THE PRICE OF EXPERIENCE

This interesting article in the New York Times revisits the Radiohead experiment of allowing its fans to pay what they want for a new album from the band. (I write about this in more depth in the upcoming Brand New World).
26drill.graphic

According to the article:

By letting Internet buyers name their price for its 2007 album In Rainbows, Radiohead introduced many people to the retailing strategy called “pay what you want.” A new article in the Journal of Marketing sets out to study the mechanism.

The experimenters, Ju-Young Kim, Martin Natter and Martin Spann, persuaded three small businesses in or near Frankfurt — a buffet restaurant, a movie theater and a delicatessen — to adopt pay-what-you-want schemes. On average, customers across the three businesses (who were not always aware of the products’ regular prices) paid 86 percent of normal rates. Customers were stingiest at the movie theater, where they seemed to think the posted prices were inflated. They were most generous at the deli, where they paid 9.8 percent more for hot beverages than the going rate, a finding that seemed linked to the amount of face-to-face chatter between customers and the deli owner. (Emphasis is mine.)

By providing a unique and beneficial experience — choosing a price instead of having one dictated to the consumer — we are able to experientialize the purchase decision. Check out the sidebar. People are into it. And when you personalize it with one-on-one interaction, the generosity flows.

Herein lies, perhaps, a significant step towards an experiential approach to retail beyond the physical experience of the store, the product and the message.

One comment

  1. This parallels something I learned about human nature while I was training to become a teacher. I learned that if you let kids choose their own homework assignments, most of them will take on more than you would have asked. I always believed this is because they were allowed to have some control over the situation instead of being told what to do.
    I would be terrified to allow my clients to set my rates or price my projects. What if they didn’t think I was worth very much? But perhaps if I would make that jump, they would pay more than I would ask because they do value what I provide.
    Food for thought.

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