Comment on Article: Inside Five Businesses That Let Customers Name Their Own Price by Lisa Evans, Fastcompany.Com, January 15, 2014

In her article the writer discusses the phenomenon of pay-what-you-want (or pay-what-you-wish pricing) and its potential as a pricing strategy. Evans tells that some businesses have experimented with these strategies, and that PWYW pricing divides people in terms of opinions about theoretical validity and real value. In the rest of the article, a handful of company examples (from cafes to business consulting) of using this strategy are introduced in short. After each company example it is briefly discussed why the strategy might work in this specific case, i.e. what the company did right.

I chose this article, because it relates to the course topics in a kind of funny way by suggesting something that at first glance feels to fight against the course theories. So, to assess the content of the article, thinking about the course topics is required. Originally, this was one of my ideas for the group work, since I had heard about it before and the idea had raised interest in me.

What pay-what-you-want pricing is then? Kim et al. (2009) define PWYW pricing as “a new participative pricing mechanism whereby consumers have maximum control over the price they pay”. In other words, the buyer decides the price he or she wants to pay. But how could this work? The article suggests that the strategy worked in different cases because some conditions were fulfilled, e.g. attaching PWYW to offer for a charity, setting limits to guarantee the seller doesn’t make losses, offering PWYW as a promotion, applying the strategy in cases with established relationship and regular buying behavior as well as providing guidance to the optimal price (sort of a reference price-thinking I would say).

I started to think PWYW in the light of the course theories and also studied the topic in more detail. From the perspective of value-based pricing and different willingness-to-pay levels, the strategy might make sense. Value perceptions and price sensitivities vary across people. This fact...