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When To Use Pay What You Want As a Tactic

Last updated November 28, 2015

Do you have difficultly pricing your products and services?

Have you considered asking your customers to just pay what they think it’s worth? The Pay What You Want philisophy.

This non-pushy pricing approach has yet to really take off, but it’s gaining many fans. It started to gather traction during the early part of the recession when businesses were finding it hard to make sales as everyone battened down the spending hatches.

Several restaurants moved from a priced menu to a sign that said Pay What You Want (PWYW) or Pay What You Can (PWYC). For some restaurants the results were surprising; many customers paid more than they would have done if the menu had prices. Other restaurants found that they could support their community when things were tough and then the community supported them when things got better.

PWYW is based on the premise that you allow customers to set the price. Sometimes that is zero, sometimes a minimum price is fixed or a price is suggested. There is no upper limit and you have to accept what people want to pay (subject to any minimum stated price).

You might think people want to get away with paying nothing, that isn’t usually the case. Of course, if your product is not up to scratch, then zero will be the price they pay. Don’t get angry, ask yourself why they didn’t want to pay. It’s a great way to get unbiased customer research.

In reality PWYW is just an extension of the 100% money back guarantee.

Positive vibes

Customers are attracted by the permission to pay whatever they want. Customers won’t be disappointed by the price they paid; there is no buyer regret either.

Businesses can use PWYW to test new products and services, gathering valuable research, data and feedback before making the decision to go to full launch. Testing a new market can be done in the same way too. It also helps them with price setting – at the very least the company can just divide the total amount achieved by number of sales to get to an average price – a starting point perhaps...

Promotions to clear old stock also see PWYW tactics being employed to great effect.

Not Just Restaurants

Radiohead album coverIt’s not just restaurants; Radiohead launched its seventh album, In Rainbows on a PWYW download and that in turn generated thousands of paid album (physical) purchases.

Openbooks.com is using the PWYW pricing model to ‘sell’ books.

This isn’t a good stand-alone strategy and I wouldn’t recommend it for your entire range but as a tactical deployment it has its benefits. Here are some rules you should consider:

  • Use it with low overhead products
  • Be consistent
  • Use it as a short term tactic and create urgency. Set a short term end date – you can always extend if necessary
  • Charity connections are strong motivators
  • Suggest a price or set a minimum fixed price if you are nervous.

Perhaps you prefer discounting? This related article, Discounting as a Sales Tactic will interest you.

So will you be letting your customers name their own price for your next promotion or launch?

shirley-mansfield-CoachSME
Shirley Mansfield
Master Business Problem Solver

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