoid
some financial losses.

As for me, fairness and satisfaction are the two determinants that affect my purchasing decision most.

I cant think of any other example of PWYW determinants. However, as mentioned by Max your environment/culture does determine how much you are willing to pay for a product using this pricing mechanism. If you value others effort, then you will be fair in paying a price above zero. If the utility you derive from using the product is high, but your culture does not take into consideration that the producer needs to be compensated fairly, then you may be willing to pay a low price, or nothing, even though satisfaction is high.

To answer the other question, fairness and satisfaction are the main factors that will affect my pricing decision. If I am satisfied with the product, then I would be fair in paying a price equal to or above marginal cost, because it cost the manufacturer to make the product or provide the service. It would be inhumane of me to pay zero dollars for somehting that satisfies my needs.

In my opinion, everything said in the article is right. I can recognize myself in all the conclusion related to the determinants. Yet, fairness and income might be the most important ones.

In my opinion, it depends on the company/person you’re dealing with. If coke launched a special taste beverage and applied a PWYW pricing model I think that I wouldn’t pay that much thinking that they are powerful and wealthy enough not to suffer from a very low price. But if I had to pay for a product manufactured by children (Nike shoes for ex) and if they would be paid more according to the Nike sales for this product I would pay a fairer price in an altruist move. Then if I had to pay for a CD or on stage performance of my favorite singer I would be driven by a loyalty feeling which would lead me to pay a ‘normal’ price. If I were somewhere where finding a particular product, which I like very much, was nearly impossible I would pay a lot just to be satisfied. If I went to a PWYW restaurant, I would behave in a fairness way thinking that there are people working for it and that they should be fairly paid for the work they do. And eventually, if I were very wealthy maybe I wouldn’t care of the price at all. Actually, I think that there isn’t one universal answer. It all depends on the particular consumer and the relation he/she has with the product he/she wants to purchase.

As stated above fairness and satisfaction would be 2 important factors when the service is good...
But I'd also add that income interacts with fairness and is strong
determinant: a student, generally on a tight budget, won't feel he has
to pay as much because of his limited resources.
A wealthy person, because of their condition will be less concerned by this aspect and will find it fair to pay more.

Also, "uncertainty" would be another determinant:
-if I arrive at a chain restaurant (Mc Donalds, Subway...) I already
have an idea of the prices usually charged, so I'll feel more confident
to pay a "reasonable" price.
-on the other hand, if I arrive in a small Taiwanese village restaurant
serving local specialities I've never had before, I won't know the
normal price for a meal, so I'll tend to pay a large sum, just to be
sure people won't consider I'm stingy and mean.

Anonymity/Personal involvement

I think it is very important, if the consumer is anonymous (e.g. on the internet), or if he is really present like in a shop or a restaurant. Most of the people wouldn't pay almost nothing when they have to do it directly to a person and get a reaction of the seller. But if you can just order it via the internet, there are no glares of anyone. It easier for people to exploit the system.

The more the consumer is involved, the more he is willing to pay.

I agree with Janick but it think the distinction is more between sellers you know(or face) and sellers you don't know than between online or not online sellers.

Again, look at the example of Radiohead, they sold their album online but buyers were their fans so they paid a lot (even if it was sold online)

I agree with you Janick but I also think that people can feel involved in something without any human contacts. For ex, if you are involved in fairtrade initiatives and if you had to buy your products on the internet with a PWYW policy I'm sure you would pay a fair price anyway.

@Betul:
No disagreement from my side - people who are searching for FAIR trade products usually are not willing to exploit someone. Concerning the keywords: Loyalty, Altruism and of course: Fairness.

@Aurélie:
Also no conflict with me. I think that point is about Loyalty. My intention was to introduce another determinant of the willingness to pay.

I think that Janick is right but you can still get involved on the Internet.

The difference is that if you don't care about what you buy, you'll pay almost nothing on Internet because you know that nobody's directly watching you and you would have paid more in a store, giving money directly to a person. It is a bit the story of the Ring of Gyges, in Plato's The Republic.

If you care about what you buy, if it males sense for you (if you are a fan of a band or the product is important for you), I think you'll pay more or less the same online or offline.

Anchoring

There is a very interesting experiment concerning the method of Anchoring. Anchoring can be understood as a picture for setting a fixed point - like an anchor does with a ship. But in the management/marketing sector it means "giving a lead".

The experiment:
People of different ages should tell their willingness to pay for a bottle of red wine. The whole experiment was separated in to two rounds.

- In the first round they were asked, if they are willing to pay xx$ for the bottle. xx was nothing more than the last to numbers of their insurance-IDs. That means it was a randomly chosen amount.

- In the second round they were asked how much they would like to pay, if they could pay whatever they want.

--> The result is astonishing! There is a very strong correlation between the ID and their willingness to pay! People with a low ID were willing to pay less than people with a high ID.

Explanation:
1) The price for a bottle of wine is very hard to estimate. It could be 2$ or 200$
2) Because of the first question, people got a rough idea (anchor), in which price category they should search for the "willingness".

It is like Jeremie wrote a few entries ago about the Taiwanese restaurant. You need a lead to determine your price.

That also means that a smart seller can provide such a lead for the customer - at the best very subtly.

Janick is right,
but as you all mentioned, there are a lot of factors playing an important role in your decision.

The question is, how can a company convince the consumer to pay more. How can a company modify the behaviour?

@Felix:
Thanks for reading the entries so carefully. I agree with you about the loyalty part.

To reinforce my argument and to get back to the direction I want it to be understood I'd like to add, that we should really be aware of the big difference anonymity of the internet causes.

A simple example: Have anyone of you ever downloaded music illegally? The ones who answered with "Yes.": Who of you has ever stolen a CD in a music store? (Hopefully less people agree!)

That is what I ment with the ananymity and the distance the internet causes.

Schulz_Martin wrote:Janick is right,
but as you all mentioned, there are a lot of factors playing an important role in your decision.

The question is, how can a company convince the consumer to pay more. How can a company modify the behaviour?

There must be number of ways to influence the prize. A new company could for example mention on a flyer that they will implement a PWYW strategy so that consumers can pay what they want "instead of the fixed price" which is for example $30. But in reality the price can be much lower, they just try to influence the customers.

If it works it's great for the company but i think it's very risky. If customers find out the company's reputation might suffer from it.

I think Martin asked a very interestinq question. Does anyone have any other idea?

How can a company modify the behavior?

Schulz is my family name.. so please call me Martin

I think if the customer experience extra service/value, even though it is just a tiny thing, they will be willing to pay more to encourage this deliberation.
For me, the pricing decisions depend on the value of the product (that is fair and satisfaction). As I have little time to shop, to make things simple, loyalty is my other concerns.
I think I have various pricing mechanisms for different kinds of products. Don't you?

Alexandra_Engel wrote:The following determinant of PWYW prices where highlighted by the authors
-Fairness
-Altruism
-Satisfaction
-Loyalty
-Price consciouness
-Income
Which of the followings variables would affect your pricing decision the most ? Can you think of any other determinant of pricing?

I think that the variable that would affect the most my pricing decision would be satisfaction. If I'm satisfied with a product or a service, I don't care to pay an relatively expensive price. I prefer to pay a higher price for a good service (or product) than a lower price for a bad service (or product).

As Aurelie mentioned before it might be a good idea to promote the fact that a seller is using the 'PWYW' pricing mechanism and simultaneously mention what others have paid before. The company must be careful how to formulate this. If the company states: ' pay X instead of Y' they're already setting a ceiling to the price people will be willing to pay and thus setting Y to high is almost a natural consequence.

Schulz_Martin wrote:Janick is right,
but as you all mentioned, there are a lot of factors playing an important role in your decision.

The question is, how can a company convince the consumer to pay more. How can a company modify the behaviour?

I think that the company should try to increase its customers' satisfaction. The higher their satisfaction, the higher the price they will be willing to pay for the service or the product.

Alexandra_Engel wrote:The following determinant of PWYW prices where highlighted by the authors
-Fairness
-Altruism
-Satisfaction
-Loyalty
-Price consciouness
-Income
Which of the followings variables would affect your pricing decision the most ? Can you think of any other determinant of pricing?

I think any of these determinants might affect a pricing decision. But as everyone said, it depends on the context.
Fairness is, in my opinion, something anybody is thinking about when paying for a PWYW product or service.
I think altruism also plays an important role. Indeed, as Betul said, you would certainly not care to pay so much for the new product of a huge multinational firm product than for a hand-made one.
However, price consciousness can be easily changed by the seller, by showing a fake "original price", it makes you think it's product worths more than it actually does!
So to me, satisfaction and fairness would be the variables affecting the most my pricing decision. If i go to a restaurant using the PWYW method, even if it is supposed to be a very good one, i will not be willing to pay a huge amount of money if i didn't like the food. I think companies which want to use this method have to offer good quality products if they want their operation to function...

Income is not a determinant, it is often the middle-class incomes who pay the most. Fairness has a role to play but for me, I would say loyalty. When you like something, you don't want something bad to happen to it. For example, if you support a young band, you will buy their singles rather than trying to find it for free because you want them to thrive.

I'd like to say that fairness, and altruism would determine my willingness to pay the most but that is assuming my income is high enough to cash my moral cheque in the first place. I can't spend money I don't have so income has to play a role in WTP.

Anticipated satisfaction would also play a role, though after a product is consumed, I may not want to pay as much. For instance, I may not pay as much for a deli sandwich that is already in my belly. Although, my sense of fairness might mitigate.

In addition to these factors mentioned, what about peer pressure? I think that generally people's WTP would be affected if the price they paid and that of those around them was know. In the example of the deli, what if there was an automatic sign that posted 'the last price paid', or the 'average price'?

The variables which would most determine my pricing decision would be first satisfaction and then fairness. Even if I would probably be tempted in paying a low price, as I am a student with limited means, if I was very satisfied with the product, I'd try to pay a fair price.