Have you ever tried the pay-what-you-want (aka the pay-what-you can (PWYC)) pricing strategy?
Used by both for-profit and non-profit business models, it allows customers to decide how much to pay for a product, and it can be an alternative to free trials or samples.
This method has both benefits and drawbacks.
And whether or not you should test this pricing format, depends on your goals. Below we cover the different upsides and downsides of the pay-what-you-want option.
Why it works
- Pay-what-you-want promotions are seen as more original and entertaining, and tend to garner more attention.
- You’ll reach a better audience than simply giving something away for free.
- If more companies adopt this method, the novelty may wear off.
- People are more likely to pay than to choose zero. However, the average price chosen by people is lower than when you sell at a fixed price.
- It shifts the decision-making burden on the client. This causes an additional thing for customers to contemplate and, as a result, increases the chance of an abandoned purchase. The ‘pick your pricing option’ format could be the solution. This involves giving the user different pricing options, so they need to make a smaller decision.
Pay-what-you-want is an alternative to the most common formats, such as “just pay shipping” or “$1” – it’s not a strategy to generate revenue, but one to attract new leads and new customers.
The biggest advantage over these two is the novelty factor.
Few brands implemented this format, although “just pay shipping” is pretty frequent.
And here are some stats from real-life examples from studies conducted on the pricing format:
- In an experiment testing pay-what-you-want vs 40% discounts for the promotion of professional photo portraits, people chose to pay $19.66 on average (equivalent to a 63% discount). But it attracted double the number of customers.
- People chose to pay $1.72 on average for a razor when Gillette tried pay-what-you-want vs. free samples. (This came to 11.8% of the standard price).