The Price Is Right
In the classic game show The Price is Right, the basic premise is to accurately guess the price of products, from everyday items to outlandish “showcases” that include luxury items, cars, and trips. Moving from the game show environment to everyday life, what if consumers could decide what a product or service is worth and set their own price? This approach does exist and is commonly referred to as “pay what you want” (PWYW).
Recently we have observed several individuals and companies embracing this model for a variety of reasons -- visibility for their business, support for less mainstream goods and services, the ability to attract new customers, and ultimately generation of sales. And for value-conscious consumers, the appeal is obvious: the price is finally right.
An independent wedding photographer we will call Sunshine Charlie is conducting what she calls a year-long social experiment using PWYW. She has three simple steps to her process. Her clients pay $1,000 to reserve a date for her services. After the wedding, she furnishes the photos and refunds the entire thousand dollars. Then the happy couple pays what they think the photographs are worth. She states that her motivations are to understand the value people place on photography, attract new business, and start a conversation. While she is still gathering data on the value of her photography, she has succeeded in gaining new clients and expanding her geographical reach beyond local weddings, and has received an outpouring of support from photographers around the world.
Humble Bundle, a company that has successfully used PWYW with video games -- generating over $5 million with their last collection -- is now expanding into music. Their newest launch, titled the Humble Music Bundle, includes albums from six distinctive musicians: OK Go!, Jonathan Coulton, MC Frontalot, They Might Be Giants, Hitoshi Sakimoto, and Christopher Tin. On the company Web site, consumers set the total price and have the option to allocate it across the artists, Humble Bundle, and two charities.
Richard Esguerra, Humble Bundle’s business developer, says: “Our philosophy with games has been to help independent creators, support charity, and provide an unbeatable deal for customers and fans around the world, and all of those values seem to be a no-brainer fit for music as well.”
Using a similar approach to Humble Bundle is the company StoryBundle. Their latest offering is a set of seven thrillers and crime e-books by independent authors. Consumers enter a total price on the Web site and then use a slider graphic to determine how much goes to the authors and how much goes to the company. In addition, readers can donate 10 percent of their purchase price to a non-profit organization. For StoryBundle, the goal is to highlight and champion indie authors and connect them with avid readers who appreciate that sense of discovery of finding a cool book to read.
PWYW seems to be a nascent trend, and it is not surprising that in this economic climate it has great appeal for shoppers. And as noted above, it is appealing to businesses, as well, for a variety of reasons -- it’s a unique way to build a business, get exposure, and bring in new consumer segments. Marketers should consider exploring and testing PWYW with the goal to better understand how shoppers, across different consumer segments, value your product or service. In doing so, it could help determine optimal pricing levels. And for new, innovative services or products that have yet to establish a price or value with consumers, PWYW might be a great way to launch and test the boundaries. Regardless, if PWYW is right for your business, it can potentially be a great learning tool to help you set the price right.