I’ve often wondered if a pay-what-you-want model could work for all the parties involved. I know Panera tested an approach that allowed well-wishers to pay for food that someone else couldn’t afford, but I believe that they eventually closed it down.
Another approach was covered in a recent Providence Journal article.
John Kostrzewa wrote, “Customers are always questioning the price — and they’re not the only ones.
“Stephen Atlas, an assistant professor of marketing at the University of Rhode Island, has been trying to find some answers. Atlas, who has a background in economics and a doctorate in marketing from Columbia, has been doing experiments in a local restaurant to learn what people will pay.
“He’s trying to advance existing studies of the ‘Pay What You Want’ model deployed in some urban areas, where customers decide on the price of a good or service. …
“Atlas has added a new twist to the research by asking what would happen if a vendor used a different strategy called ‘Rebate What You Want’ that would allow customers to get back what they have already paid. …
“The test worked this way: At the end of a meal, 231 randomly selected diners were given a card with one of three payment options, which differed from table to table.
“The options on the cards were: They could pay any portion of the menu price. They could agree to pay the posted price but request a full or partial rebate immediately. Or they could pay full price and later mail in a rebate form to get back up to a full refund. (The URI grant helped pay for the rebates.) One set of diners also received a regular bill with no card as a control for the test.
“The results showed the payment options did affect how much diners wanted to pay for their meal. The diners paid the most up front if they picked the option to mail in the rebate later. They paid less up front if they picked their own price directly. And they paid the least when they picked their own instant rebate. …
” ‘The most surprising outcome was how much diners paid across all the options despite being told when they received their bill that they could have received a free meal,’ Atlas said. Including the tip, ‘diners in all the pay-what-you-want conditions paid more than the asking price.’ ”
More here.
Photo: The Atlantic
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