“Pay what you want” (abbreviated as PWYW) is an increasingly prevalent pricing strategy made ever-present by the internet age. Though many people interact with PWYW promotions on a frequent basis, many don't understand the psychological intricacies of the behavioral economics ploy. Sometimes used by charities or nonprofits, other times by artists, and even by high schoolers like myself, the PWYW technique is not just a slogan but a tool of mental manipulation and economic genius.
The Basics of PWYW
“Pay what you want,” or PWYW, is just as it sounds: At a payment checkout, the consumer is given a proposition—to pay what they desire for a service or product. An organization may set a price floor for their product or service’s PWYW promotion or give consumers the option to pay nothing. While there are inherent risks of PWYW: the user may pay zero or opt to pay a price below the profit margin of the organization, overall, (when correctly applied) the benevolent consumer's contribution negates or reverses the effect of the consumer who pays below the profit margin or doesn't at all.
Correct and Incorrect Application of PWYW
PWYW is not a universally applicable strategy. If the consumer has a sympathetic viewpoint of the producer and their intention and may achieve gratification by helping them, for example, a small artist or a non-profit, the PWYW technique may have a high upside; if they don't, for example, a large corporation or commercial company, it may not.
A 2010 field study of people purchasing photos of themselves after a roller coaster found that when photos were simply advertised as "PWYW,” the average payment was 92 cents; however, when advertised as “PWYW, half of proceeds go to charity,” the average payment was $5.32. This is a substantial difference and reveals that the correlation between the consumer's perceived value of the product and their payment is likely weak, and in reality, the driving factor of their payment is the altruistic gratification they will derive from it. A well-known example of the improper application of PWYW is Panera’s “Panera Cares” experiment. The project debuted in five locations in 2010 and was run on the reliance of the middle and upper class to pay generously so the poor and homeless could eat for free or cheap. To consumers, the program felt artificial; they even drew little altruistic gratification from it because they felt a multi-billion-dollar organization was pressuring them (the middle and upper class) to pay generously and feed the poor. The program seemed tacky and caused discomfort to consumers. By 2019, all five locations had closed, and so had the "Panera Cares" program.
My Personal Experience Testing the PWYW Pricing Strategy
A few friends and I were running a bake sale to raise money for educational technology to be sent to Guatemala. I thought, in this case, PWYW would be perfect. I had previously read about the study of PWYW's effectiveness in the aforementioned roller coaster park and presumed, “Likely, no one is going to take from a fundraiser's bake sale table without paying if they have an ounce of dignity, even if it’s PWYW." The technique worked to perfection; we set up on a corner, and the bare minimum people paid is what we could have charged them in the first place. It seemed for every three people who paid a dollar or two for a baked good, as we would have charged them regularly anyways, a fourth would pay 5, 10, or even 20. While it is hard to directly calculate the monetary efficiency of the bake sale, in 2 hours we earned $200 in revenue for baked goods, which probably would have grossed us $80 if priced a dollar each.
Conclusion
All in all, PWYW is a high-risk, high-reward venture. If planned and applied properly, it can be an invaluable tool. There is really no end-all-be-all for when PWYW will work or won't, and experimentation and trial are necessary to predict its scaled use for any purpose product or service. In a digital age where e-transactions are occurring at a faster rate than ever, for producers and consumers, understanding PWYW can mitigate poor financial decisions and promote philanthropic or cost-efficient ones.
Works Cited
Dholakia, Utpal.“When Does Pay What You Want Pricing Work?” psychologytoday.com, 5 March. 2017, https://www.psychologytoday.com/us/blog/the-science-behind-behavior/201703/when-does-pay-what-you-want-pricing-work
Peters, Adel. “Why Panera’s experiment with pay-what-you-want dining failed.” fastcompany.com, 9 June. 2018,
댓글