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‘Pay what you want’ gained limelight when Radiohead released their album ‘In Rainbows’ and left it to the discretion of their fans to pay whatever they feel like for the album, surprisingly they earned hundreds of thousands of dollars as revenue and that’s when it became an important topic to research upon.

So, what is pay what you want ?
Pay what you want is basically a technique wherein businesses do not decide a price for their product and leaves it upon their customers to pay a price which they think is worth it.

To understand how will this technique work, we need to focus on the psyche of the person who comes and visits us. When somebody is offered a pay what you want, there are a lot of things that comes to his/her mind. A person will pay a nice amount when he/she actually feels that they owe something to the seller or they might just do it to boost their self-image. Now, the next question is how much to pay? When I am availing some service whose value is familiar to me, I’ll know how much to pay but when I am taking away something whose value is not so familiar with me then I wouldn’t know what is the right amount. When it happens, usually the person will see what others are paying and might just pay a similar amount and when they’ll see that nobody is really bothered about paying then it might leave an impression that the service isn’t worth it and they won’t pay. When I heard about this thing, what came into my mind is that why would anybody like to pay any amount when they can get away from the situation for free? They’ll only pay when they’ll feel indebted to you otherwise nobody will bother. On the other hand, when we’ll relate this to some social cause then people will pay more. Why? Because now they have something to relate to.

There were many studies over the same topic which revealed some really interesting results:

  1. As I mentioned earlier as well, one study says that when we attach some social cause to our good then ‘pay what you want’ becomes really successful, because now people are emotionally attached to the good and they would like to pay more than it is worth. At one time, people paid five times the amount they paid earlier.
  2. Other study shows that sometimes ‘pay what you want’ turns out to be less successful because it raises a question of fairness, as nobody wants to pay any less amount and don’t wanna feel guilty about it later and therefore the demand for the product might just get lower. But when, the business will lower the amount of their product say from Rs.100 to Rs.95 then demand would be much more higher because of low price and because the concerns for fairness and self image is also gone.
  3. Also, there was a research done wherein people were asked to pay anonymously for their meal or pay to the owner and it turns out that people pay more anonymously as compared to the owner because apparently it boosts their self-image.

There is one more concept – ‘Pay forward’ which proved to be more efficient than ‘Pay what you want’. Here what is done is that, rather than asking you to pay for yourself they ask you to pay for someone who came before you or after you so its like you are paying on behalf of someone else as a gift ,which research shows will lead to an increased revenue. Karma Kitchen did the same experiment with the following cards:

And at the end they noticed that the revenue turned out to be in the following manner
Paying for someone coming after you > Paying for someone who came before you > Pay what you want for yourself

When you are paying for someone else, you feel a sense of responsibility for the other person and again you pay more to boost your self-confidence.

Concluding, Pay what you want seems like a good option but not the best at your disposal. There are much better options to know your audience. But we can’t ignore the fact that it is a good way of increasing your reach and building customer base.

The topic is vast, and the studies will go on forever, we can always add more things to each study and find out more results! I’ll definitely do a follow-up with this topic which will include more researches.
And, the next article will be a continuation on our previous discussion ‘There ain’t no such thing as a free lunch’. Keep following 🙂