Looking for innovative ways to price and sell your products? Is there a pricing strategy that can attract new customers and increase sales/profits?
The answer is simple. Let your customers pay what they want based on the value they think they are getting!
Pay What You Want (PWYW) is a unique pricing model effectively used by software companies, restaurants, artists, and content creators. The flexible pricing allows customers to pay an amount that they deem affordable.
Customers can also choose to pay more for a product as a means of gratitude towards the brand.
Read on to learn how you can use the PWYW strategy to your advantage.
What Is the “Pay What You Want” Model?
The "Pay What You Want" model is an innovative financial strategy in which customers are offered a flexible pricing model, allowing them to pay what they deem fair for what they're receiving.
Source: Twitter @SemJart
It's a win-win situation as it allows brands to gain new customers on their own terms and patrons the ability to choose what works for them. This unconventional business model has revolutionized how brands charge for their content.
Businesses can now respond swiftly to customer demand and create relationships with those who view their product from a different price point perspective.
Benefits of the Pay What You Want Pricing Model
- Build awareness - People are intrigued by flexible pricing. Being able to pay your price for a product will undoubtedly grab the consumers' attention.
- Increase in web traffic - More people will be inclined to visit a product page that allows them to pay a price of their choosing.
- Increase in profit - Some people may choose to pay a higher price than what is necessary. This can help boost profits.
- Charity meets business - Fans can pay more for exclusive digital content from their favorite creator to show appreciation for the creator's work. The creator can then direct some of the proceeds to a charity.
- Automated price adjustments - No need to worry about adjusting product pricing. Let the consumer make an offer.
How Does the Pay What You Want Model Work?
The 'pay what you want' model is quickly becoming popular among brands due to its flexibility and potential financial benefits.
How does it work? Customers can decide how much they will pay for a particular product or service. All that is required is that they make an offer, however small or large, as payment.
This approach has gained traction recently because customers can afford products that may otherwise be too expensive for them - and brands have still received remuneration for their efforts.
It's a win-win situation for all involved!
Why Do Brands Use the Pay What You Want Model?
The pay-what-you-want model is an innovative way for brands to increase customer loyalty and create a new level of consumer engagement. It's also a great strategy for selling digital content.
Source: Twitter @JanetJealousy
Here are a few reasons why brands use PWYW:
- This model removes many of the barriers customers face when purchasing a product by providing a flexible pricing option. It instead creates a win-win situation with customers paying what they feel is appropriate for the value they gain from their purchase.
- Customers may also be more inclined to purchase if they're not locked into one fixed price, as there's always room to negotiate or decide how much you're comfortable spending.
- Brands that produce evergreen digital content can see that content as an investment when sold over a long period (years) using PWYW.
- It allows brands to demonstrate transparency and understanding and overall creates opportunities for more significant revenue.
Ultimately, the pay-what-you-want model succeeds at creating a unique and adaptable system of commerce that enables brands to engage in direct dialogue with their customers.
Examples of Pay What You Want Pricing
The PWYW pricing model is versatile and can be used in various niches and industries. Here are a few ways you can implement PWYW:
Musicians can allow fans to pay whatever price they want for songs or albums.
Streaming revenue isn't lucrative for most musicians. Selling your music for a few dollars online isn't worth it, either. However, giving fans the freedom to pay what they want could lead to better revenue.
Fans that appreciate your music (and the effort that goes into making it) can choose to pay way more than the suggested price. Also, fans still warming up to your music can pay a much lower price to access your music. This can help eliminate piracy as well.
Source: Twitter @JoshGarrels
Musician Josh Garrels recently offered his entire music album catalog to fans on a PWYW pricing model. As a result, music fans can now discover Josh’s music at a low cost (or even free).
This strategy allows Josh to effectively promote his brand online and acquire new fans for his ever-growing fanbase. He can later capitalize on the new fanbase by offering them merch, new album releases, and concert tickets.
Radiohead also famously released their “In Rainbows” album on their website using the PWYW strategy. Fans were allowed to pay any amount of money for the album for a limited time only on Radiohead’s website.
Source: Reddit r/radiohead
Here are a few things we learned from Radiohead’s In Rainbows album release:
- Most sales revenue during the album launch came from digital downloads on their website.
- The limited-time offer helped boost sales during the launch, as fans wanted to take advantage of the PWYW offer. This shows that paying what you want and the fear of missing out (FOMO) make a great combination.
- Radiohead gained a lot of attention because of the PWYW strategy. Fans, businesses, and marketers were all intrigued by this pricing strategy. This allowed the album to gain incredible traction exponentially through word-of-mouth.
Brands or content creators can offer digital products using the PWYW strategy.
Digital products like online courses, images, videos, and games require plenty of initial resources and work to develop. However, once the content is produced, it's only a matter of selling the digital product online.
The PWYW pricing model works great for digital products for a few reasons:
- An increase in traffic and exposure as more people will be intrigued at the prospect of paying what they want instead of a fixed-price product. Creators can build a fanbase and capitalize in the long run.
- Evergreen content can be sold online for years to come. This allows the seller to sell their products at a low price over the long term. This works if the creator is willing to recover their expenses over an extended period.
- Most content creators already have the tools required to produce content, which makes the creation process inexpensive. This allows the creator to easily cover low costs with smaller payments from fans who pay less.
Humble Bundle is an excellent example of a brand that sells digital products like games and ebooks using the PWYW model. They also included a charity element in their strategy, which makes their offering even more intriguing and unique.
Their mission is to support charity while providing excellent content at affordable prices. Users are encouraged to pay more for products knowing that a portion of their money will go toward a good cause.
At Humble Bundle, you can pay as little as $1 to access a limited amount of eBooks. $18 gets you access to the specific book bundle. Paying more will allow Humble Bundle to distribute the additional funds to publishers and charities.
Humble Bundle’s strategy is also ideal for up-and-coming writers looking to expand their fanbase. Writers can offer their books to companies like Humble Bundle for a low cost, hoping to gain exposure and potential revenue from readers that pay larger amounts.
The Pay What You Want strategy gets tricky with stores that sell physical products. It doesn't make sense to allow people to pay a dollar for an item that costs $50.
You will likely have to set a minimum price for your products. This amount will cover the cost of your product. You can then give users the option of paying higher amounts for the product.
It's evident that most people will undoubtedly pay the minimum amount, which is why it makes sense to offer additional perks for those who spend more.
Perks such as:
- Free delivery
- Gift wrapping
- Personalized messages
- Gift bags
- Aftermarket accessories
Another PWYW strategy for online stores is to price your products at the full retail price. Then allow customers to "Ask Their Price." Once they have placed a bid for a lower price, you can choose to accept their price and ship the product.
The PWYW plugin from the Shopify app store allows you to do this:
Source: Shopify PWYW App
This strategy will save you time adjusting pricing due to weekly or monthly promotions consistently. Instead of putting products on sale, let the consumers decide a sale price for a product of interest on an ongoing basis.
More examples of Pay What You Want:
- YouTubers can offer premium content to fans that will pay the price they think the content is worth.
- News and Media outlets can let fans pay a custom price for daily newspapers or magazines.
- Coffee Shops like Java Street Cafe can let customers "pay what they think is fair." Java Street Cafe found that most people paid close to what they were charging before as they loved the venue and chose to pay fairly as they wanted to place to stay around.
- Content Creators that produce digital content like online courses, audio, image, video, etc., can offer their work on a PWYW basis. Fans that love a creator's work but cannot afford to pay can still gain access at a lower price.
- Sporting Clubs can allow fans to pay what they can afford or pay extra cash to support the upkeep of their club's venue. This will certainly encourage more fans to attend games.
Source: Instagram @PooleTownFCOfficial
Are There Any Disadvantages to the Pay What You Want Model?
Although the "pay what you want" model gives customers unprecedented control and flexibility when deciding how much they are willing to pay for a product, this approach does have disadvantages.
- Many brands that use the model have significantly lower revenues than initially anticipated.
- It is possible that customers who might be interested in the product but feel like they can't afford it won't purchase it at all. Customers that can afford full price won't always want to pay as much as they could.
- If more buyers adopt the mindset that it's ok to offer lower prices, many brands may end up undervaluing their products and experiencing losses.
- Brands could disrupt the market as people will refuse to pay full price for products anywhere and would rather wait for the next available opportunity.
It is important for companies to carefully consider all potential disadvantages before implementing the pay-what-you-want model.
Pay What You Want Q&A
❓ Can the Pay What You Want Model be applied to any business?
The PWYW model works best with products with low physical costs, like digital content. However, you can still use the PWYW strategy on physical products by limiting users to a minimum price around the product's cost.
❓ Can I make a good profit using the PWYW pricing model?
A specific piece of content that did not cost much to produce can be profitable. Especially over a long period, which is why evergreen content can potentially perform well in the long run.
❓ How long should I use PWYW pricing on a product?
Brands experimenting with PWYW by offering it for a limited time have found plenty of success with this strategy (refer to the Radiohead example above). Customers will quickly jump at the opportunity to pay their price in fear of missing out. Once the PWYW period is over, you can revert to normal pricing.
PWYW over an extended period is also lucrative, especially for digital products with a 'once-off' cost that can be sold repeatedly. In addition, your products can generate profits in the coming years, so creating evergreen content is crucial to this strategy.
TL;DR: The Pay-What-You-Want Model
The pay-what-you-want model is a unique selling strategy that allows brands to sell their products with a flexible price option.
This pricing strategy can be beneficial for both the consumer and the company. Those benefits include:
- Consumers are given the opportunity to choose how much they would like to spend on a product.
Companies with this type of pricing can help increase sales and brand awareness.
- Although there are some disadvantages to using this method, overall, it is a win-win situation for both parties involved.
Do you see your brand using the pay-what-you-want model?