Question 2: PWYW determinants

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.

Anais_Grelet wrote: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.

I think that the price does not take in that account if customers really believe in the company which procures them the product or service.
For instance there is a famous PWYW restaurant in Italy which is well known for his policy. All the food used came from small producers and small farmers who produce in so low quantities that they are not competitive enough to sell into the real market. The fact is that the main customers are low-revenue customers and they are willing to pay even more than the real cost of the meal.
So I think that behavioral aspects are stronger than the rational ones like money. A good way to establish a PWYW business is to make customers concerned about your philosophy.

In my opinion, price consciouness and satisfaction are the two main factors which can affect my price decision. Indeed, if I get used to pay a price for a product, I can have an idea of this price product on the market. With this idea, I can just set up the price I want to pay according to the satisfaction the product will give to me.

@ Anais... I agree with you, satisfaction has a role in the success of PWYW method. However, it put pressure on the seller so as to provide high-quality service to ensure that each and every customer is satisfied.

florent_lefevre wrote: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 don 't think loyalty is so important because a regular customer that have used your product or service for many years would expect in the long run lower prices

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 a company can modify the customer's behaviour and convince to pay more if only it increases the customer satisfaction and maintain a good buyer /seller interactions (example reinforcing customer service). If A customer is satisfied with one product or service will tend to pay more pay more

There are gaps between the conceptualizations and the experiments in the paper. All three experiments involve experience goods and services. This means that customers get the chance to consume them before they decide how much to pay. This can be very different from non-experience goods and services where consumers have to decide how much to pay before they experience the offerings. As a result, different drivers will have different impacts on PWYW for different types of offerings. For example, satisfaction will become less relevant for non-experience offerings.

Loyalty, Satisfaction, and Income would affect my buying decision. If I am loyal to a certain product (band), I would pay as much as they asked (or the "norm" is) for the product... Satisfaction would determine if I would pay more than the norm (if I think that the product is rediculously good) or if I regret what I had paid for...and my income would almost over-ride my previous two statements, if I am rediculously wealthy, I wouldn't care how loyal or how satisfied I was with the product, I would pay slightly above average.

But like it was mentioned above, that average or "anchor" price, needs to be present in order to guide our willingness to spend on purchasing the product.

Availability can be another factor that surprisingly no one has mentioned. How available is the product in the market or how available is the product to you? -For example Radiohead only sold on-line, would you pay your friend extra money to buy you the album if you didn't have an internet connection at your house?

~Zoo
PS: is "Batik" Bartik? You would pay MORE for products made by children?! haha... You should BOYCOTT products made by children, otherwise the producers would higher MORE children to work for them since people (like you) would pay more for the products! haha...c'mon!
PPS: I worked at a coal mine for 2 days...::cough cough::.. they had children working there too yet no one paid more for out coal.

As for another determinate...what about peer pressure? or Past
experience (have you been in the waiter's shoes, or developed sold
similar products). If either of these are true, they would have a
significant impact on how much you pay. All of this is of course
assuming your cultural background isn't one that stresses personal
goals only...

Personally, I would probably choose satisfaction as the top reason to determine how much to pay. Usually, in this kind of PWYW environment, fairness can be difficult to judge such that it really is 'fair'. How do you really know what the owner/supplier spends on the services/products? Past knowledge of equivalent prices would help, so that is why I say satisfaction is the driving factor. If satisfaction is low, why pay even a fair price (that is a price that keeps the owner from losing money). I don't see any upside in paying for something that dis-satisfies. Second I would choose fairness and loyalty in determining how much to pay.

I think "fairness" is the value I would emphasize the most. Because it can be applied to all parties that are involved in the prodcing / selling / buying process. Of course I would not want children to produce the shoes I wear. So the price must be high enough to guarantee that people who participate in production must be paid a fair amount of money. Then there is the company, the shop and the salesperson who sell the item to me. I know they have to make money too, so it's fair to pay a little more so they can make some money. And then, after all, there is me. The customer. I would like to pay a fair amount of money for the quality and quantity I get. I think the best price will be the price, where everybody involved considers it to be "fair" for themselves.

One factor that has not been mentioned yet is the availabilty of substitutes. I think the more substitute products there are, the lower the consumer's willingness to pay. Assuming that consumers don't want to "cheat" and get things for free, just sneaking away with it, i think there are two things that one can do to increase the willingness to pay in a PWYW environment:

1. Educate the consumer: Explain the user what's the cost drivers or what's a reasonable anchor-price and why. After learning that my coffee is a fair-trade coffee, of course I would pay more for it. I would also pay more if I got the feeling the product is very unique and mnuch different from others.

2. Create social peer pressure. Like in church. Of course you don't have to put money in the collection box. But if your neighbors left and right to you donate money, you would be looked upon strangely if you didn't.

I think it really depends on the stage of buying-process of customers:
For beginners (customers who never use that model); they will first be influenced and convinced by the fairness,the altruism and the income of that specific model. (customers will enjoy this innovative process and the fact that some people, according to their revenues, cannot put a lot of many on the products)
In a second time, customers who are already used to buy products with that model, the price, related to their satifaction, will matters most. If those customers are satisfied by their first experiences, they will probably pay the same price or an higher price because they enjoy their first experiences and become really convinced by the model.
Finally, customers who are addict to the model, will become loyals to the process and will recommend it to their friends.

I think, fairness and income would be the principal PWYW determinants.
If a seller offers his/her product in a market where the purchasing power is not high (income) or where there are a lot of customers who are waiting to pay very cheap for a product with a high value (fairness), I think the seller should think many times before to lunch his product in PWYW.
If this two determinants exists, then the seller could risk with a marketing strategy in the form of PWYW; but if not, then it's better to do it with the traditional method.

Like Luis I would also pay a fair price. If I believe that a company's product and service is created to satisfy their consumers then fairness would be my choice. However, it the product is of low quality then i would go for low price. It depends on the need for the product or service offered.

betul_batik wrote: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.

I totally agree with Betul. There are many determinants but I think that depending on the kind of product is how PWYW will work different. In the market there are many products, basic & commodity products, depending how high is the consumers' level of loyalty to the brand, and how this product has been promoted will be the response of the consumer to this strategy. Fairness is very important, if it is a basic product it's easy to set a fair price because this product will be something we use for a daily living and is something everyone buys and can affort to buy it. In the other side, if the product is a commodity it is a bit difficult to set a price, eventhough is just a product but here the determinant is loyalty to the brand.

As a seller the main determinant will be profit/income in order to avoid having losses, is more simple because pricing is based on costs, and just by covering the costs the income will be safe.

Culture is also one of the determinants I agree with, because depending on the person's background, values, and education is how it will determine the price. Cultures such as Chinese and Indian have always in mind to get as much as they can so they will always go for the lowest prices.

Finally, I think setting price with PWYW is very subjective because it gives the consumer the free will to set the price and every person has its individual world and different way of thinking. In one part using PWYW is very risky for companies because they can loose a lot of money, but depending how they manage the strategy is how they will make it work. By using is with some products in order to attract more consumers and having other product lines with set prices I think is the best way to make it work. On consumers side, it is always better to have the lowest prices and pay less, as long as you get quality of course.

@Florent:

You made me think a bit differently:) I wanted to say that money and income is extremely important, but it is right that it is middle class that usually pays the most. I guess it is due to the fact that the wealthier you get the most used you get to idea of saving wherever possible and you stop appreciating work of the others;) middle class, on the other hand, are the ones who enjoy products the most. Just look who leaves the best tips in restaurants: these aren't businessman, these are definitely not students but families with 2 children, who appreciate the service. So the attitude is the biggest issue here.

@Betul:
Although I wrote what I just wrote, I have to also ad, that according to the rule that we behave as homo economicus, we are trying to do as good deal as possible. When I am looking for new pair of sneakers, I am not buying the most expensive ones, but I am looking flr the best deal I can do. There are ones that cost 300$, but I am proud of myself when I can buy them for 20$, with extra promo "buy 3 get 1 pair free". And working children have nothing to do with it...

It is because even if I pay 300$, the people that did in fact made that shoe won't be paid more. It is kind of silly thinking and, unfortunately, world of business does not function this way.

I think customers' satisfaction is very important in PWYW. It also depends on when satisfaction will take place. The buyer don't have to be the user.

E.g.
What if a man wants to buy his girlfriend a cute Hallo Kitty cell phone (limited edition) as a birthday present. And in order to generate the maximum profit from him, through PWYW, I think the client should provide an aution like scene for the man to act as a hero in front of his girl.

I would suggest, the ingredients of a successful PWYW method will include
Special occasion => birthday
Heterogeneous product offering => Limitied availability
In public => personal heroic image, face-to-face contact
Girlfriend => someone important in his life, thankfulness

Everyone, any opinons?

florent_lefevre wrote: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.

Income is always a crucial derterminant when making purchase decsion in Economics. Things change everyday in our life. The sudden global financial crisis, the rise of oil prices, inflation etc., all of these enviromental changes alter the sense to our income and affect our purchase behavior and the price we are willing to pay.

As for income and economy, how much do they affect your WTP vs Paying anything at all. For instance, if you really have to start thinking about what you are willing to pay, then in the 3 case examples provided, my answer would be zero.
1. Buffet - I won't even go, can cook cheaper at home
2. Movies - I won't even go, watch tv or download something
3. Hot Coffee - I won't even go, are you kidding me 3 bucks for coffee??? I can make coffee at home.
So, I guess my answer is...in bad times, I don't look for free deals out there to save money. In in social environments where peer pressure, or fairness are strong values, then PWYW strategy would still work in bad economic times for those who can afford it.

shirleyo wrote:

florent_lefevre wrote: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.

Income is always a crucial derterminant when making purchase decsion in Economics. Things change everyday in our life. The sudden global financial crisis, the rise of oil prices, inflation etc., all of these enviromental changes alter the sense to our income and affect our purchase behavior and the price we are willing to pay.

Yes, you are right it is IMPORTANT, but what Florent said, is that it is not CRUCIAL. you cannot forget to take human behaviour and approach into the equation!

What about "peer pressure"? Would that fall into any of the above mentioned categories? If you to go a PWYW restaurant with your friends, the person that pays the highest would like set a standard for his/her peers, where as the person who pays the least would be laughted at.

I would be influenced in the following way:

I think an important factor is also “when” I would have to pay.


If I would have to pay on beforehand I have a “risk” that the product will not fulfill my
expectation, lowering my willingness to pay.


If instead I have been using the product for a while, the level of these risks or
uncertainties would be determined, adjusting the price I would be willing to
pay; lower if I am unsatisfied, higher if I would be pleased with the product


I also believe the “price information about other customers” could be a factor. If you find the product to be very good, or perhaps supporting a good cause, I believe there could be an “I-pay-at-least-as-much-as-my-neighbor“-effect (sorry for the self invented term). Take for instance charity dinners, if you see people around donating a certain amount, you will probably set your
expectations around the same.


Another issue which I believe could be important, and which is also used in common negotiation strategies, is the “anchoring-effect”;meaning the ability of one party to set the other parties level of expectations. Say if you post a message like this: “You can pay what you want,
but for our project to be able to continue with its good cause, we need
customers to pay in average 500 NTD.” Then you might be able to “anchor” people
around this price, but still enabling customers to pay what they want. Of
course there are also risks associated with this strategy, such as potential
customers might see it as an actual price, or you could potential loose the
extra money some customers might have been willing to pay extra. It would depend
on your ability to promote the PWYW-concept.

/Anders