Pay-what-you-want

Radiohead surprised the music industry by letting its fans pay what they thought was fair to download the band’s latest album. Radiohead’s pay-what-you-want business model gained incredible attention, and has been applied to other sectors as restaurants and magazine subscriptions. If you just offer a commodity, chances are high that people will not give anything. If you just beg or ask to donate something in return for a rather useless product, it is still possible that people will give some money though, just to be polite. Profits will be rather lower per ’sold’ piece, but if you manage to distribute in large amounts you could earn big revenues. Sometimes a very low minimum selling price is set to cover the fixed cost. Customers can then pay more if they want. Often charity organizations apply this type of revenue model.

In many cases companies apply the pay-what-you-want system as a promotion tool to sell other products, on which their real profit is made. Companies that offer services, experiences or reputation instead of a product, have better chances to earn large profits with a pay-what-you-want business model as people are more willing to put in an extra cent for an excellent personal service or experience.