Pay What You Wish

By Nicole Perrault

A new business model lets customers decide how much they want to pay depending on how much they can. Is this choice effective or a bad business move? Companies want you to decide.

In 2007, the alternative rock band Radiohead severed a contract with its record company just before the release of its new album “In Rainbows.” The band members, who wanted more control over their own work, instead sold the album on their website for whatever fans wanted to pay. The result: record sales climbed and the band’s sales did not suffer. In fact, the band entered the Billboard chart at No. 1 because more people had access to its music.

Panera Bread Co. used this same idea when it opened its first pay-what-you-want restaurant in Clayton, Mo. The company ended up making over $100,000 in revenue in the first month alone.

For a business model that might seem counter-intuitive to sales, it’s becoming more popular. Companies around the nation are adopting the idea that allows the customer to decide how much he wants to pay for a service or product. Many employers think giving consumers a choice of how much they want to pay for a yoga studio, for farm goods, or at a business retreat makes both the buyer and the provider happy. And they’re turning out to be right.

Jeffrey Mcpherson, a professor at a North Carolina community college and an honor system marketing entrepreneur, has spent years researching the motivation behind pay-what-you-want services. “Companies are opening up an air of trust in their clientele,” Mcpherson says. “Even though they are also giving thieves a chance, they are still making more money because of the good folks.”

These businesses ask consumers to pay what they think their services are worth — and results show they’re worth a lot.

The Power of Yoga

Bryan Kest’s Power Yoga offers classes on a donation-only basis. His definition of donation: “the act of giving.” Kest opened the Santa Monica, Calif., based studio 18 years ago. Due to high demand, he’s expanded to two studios within blocks of one another. Each yoga class hosts 70-plus students. “I chose to create a donation-based studio because it feels right,” Kest says. “The advantages are that the donation system makes yoga accessible to everybody. There are no disadvantages.”
Photo courtesy of Bryan Kest’s Power Yoga

Honor System Marketing

Farmer Jeffery Mcpherson decided to implement the honor system to help sell produce from his Lumberton, N.C., farm. The result was a successful and exciting way to gain customers and make money. His work inspired him to write the book, “Honor System Marketing.” “[This marketing] makes money for the establishment and demands positive attention from the surrounding community,” Mcpherson says. “Curiosity draws customers, and using integrity gives the customer satisfaction.”
Photo courtesy of McPherson’s Honor System

Small Business Success

Mark LeBlanc has asked customers to pay what they want for over a decade. In April 2000, Minneapolis native LeBlanc began conducting weekend business development seminars and retreats called the Achiever’s Circle. At the end of the weekend, participants wrote him a check for what they felt the value of each retreat was worth — or what they could afford. “It was rewarding both personally and professionally,” LeBlanc says. “The ongoing relationships I formed, the spin-off business I got and the referrals I received were amazing. People liked me and saw me as a good guy with my heart in the right place.”
Photo courtesy of Mark LeBlanc