I am going to begin this with a small disclaimer. Pay what you want DOES in fact work if you live someplace small, people will be shamed if they pay nothing, and its a face to face or honor type service where their coworkers and neighbors are watching them. It also DOES work in cases where what you are giving away is a failed product and your only option is to just give it away and hope for the best or just waste time and money invested so far and receive no money at all.
In all other instances it does NOT work.
Number of people you can Google and read about who tried to use this business model properly seems countless.
Radiohead used it for their 2007 album 'In Rainbows'.
Its been written about on major media sites like The Guardian.
Kiss's Gene Simmons is even quoted as having said "Come on in and pay whatever you want.’ Are you on fucking crack? Do you really believe that’s a business model that works?”
Yet I see people keep trying it, with usually wasted time and resources.
On a last day of their season at a nearby Farmers Market, which simply means that these specific farmers were done with coming to sell their goods for this year, in city of about three million, they still had about 200 watermelons, priced at four dollars a piece to sell.
If I was their business adviser I would have told them to sell them at $1-$2 to other farmers. Then other farmers who were not quite done could move the watermelons at usual $4 a piece and double or quadruple their money. If they didn't sell them at all, they would earn nothing for them.
Instead, they chose to go with 'pay whatever you want' business model, left kid who was about 14 to watch the stand with bucket for people to toss money they wished to pay for watermelon they took into, and went off packing rest of their things, like homemade bacon, cheese, etc.
They made total of just under $20 for entire stick of some 200 watermelons. That is just 10 cents per $4 watermelon.
Another time I passed by a hair salon which was offering 'pay what you want' men's haircuts. It was a salon primarily targeting women normally, and they were losing money and were near closing because their prices were just too high for area they were in. We are talking area where normal person will pay $8 for a full haircut, and where anyone who opens a new business and tries charging downtown prices (which are closer to $20 haircut) will never get any business. Difference is that downtown is targeting tourists which come all year long, while suburbs here are lower income families.
They had four women working all day, plenty of guys came down, it was a Saturday and they paid for flyer advertisements week earlier, women brought their children for free haircuts, there was a lineup. Only, people read it as 'free haircuts'. Because up here, if you do not have to pay, you do not pay. And most do not believe in tipping either as unlike most places, our servers get paid minimum wage or better and in lot of places they are prohibited from accepting tips as tips are looked at as charity. Yeah, some places are filled with beggars and here we hate beggars and expect cops to remove them right away.
Hair Salon made total of $7 in tips entire day. They were too busy giving free haircuts to do even one woman. If they set minimum price of at least $1 they would have made several thousand dollars instead, people would still come. If they just understood community and charged $7 per mans haircut normally, they would have had nearly ALL business in entire area.
Pricing your products and/or services right is far more important than most other things. If you give something for free, people will take it, but you end up devaluing yourself and will earn accordingly.
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