Pay-what-you-can is an old story in the arts world. Many club performers, theatre groups and art galleries have used a “pass the hat” model for live events as long for as long as anyone can remember. Recently, this model has started to migrate online. International rock stars Radiohead and Nine Inch Nails have offered their most recent releases using some form of audience determined pricing. Canadian pop icon Jane Siberry (who now performs under her new name, Issa) has been allowing folks to pick their price to get digital downloads for a few years now, and many independent bands have also gone this route.
I’ve been thinking lately about how far the model of consumer’s setting their own price could be taken; what are the logical kinds of products and services this model could be applied to?
Customer price setting traditionally works well if a few different criteria are met.
- Low or no incremental cost. If you’re a musician, the cost in time and energy of playing to an empty room or a packed house are the same. For digital downloads the cost for allowing each additional download is negligible.
- Instant gratification. Downloads or live shows are things that can be experienced immediately. In fact, in many cases the consumer has the opportunity to pay after the fact, allowing them the benefit first and asking them to pay according to their sense of value after the fact.
- Emotional or intellectual value. Does the product in question actually have a perceived value to the consumer? It’s interesting to note that Nine Inch Nail’s leader Trent Reznor had spoken out against the consumer price setting model after an unsuccessful experiment by Saul Williams with an album Reznor had produced. The difference between Williams’ experience and Reznor’s? Saul Williams was an emerging music with essentially no commercial or artistic track record, whereas Reznor and NIN are well established celebrities whose output has inherent value due to their existing and avid fan-base. It’s not strictly necessary to have an established audience to use a consumer price setting model, but it sure helps!
So, what’s your feeling on letting consumer’s pay-what-they-want? What kind of goods and services do you feel it could work for, if any?
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