Pay-What-You-Want Revolution
By Penny Saver, September 14, 2011, Shopping Tips
There is a new trend in the marketplace right now, and it is growing. This trend is the economic system by which consumers pay what they want for a given service or product. There is no set price, and the consumer may choose to pay what they feel the product is worth, far less than it is worth, or even more. It may seem too good to be true to the consumer, and the vendor may seem to be taking a terrible risk, but in certain markets, this system has proven itself a success.
Industries Utilizing The Pay What You Want System
This system is popping up online with downloadable music and video games. The band Radiohead, first pioneered this economic idea with their album, In Rainbows, in 2007. The album was made available for download at whatever price their fans deemed fair. Later that year, Moshpit Tragedy Records changed their entire pricing system for downloads over a pay-what-you-want system. Both have enjoyed success in generating sales and revenue.
It is becoming more prevalent outside the virtual world as well. Coffee shops, cafes, and restaurants are successfully utilizing this system in certain key markets, and we are also seeing it in museums and galleries. Customers and patrons can take buy food, beverages, admission tickets, and so on for the price they think is fair or for the price they can afford. It is a revolutionary idea, and it is growing.
Advantages To The Consumer
The advantages of this economic system are obvious. Some consumers who might otherwise find they cannot afford to go out for a cup of coffee or see a new gallery exhibit can now indulge themselves without going broke in the process. This system can help enhance their lifestyle and even open up their budgets so they can enjoy a few more luxuries. This is particularly prevalent in an economic climate that includes inflation increases and high unemployment.
Advantages To The Companies Or Sellers
While this may seem like a formula for ruin for vendors and retailers, it has proven quite the opposite. Companies are finding that by using a pay-what-you-want system, they have been able to increase the number of patrons they are seeing walk through their doors. With a traditional pricing system, they may have failed due to a lack of customers; with this system, their customers may be paying less than they would have asked, but they are paying something. Word of mouth and return customers then become instrumental just as they would under more common circumstances.
Surprising Results
Music companies, restaurants, and cultural hubs have been successful using this system. While some patrons pay very little, they have found that those consumers who can actually pay more than regular pricing would demand. This may be motivated by a desire to help keep the system alive, an aspiration to support the company or organization involved, or a more philanthropic “I’ll pay because others cannot” attitude. Whatever it is, the system has worked.
Know Your Market
Of course, this is not an economic system that you, as the retailer, will want to instill everywhere. You should know your market area. For example, in a depressed area where the majority of the populace is either under employed or unemployed, this system could lead to disaster. A more stable area with a mix of people and financial means will be a more appropriate environment for an endeavor such as this.
Not For All Products
Not all industries are suited for a pay what you want system. For example, you could not sell washing machines using this method because you would almost certainly not be able to cover the cost you must pay for the machines before selling them. Your product must be intangible, like admission an art gallery or a play, or a download online; your product may also be one that is of low cost to you. For example, even cafes with traditional pricing give endless free refills on soft drinks and coffee. This is a great place to work with a system like this.
Win/Win
This surprisingly successful new system seems to be a win for everyone when done correctly. The company builds a solid customer base with lots of referral and return business, while standing out in the community as a philanthropic organization. Consumers can enjoy a luxury or indulgence for exactly what they can afford to pay. The system works, and it may be the next big trend in today’s capitalist market.
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