Better Revenue Models: Pay What You Want – Not Crazy After All These Years?

Pay What You Want (PWYW) pricing has gotten some attention in the past few years, but most people still dismiss it as naively utopian, only suited to very special situations.  

 

I have posted a survey of a growing body of research and real use that suggests that it has much more value than most businesses realize, in a wide range of situations.  Many of you know of Radiohead, and now there is the Freakonomics movie preview, but there is a lot more to think about.  A blog post with a link to this survey is at http://www.fairpayzone.com/2010/10/pay-what-you-want-still-crazy-af....

 

What is more, I suggest that an enhanced form of PWYW can be applied to ongoing Internet relationships, using feedback on how well people pay, to gate access to further PWYW offers as a special privilege.  This FairPay process enables behavior like a freemium model that can be far more simple, fair, adaptive, dynamic, and profitable.  It is especially relevant to digital content but can apply to other products/services.  More on this is at http://teleshuttle.com/FairPay.

 

(It seems PWYW and FairPay are patterns, in that they deeply alter many other building blocks of the canvas, especially on the customer-facing right side.)

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Permalink Reply by Neil Adams on October 11, 2010 at 9:10pm
Richard

I don't have any practical experience of this business model but it makes an enormous amount of sense to me although I do buy people a drink if they are nice to me

I had an idea for a business that would take over from standard branded journalism and freebee papers. It works like this:

1. The free newsite is open to journalists and readers
2. Readers must buy some credits - they get $5 free credit when they sign up
3. If they read an article they are invited to donate some of their credit to the author - they are under no obligation to donate anything
4. A chart is produced which ranks artcles by the amount donated - this subdivided by topic - e.g. sport, politics, business etc etc
5. The site could also makes money from advertising

so you see we have a sort of Open newspaper but one which rewards the producers of the copy - the better the copy the more they will earn.

But it relies on PWYW?

What do you think?

PS - I'm half expecting someone to say it is already happening!
Permalink Reply by Richard Reisman on October 11, 2010 at 9:30pm
Yes there are some close approximations to that, and they work across a network of sites/publications -- katchingle .com and flattr.com.

Interesting idea, and seems promising, with some apparent success.

What FairPay adds to such PWYW variations is the idea of tracking feedback on how individuals pay, and selective/gated control of who gets such offers (based on that payment history), so only those who pay fairly continue to benefit. That can motivate prices that are much more fair to the seller (and still acceptably fair to the buyer). That makes FairPay much more suited to broad commercial use by serious media businesses that need a fair profit, not just token contributions.
Permalink Reply by Erwin Fielt on October 16, 2010 at 6:51am
See a related article in the Economist: Panera’s restaurants are thriving in the downturn http://www.economist.com/node/17209665
Permalink Reply by R Subramaniam Iyer on January 20, 2011 at 5:47am
I know of a restaurant in Singapore that has this model.  The hook, however, is religion.  The restaurant is run by a Hindu group associated with an ascetic who is known in the Indian community.  So it would be fear or respect that makes people pay, and some pay more and others less based on ability.  But what is interesting is that even non-Hindus frequent that place for the quality of food, so much so that it is crowded at lunch times.
Permalink Reply by Sami Dob on January 20, 2011 at 8:51pm

Hi,

 

At Panera’s restaurants in ST Louis, 65% have paid the recommended price! not bad at all!

And it's close to breaking even, wouw!

Human nature is in fact what we want her to be...

Permalink Reply by Salvador Pérez Sempere on January 24, 2011 at 11:05pm

Nice proposal!!! I am thinking how to use this schema of prices for an ecommerce solution we are developing, just looking to include something different.

 

Permalink Reply by Richard Reisman on January 24, 2011 at 11:27pm
Salvador, thanks -- I would be happy to hear about any plans relating to FairPay pricing, and possibly offer suggestions.  Can be reached at fairpay at teleshuttle dot com.
Permalink Reply by Scott J. Wood on February 17, 2011 at 6:15pm

An example of sustainable PWYW.

 

I see a correlation here in the Milwaukee, WI (USA) area with a food coop that has three locations (Outpost Natural Foods). 

 

This coop provides organic food and other organic consumer goods that incur premium pricing that is in effect PWYW.   One could opt for the less expensive alternatives to organics and therein lays the PWYW.  The choice is to pay a bit more for organics or less for the alternatives.

 

The question then becomes:  Pay me now or pay me later?

 

Organics = pay me now, and the alternative is pay me later (health and environmental concerns).

 

The long-term benefits to human health and the environment regarding organic food and organic consumer goods are known by the buyer who will pay this premium price (now). 

 

The coop is sustained by its membership.  The membership is sustained by the coop.

Permalink Reply by Antony Upward on July 22, 2011 at 12:27am

Richard,

 

You said at the end of your post "It seems PWYW and FairPay are patterns, in that they deeply alter many other building blocks of the canvas, especially on the customer-facing right side."

 

I've been thinking about this too...

 

Care to share what you had in mind?

 

Antony

Permalink Reply by Richard Reisman on July 22, 2011 at 11:43pm

Antony,

Thanks for picking up on my suggestion that "It seems PWYW and FairPay are patterns, in that they deeply alter many other building blocks of the canvas, especially on the customer-facing right side."

I see FP as an architectural pattern much like "The Long Tail" and "FREE as a business model," both in general, and with important similarities to key aspects of each:

FP exploits a different long tail, one that I have described as a Long Tail of Price sensitivity, to sell to buyers across the full range of value levels and price sensitivities.  See:
http://www.fairpayzone.com/2011/03/cutting-gordian-knot-of-price-setting.html
http://www.fairpayzone.com/2010/06/long-tail-of-prices-uncoil-it-wi...

FP also has a close relationship to free and freemium models, in that it benefits from tiers, much like freemium, and that it captures high revenue from high-margin buyers while also generating scale revenue and economies from low-margin buyers. See:
http://www.fairpayzone.com/2011/03/reinventing-subscription-platfor...
http://www.fairpayzone.com/2010/06/fairpay-for-hulu-or-youtube-or-better.html

FP has deep ramifications on the right side:

  • Customer Relationships (acquisition, retention, upselling, and learning in an ongoing relationship dialog),
  • Segments (dynamic tuning to segments of one),
  • Value Propositions (unlimited factors), and
  • Revenue Streams (various kinds, recurring/subscription/usage)

Much of the FairPay site, and the related blog, addresses these pattern aspects (even if not clearly labelled as such).
http://teleshuttle.com/FairPay/default.htm
http://www.fairpayzone.com/

 

Permalink Reply by Richard Reisman on August 11, 2011 at 7:46pm
I should have added one more blog link as being directly on this range of impacts: http://www.fairpayzone.com/2010/09/business-model-generation-with-n...

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