Pay What You Want

A fair price for a fair value proposition

Pay What You Want Business Model Pattern

Pay What You Want Business Model Pattern Featured Image

The pay what you want business model pattern allows customers to set the price they pay for a product or service.

What is the Pay What You Want Business Model Pattern?

Pay What You Want Business Model Pattern

The pay what you want business model pattern is a pricing strategy where customers are given the freedom to determine the price they pay for a product or service. In this model, the seller allows the buyer to set the price, sometimes with a suggested price or a minimum floor price as guidance. This approach is based on the belief that customers will pay a fair price based on their perceived value of the offering and their willingness to support the business.

Why is the Pay What You Want Business Model Pattern Important?

The pay what you want business model pattern is important because it offers several key benefits for businesses and their customers:

  • Increased Accessibility: By allowing customers to set their own prices, PWYW makes products or services more accessible to a wider range of people, including those who may not have been able to afford them otherwise.
  • Attracting New Customers: The unique and customer-centric nature of PWYW can attract new customers who are curious about the model or drawn to the idea of having control over the price they pay.
  • Building Trust and Loyalty: When businesses trust customers to pay a fair price, it can foster a sense of trust and loyalty, leading to positive word-of-mouth and repeat business.
  • Differentiation: In markets where competitors use traditional pricing models, a PWYW approach can help a business stand out and differentiate itself as customer-focused and innovative.
  • Social Proof: If customers see that others are paying fair prices for the offering, it can create social proof and encourage them to do the same, reducing the likelihood of exploitation.

Impact on the Business Model

The pay what you want business model pattern significantly impacts various aspects of a company’s overall business model:

  • Revenue Streams: In a PWYW model, revenue is determined by the prices customers choose to pay, which can lead to more variable and unpredictable income compared to fixed pricing models.
  • Value Proposition: The value proposition in a PWYW model centers on providing customers with the freedom and flexibility to pay what they believe is fair, based on their perceived value of the offering and their willingness to support the business.
  • Customer Relationships: PWYW can help build stronger, more trust-based relationships with customers, as the model demonstrates the business’s confidence in its offerings and its willingness to put the customer first.
  • Target Customer: PWYW may appeal to a wider range of customers, including those who are price-sensitive, value-conscious, or drawn to innovative and customer-centric business models.
  • Cost Structure: Businesses using PWYW must have a clear understanding of their costs and break-even points, as they need to ensure that the average price paid by customers is sufficient to cover expenses and generate a profit.

How to Implement the Pay What You Want Business Model Pattern

To successfully implement the pay what you want business model pattern, companies should follow these steps:

  • Assess Suitability: Evaluate whether PWYW is a good fit for the business’s products, services, and target market, considering factors such as production costs, customer demographics, and market norms.
  • Set Guidelines: Establish clear guidelines for the PWYW model, such as suggested prices, minimum floor prices, or any other conditions that customers should be aware of when determining their payment amount.
  • Communicate Value: Clearly communicate the value of the offering to customers, highlighting its benefits, quality, and the costs associated with its production or delivery, to encourage fair pricing decisions.
  • Monitor and Analyze: Continuously monitor and analyze customer payments, looking for trends, patterns, and insights that can help optimize the PWYW model and ensure its long-term viability.
  • Adapt as Needed: Be prepared to adapt the PWYW model based on market feedback and results, such as adjusting suggested prices, introducing minimum floor prices, or combining PWYW with other pricing strategies.
  • Foster a Community: Encourage customers to share their experiences with the PWYW model, creating a sense of community and social proof that can help reinforce the value of the offering and encourage fair pricing.

Trigger Questions

  • What products or services can we offer on a pay-what-you-want basis that aligns with our brand values and target customers?
  • How can we communicate the value and benefits of our offering to encourage customers to pay a fair price?
  • What default or suggested pricing options can we provide to guide customers’ payment decisions?
  • How can we create a sense of transparency, fairness, and social responsibility around our pay-what-you-want approach?
  • What supplementary revenue streams or cost-saving measures can we implement to support the sustainability of our pay-what-you-want model?
  • How can we measure and learn from customer payment behavior to continuously improve our pay-what-you-want offering?

Examples of the Pay What You Want Business Model Pattern

Panera Bread Uses The Pay What You Want Business Model Pattern
  • Humble Bundle: Humble Bundle is a digital storefront that offers collections of games, books, and software using a PWYW model, allowing customers to set their own prices and choose how to allocate their payments between the content creators, charity, and Humble Bundle itself.
  • Radiohead: In 2007, the rock band Radiohead released their album “In Rainbows” using a PWYW model, allowing fans to download the album from their website and pay whatever price they wanted, including nothing at all.
  • Panera Bread’s Meal of Shared Responsibility: Panera Bread, a U.S. bakery-cafe chain, experimented with a PWYW model at its Panera Cares community cafes, where customers could pay what they wanted for their meals, with the goal of making food accessible to all while raising awareness about food insecurity.
  • Amanda Palmer: American singer-songwriter Amanda Palmer has used a PWYW model for various projects, including her music, art books, and live performances, relying on the support and generosity of her fans to sustain her creative work.

Summary

The pay what you want business model pattern is an approach that empowers customers and builds trust, while also attracting new business and fostering a sense of community. By carefully assessing the suitability of PWYW and setting clear guidelines businesses can successfully implement this model and create a unique and memorable customer experience.

Related Business Model Patterns

Explore More Business Model Patterns

References: