OnDemand WTP Pricing Research

Discussion: Pay-What-You-Want Pricing in Restaurants | Utpal Dholakia

One of the most fascinating pricing methods is Pay-What-You-Want pricing. Regardless of industry, I have yet to meet a manager who’s not intrigued by this model and doesn’t think for a moment, “Can I use this in some way in my business?” The restaurant industry is one where we tend to find PWYW pricing more than others. Yet, it is very difficult to find a success story of a restaurant where PWYW pricing has worked over a long period as the primary pricing model. Whether it is a miscalibration of economic valuation or a propensity for minor dishonesty, consumers, on average, underpay significantly below what is sustainable for the business, when they are in the driver’s seat.

Top Comments

Rags Srinivasan, Business Leader: Vertical Markets, IoT, Video Surveillance

There are no pricing problems, only segmentation problems. Somehow managers and businesses seem to think they can adopt pay what you want as a shortcut but the their failure is fully understanding their target segment, what job are they trying to get gone, what alternatives, how this product would serve that job better than alternatives and get their fair share of the value created.

Anjana Prabhu, Marketing | User Experience | Behaviour

PWYW was one of the only ways we could afford food as poor stipend-supported students in Singapore. We have always underpaid and I knew a lot others who did the same despite having a steady income. I wonder where they find their motivation to run these businesses.!

Prof. dr. Koen Pauwels, Distinguished Professor of Marketing at Northeastern University

PWYW works best as an alternative to free sampling: because consumers have to think about what the sample is worth to them, they show both higher repeat purchase (at regular price) and word-of-mouth than those acquired by free samples https://www.sciencedirect.com/science/article/abs/pii/S0167811614000305

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Pay-What-You-Want Pricing in Restaurants.