More News on the Pay-What-You-Wish Front
We recently posted about a taxi driver who runs his business on a pay-what-you-wish (PWYW) model. In response, a few readers sent along interesting notes.
Gregory Taylor tells us about a law firm in Chicago called Valorem that pitches itself as revolutionary on several fronts, including its use of “Value Line Adjustments” in its pricing:
On each bill, you have the right to make any adjustment to our proposed fee that you feel is needed. We provide value or you adjust the bill, it’s that simple.
We do this to give you the ultimate check on our unwavering commitment to client service, and to eliminate the concern that our level of service will wane once the work we’ve performed exceeds a given flat rate or capped fee allotment.
Some have said that the Value Adjustment Line is extremely risky. We agree. If we aren’t willing to risk our own fees on our service, do you really want us advocating for you?
From Hawaii comes a note from Dr. Reed Shiraki, a chiropractor whose e-mail address (honorboxdoc) and url (honorboxchiropractic.com) give him away. He explains here how he started using the honor box for his business, and discusses some of the challenges here:
There’s been hard times. Times when I would open the box, count the money, and worry about how in the world the bills would ever get paid. There have been frustrating moments, like the time someone left me a Subway Club Card as payment.
But for the most part, I have come to believe that it is not from the pockets of my patients that the box gets filled, but rather, from the windows of heaven. God fills the box.
And we also heard from Jose Fernandez, an economist at the University of Louisville, who has “written a paper on Pay What You Like Pricing where much of the theoretical outcomes coincide with many of the comments posted by your readers.”
The paper can be found here (pdf); keep in mind it is a working paper, but here is a tantalizing excerpt:
Under certain conditions, for a risk-neutral firm, Pay What You Like pricing could be more profitable than uniform pricing and hence there is an incentive for the firm to use this pricing. For risk-averse firms this incentive becomes even stronger. Additionally, this form of pricing becomes more attractive from a profit standpoint when savings result from eliminating costs related to price setting, especially when the cost of setting a price is large.
Considering the very vigorous pushback to James McWilliams‘s recent post about farmers’ markets, I’d be interested in hearing from anyone who has experience with a PWYW model at a farmers’ market, whether from the buyer’s or seller’s side.