General Question

jlm11f's avatar

What do you think of the new "pay what you want" style of business?

Asked by jlm11f (12413points) March 17th, 2009

As some of you might know, Girl Talk (mash songs artist) puts his albums up online for free and asks that if you want to pay anything for it, you can choose the amount. Now, Sam Lippert, who owns a cafe in Ohio, decided to remove prices from the menu and let people pay what they feel is fair.

For both, this strategy seems to be working, since sales have been high and for Sam, customers have increased by a significant amount. Do you think this kind of “pay what you want” strategy will work and be adopted by other artists/restaurant owners? Is this a plausible venture? Do you like the idea? I do!!

Here is the CNN video about Sam Lippert and his cafe for those interested. It is about 1 min long.

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16 Answers

aviona's avatar

(I love Girl Talk even more now!)

tiffyandthewall's avatar

i think it’s a really cool idea. i don’t know how well it would work out in all cases, but i think that a lot of people will/do respond well to it. a lot of people are willing to pay more for something when they don’t feel as if they’re being overpriced.
of course, i think that in a lot of cases, people who opt for the “pay what you want” sort of thing are going to get ripped off. but it’s kind of, i don’t know, a nice idea.

La_chica_gomela's avatar

Another example! This one is a restaurant in Great Britain!

jlm11f's avatar

@La_chica_gomela – It seems to not be an uncommon idea in Europe. Just new to USA. At least according to the video I linked to.

TitsMcGhee's avatar

There are “Really, Really Free Markets” in NYC that function essentially on the barter system for new and used items. I think it’s a good way of recycling, and I think the fact that the business does it almost induces guilt if you don’t pay what you should. It also allows for more opportunity. The Met in New York functions on this system, and it’s great for us college art students with no money, because we can pay a dollar, instead of 15.00, and go many more times. I don’t think all retail would benefit, but I’m glad that some do.

marinelife's avatar

It is an interesting concept. I’m glad sales are high. I would be interested to see what profits are relative to when they operated at a fixed price.

cwilbur's avatar

I think it’s an interesting approach, but I can see two ways it can go wrong.

The first issue is price signalling of some sort. The customer has to have some way of knowing what a fair price for the product is. One of the reasons that a cafĂ© is an excellent testbed for this is because the ubiquity of Starbucks has taught people that coffee drinks cost $3—$5—and it’s possible for a savvy entrepreneur to cut operating costs pretty substantially so as to be able to make a profit if the average coffee price is $3. Meanwhile, the customer thinks, “This would cost me $3 at Starbucks, and this is an independent business doing something cool that I want to support, so I’ll throw in $4.”

On the other hand, there’s a tea shop near me that sells an incredible variety of teas. Some of them are available at Starbucks prices, but others cost four or five times that much, because of rarity or labor-intensive tea farming. Without some kind of a price board, how can you signal to the customer that this is an organic estate Darjeeling that costs the shop $5/ounce, and that is a blended tea that costs the shop $1/ounce? For the organic small-estate Darjeeling, I’m not bothered by paying $10 for a pot of tea; for the blended tea, a fair price is closer to $3. Now, I’m a tea snob, so I know what the price ranges are; but how is a tea novice who just knows it all tastes good to know that if he offers $3 a pot for the organic small-estate Darjeeling he’s making the store take a loss on that tea?

The other issue would be freeloaders. This is a huge cultural difference that I’ve observed in my trips to Europe—Europeans take a more collectivist attitude towards things, while Americans take a more individualist attitude. The system can support a certain number of freeloaders, because some people will pay more than the product costs, but if there are too many freeloaders, the people who are paying money will think it is unfair. In Europe, this would result in social pressure to not freeload (and to only pay less if you genuinely can’t afford it); in the US, I think it would return to a fixed price system, if it got abused.

But I don’t see why it wouldn’t work, even in the long term.

brianlong88's avatar

yeah i think it is a really cool way to sell your music, you got to pay what you want for both the girl talk and the radiohead album but if you wanted a better quality version you had to pay a little more, i think thats fair also. i live in the nasty frozen AK though so the cool new ideas of restaurant or cafes adopting that policy is never gonna happen or not for a good 5 or 6 years. i would be for it though, i bet more people pay a fair price for the item when they get to choose how much its worth.

phoenyx's avatar

I think it is certainly an interesting idea, but (as stated above) I think it is hard for people to evaluate how valuable something is without price. I find that I use price when I try to weigh decisions of how to spend my money or what to do with my time.

asmonet's avatar

Harvey Danger did it too!
I think it’s a wonderful idea.

And actually, it’s a fantastic album, I think. I downloaded it and I was all FREE! YAY! But then I liked it so much, I sent them $10.00, a bit more than I saw it for at a store. I thought they deserved it.

So in that instance, they made more.

phoenyx's avatar

@asmonet what do you think you would you have paid for it if you hadn’t seen the store price?

asmonet's avatar

I think ten bucks, still. It’s around the same price as any other CD I might purchase. And even removing that as a factor, I think ten dollars is a nice roundish significant number.

Jayne's avatar

The reason this strategy has seen such success so far is, in my opinion, its novelty. People feel as though they have developed some revolutionary new relationship with the producer, a closeness that is open, fair, and honest, almost personal (In reality, of course, at least in the music industry, it is a shrewd and carefully calculated reaction to the rise of piracy). But people always feel entitled to what they don’t have- this is why piracy exploded in the first place, and part of the reason this pricing strategy has seen such success: people began to feel oppressed by artists and record companies ‘imposing’ a price on their product in this New Age of free information- and once the buzz and the thrill that makes customers give so generously wears off, they will revert to financial pragmatism or even a gleeful pleasure in ‘gaming the system’.

I may be too cynical, but I am of the opinion that capitalist tendencies are too deeply ingrained in our culture (for example, the idea of owning something for the sake of owning it is indicative of a sense of entitlement towards what one is capable of acquiring, and almost everybody I know owns an iPod simply because they are snazzy, and because they can) for such a system as this to be sustainable in the long run. It must be supported by a deep-seated cultural evolution- and the technological revolution of the past few decades, which seems to promise such a change, is far too young and too consumer-oriented to have had that effect as of yet.

Trustinglife's avatar

I sometimes feel imposed upon by prices, especially if I deem them high. I like to keep my money local – very local – like, in my pocket.

When there is this opportunity to pay what I want (or pay by donation), I no longer feel imposed upon. I feel free. And their generosity and TRUST inspires me to want to give back. I may not pay much, but I will have a completely different experience and impression of whatever it is I’m buying. And I’ll be much much more like likely to recommend it.

One exception: I’ve seen holistic practitioners (like new life coaches) offer their services by donation. Sometimes this is a cop-out on the courage it takes to set a price that represents the value of the gift they offer. I’ve been guilty of this myself. In this realm, I find it takes courage and practice to declare one’s price and then hold that standard.

asmonet's avatar

I simultaneously agree with both Jayne and Trustinglife. :)
A person can be an intelligent creature. People are fucking idiots.

evelyns_pet_zebra's avatar

It is fairly common here in the Midwest when it comes to people putting a fresh vegetable stand in their front yard. People pay a fair price for fresh produce. Of course, people for the most part in the Midwest are honest and fair, and it’s only the immigrants from the two coasts that screw up the equation. :-)

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