The “Pay what you wish” model has seen quite some discussion in the past couple of days with Indian startups. First it was the NextBigWhat team announcing this model for their BigMobilityConf, then Explara founder, Santosh, mentioning they have this option live and then Instamojo announcing this feature. This has really got me thinking about the power of this model.
The model is not new. From roadshows to donations, specially religious institutions, a lot of organisations have been following this form of “pricing” policy. Restaurants have tried this as well.
There are few things I find interesting about this model and how these can determine the overall collection.
1. The pressure to perform – Pre-payment for any goods/service only makes sense when it is standard. The customer knows exactly what to expect and key performance metrics can be measured. There’s a sort of SLA. Movie theaters don’t have this, hence movie reviewing is a business by itself. With one off events even reviews is not possible so this model makes a lot of sense. When the performance is to be paid for, the performance will be better.
Think of it, non-standard goods/services should be priced only like this. Or may be good old religious/college festival style – where the main show is free but everything around it, like food, parking, private darshan, green-room access, is premium priced.
2. Anchor seeding – Who decides what the price should be around? How do you even decide if it should be double digit, triple digits or in thousands? For the bigMobilityConf, I would guess people will take cues from pricing of past events from NextBigWhat and other industry events i.e. anything between Rs.500-5000. Are there other factors that would determine how much people pay. For this event particularly, I believe there are some tangible parts, like the quality of food, that could determine the collection. Unfortunately, that is something people can determine the cost for and will take into account while paying. People are comfortable paying for cost directly borne for them. The attendees don’t know the per head cost of the venue or the effort cost of putting the show together. Unlike an entertainment show, here the artist isn’t getting paid. The people getting paid are all behind the curtain.
3. Freebies – Imagine a temple where the prasad is served before the hundi box. Will the quality of ladoo in prasad determine the donation you make? Most startup events have sponsored freebies – does that result in a perception of better bang for the buck for the attendees?
4. Transparency – I mean this in a more literal sense. Some NGOs and temples have a transparent box for hundi. The amount already in the box sets the anchor for the next donor. Knowing how much your neighbor donated will set the benchmark for you. The organisers for the above mentioned event have planned to collect the money in un-named envelopes. When the money is anonymous, when no one is watching you, will greed set in? Do people pay more for an art when there’s an open auction and others are watching?
5. The face – Who is collecting the money? Is there an un-manned box where you drop in the envelope or is the chef collecting it in person.
6. Bounce rate: What about people who don’t want to stay till end? Since there is no potential sunk cost, what will ensure that people stick till the end. Quality of content is determinant factor here. Scheduling the best for the end could be a good trick but then you have to make people attend the morning part as well.
While all these are variables to play with for higher returns, the most beautiful part of this pricing policy is that it works on the premise that the world is honest. The artist assumes that the audience will clap. It makes the world need one lesser law protecting an agreement. It helps you try more things, with lesser fear.