Pay What You Want Pricing

your product, whether that's £1 or £1,000, and give people the option of paying more.

In the example below the minimum price is $1 at checkout but people can of course choose to pay more.

Pay what you want pricing has been tested in a wide range of situations, from concerts to paying for video games online. However, does it work? Or do people just give you a tiny amount leaving you out of pocket and feeling deeply disgruntled?

We test out whether Pay what you want pricing boosts revenue

We run an ecommerce platform called SendOwl, which makes it easy for people to sell their digital products to people all over the world. And we have offered Pay what you want pricing as a feature since 2013. So, we've got a lot of data on whether PWYWP pricing works for our sellers - or not.

The results were fascinating.

Pay what you want is actually am effective marketing strategy

On average our sellers boosted their revenue by 232% when they used Pay what you want pricing for their digital products. This meant that customers were paying a lot more than the price they had to pay, meaning, rather encouragingly, that customers don't always pay as little as they can get away with!

Minimum prices don't have to be low

About two thirds of sellers chose a minimum price of under $10. A few sellers seemed to be aiming at volume sales so although their average price might hover around $5 (with a very low minimum price) they were selling thousands so their revenue looked very healthy.

However, even though some sellers specified a very low minimum price of $1 some saw a much higher average price, even up to $45.

About one third of sellers choose a higher minimum price. They tended to see a smaller % increase in revenue with Pay what you want pricing. However, this marketing strategy could still provide a decent bump in revenue.

Pay what you want pricing is a marketing strategy

Sellers who had the most success with Pay what you want pricing often seemed to be good marketers. This makes sense because Pay what you want pricing is really a marketing strategy rather than a pricing strategy. Customer need to understand why you have chosen this form of pricing before they'll support it. This needs to be obvious in your publicity material, not sprung on customers at the end of you checkout.

Based on our research and our own experiences, here are a few marketing approaches that work well with Pay what you want pricing:

You're super confident about your product's value

You're so confident that your product is worthwhile that you're prepared to wait for customers to give you what they want. You can price at $1 because you know that people will see the value and give you more. At least, this is the marketing message your content conveys to your customers. Be bold and very persuasive!

You care more about your customer getting your product

You price your product low (with an option to pay more) because you really care about people using your product. You want to change lives and reach as many people as possible who need you. This angle can inspire people to be generous as a reward for your less-capitalist-than-usual attitude. This angle could work well for lifestyle businesses with an emotive backstory, for example.

You're the underdog and you've worked really hard

If Nike or some other multinational asked if you wanted to pay more for their products you'd probably say no. Why would you? You don't intend for their top brass to get even more money than they are doing at the moment. However, if you are an underdog then you can inspire loyalty and affection – and generosity when it comes to paying more. Your customers think you deserve the money and they know you'll get it. They may even feel guilty giving you a smaller sum because they've read your blog and know how hard you've worked on your product!

You're doing good

If you're doing good, in some way, then Pay what you want pricing can make sense to your customers/supporters. You'd like $5 for example, to help fund a charity project, but if people like what you're doing and want to give you more then that would be lovely, thank you.

If you choose one of these marketing approaches (or similar) it's more likely that Pay what you want pricing will work for you. Your customers will be in the right mood to participate. And they don't mind a tiny bit of extra work at checkout, when it comes to choosing a price.

Other PWYWP case studies

Although we found that PWYWP can work well for our sellers, we were also interested in the experience of other people.

This case study by four statisticians about trying out PWYWP for their book The Data Science Handbook makes interesting reading.

This is their conclusion:

After we analyzed our results, to our surprise, we discovered strong statistical evidence that with a PWYW model for our book, we could significantly expand our readership (by 4x!) while earning at least as much revenue (and potentially even more) as either of the fixed-priced variants.

For a pricing strategy, look elsewhere

Be wary of using Pay what you want pricing because you can't decide on what price to charge for a product. This is unlikely to be effective because customers won't really understand why you're diverging from the norm of a fixed price and may respond less enthusiastically.

For help deciding on a price see our article 'How much should I charge for my digital product?'.

Want to try out Pay what you want pricing?

If you use SendOwl then we support Pay what you want pricing. This means you can experiment with Pay what you want pricing and see if it works for you. If it doesn't generate decent returns, turn it off and try another marketing technique like discounts or one-click upsells (also supported by SendOwl). Good luck!

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