Wednesday, May 19, 2010

Pay What You Like Pricing Scheme

The pay-what-you-like pricing scheme allows for patrons of a good/service to donate what they feel that good/service is worth. There are many examples such as Radiohead's album In Rainbows. Also, various local restaurants, soccer clubs, and rental accomodations have tried this pricing scheme with varying success. And, our readers may remember that Calvin's Coffee (which Mark and I were instrumental in opening) had to adopt this model because of expensive Tallahassee Government regulations on business. We are happy to report that Calvin's is increasingly successful. Moreover, our opening of Calvin's led us to write a theory paper about pay-what-you-like (PWYL).

BUT, a bigger fish just entered the pond: Panera. Here is an article from USA Today on Panera's decision to adopt this new pricing scheme. One question I have is that they have located the business in Clayton, Missouri. The original Panera was also in the St. Louis area so the company has ties. A very interesting economic/psychology argument can be made about why they choose Clayton: homogenous population. Clayton is 85% white with a median family income of $107,000. This homogeneity could help the stability of the norm to contribute. If I am right about homogeneity being such a big issue then Panera has given themselves the best opportunity to succeed. Only time will tell.

1 comment:

joe said...

pay what you like works well when it
is attached to a car wash when you
are raising money for some cause but
I believe with out some incentive like that it will fail because the
motives that control the soul that
is provision & protection , would
eventually cause people to pay less
then the value of the service