The pay-what-you-want trend is simple to implement. Instead of choosing your rates, you let customers choose what they want to pay you. Restaurateurs, writers, graphic designers, and many other small business owners and freelancers have tried this payment scheme and reported success. Although it’s not without risks, pay what you want offers several compelling benefits.
1. Greater Earning Potential
In many cases, entrepreneurs report boosting their revenues under the pay-what-you-want model. For instance, in one experiment, marketers applied three pricing models to a book. Two prices were static at $19 and $29. In the third case, customers could choose to pay what they wanted, and they could opt to have the book for free if desired. In total, the researchers dealt with over 5,700 customers. They found that the pay-what-you-want model attracted four times as many customers and generated more revenue than the other models.
2. Attention for Your Business
When something is free, word often spreads like wildfire, but giving away products or services for free does nothing to boost your revenue. With the pay-what-you-want model, you get the best of both worlds. Clients are likely to spread the word about your pricing, but you don’t have to sacrifice revenue. For example, when the Taverne Crescent in Montreal instituted a pay-what-you-want model, the company received media attention from major newspapers around the country. In addition to PR promise, the pricing model can also help with lean marketing on social media. The hashtags #PayWhatYouWant and #PayWhatYouCan are fairly popular on Twitter, and Facebook and Instagram users tend to love sharing stories about pay-what-you-want businesses and entrepreneurs on their pages.
3. Promotional Benefits
Like the Taverne Crescent, you don’t have to use the pay-what-you-want model forever. Instead, you can use the model on a limited basis as a promotional tool. Offering flexible pricing can be a great way to attract new clients, while also generating some buzz around your company.
4. Feeling of Value
Whether you’re selling a product or providing a service, the pay-what-you-want model puts the ball in the customer’s court. Rather than yielding to whatever price you have selected, your clients decide how they value your services and pay accordingly. For some business owners, this provides a boon of confidence. If your clients decide to pay you more than you normally request, it can give you the satisfaction that you truly provide a valuable product. Ultimately, this can give you the confidence you need to raise your prices, pursue new avenues with your business, or even offer sliding scales permanently.
5. Residual Rewards
In some cases, the pay-what-you-want model can create residual benefits for your company. For example, in 2008, Paste magazine was about to go under. Instead, the magazine jumped on the very new pay-what-you-want trend. In a short time, it attracted 30,000 new subscribers who paid an average of $9 per subscription. However, the benefits exceeded a full bank account. The influx of new subscribers helped the magazine land new advertisers, which ultimately kept it afloat. Pay what you want is a compelling trend, but you need to embrace it carefully. Unfortunately, one restaurant in China tried the technique and lost thousands of dollars in a week. Before you get started, read about other companies that have used this model and follow their successes.