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This pricing strategy – PWYW – was brought into limelight by a British Rock band called Radiohead when they released their seventh album ‘In Rainbows’ in October 2007.
This strategy was so different that it caught everyone by surprise and created a lot of ado. Inspired by Swami Shantananda Saraswati, ‘Annalakshmi’ vegetarian restaurant in Kuala Lumpur started in 1984, has adopted this pricing strategy to this day. Thomas Nagle, the author of the book Strategy and Tactics of Pricing, asserts that pricing of a product or a service should be the first decision that a business should make and the price should reflect its value. With this pricing strategy coming into prominence with the release of ‘In Rainbows’, some researchers have tried to find out its effectiveness and how it may be applied to wider offerings and in varied industries. This resulted in both a substantial profit to the company and a significant amount for charity.
In an another research by say, “However, in light of the extant literature that suggests a role for non-economic factors, we wished to assess whether PWYW can be a profitable strategy, even when consumers are not motivated by altruism or their innate sense of fair play”[2]. In US Panera Bread Cafe runs a bakery chain in five different locations; their pricing policy is take-what-you-want, leave-your-fair-share. The task of setting a correct price today for one’s offering is just as important, if not more, as it has always been. Founded in 2011 by IIT-ians, VJTI-ians and Finance Professionals ­ MarketExpress is an online financial, business news, insights and research portal. Yet for many B2B marketers, the pricing strategy in their marketing plan is challenging to write; many aren’t even involved in creating their pricing strategy. There are many factors to consider when developing your pricing strategy, both short- and long-term. Note: You can access guided pricing strategy templates and step-by-step instructions for writing the pricing strategy section of your marketing plan in our marketing planning and management app. When you offer a truly unique product or service with little direct competition, it can be challenging to establish your price. When your price, value proposition and positioning are aligned, you’re in the best situation to maximize revenue and profits. Company C regularly evaluates their competitors’ prices to make sure they’re delivering on their promise. However, if there isn’t a strong market for prestige, this strategy may be the best one for the company long-term.
If Company B charges a premium price for an average product, they’ll have a very difficult time generating interest in their it. Yet Company B may be able to implement a small price increase to raise revenue and profits; it depends how much more its customers are willing to spend. By analyzing price sensitivity and testing different prices, they can evaluate the strength and potential of this new strategy. If Company C’s prices rise in relation to those of their competitors, sales will plummet – their market is shopping on price, not factors like product leadership or customer intimacy.
If Company C cannot maintain its operational efficiency and cost leadership, it will need to develop new products or markets for its existing product.
Their pricing is typically 15% above the competition – they’re the most expensive product in their class. Their demand curve is relatively inelastic, meaning that their market isn’t that sensitive to price.
Much of that results from the carefully selected positioning and branding over the past five years.
When they’re behind their sales targets, individual reps are given the green light to discount if needed to meet their sales quotas.
Management doesn’t want to get in a price war, but is willing to ensure that they hit their short-term numbers.
Management knows that they could spend more in R&D to differentiate their offering and have greater pricing power, but they haven’t yet committed the budget to do so.
The quality of their offering suffers, and they end up providing mediocre service for both markets.

By lowering the price of their “prestige” brand to access a new market, Company C has increased its revenue, while reducing its profit margin and damaging its brand. Create a free account in our marketing planning and management web app for step-by-step guidance. It’s best to define your positioning, create your brand strategy, and identify your distribution channels before you develop your pricing strategy in the marketing plan. For example, if your method for delivering value is product leadership, you shouldn’t discount heavily or compete on price; you should also minimize pricing conflicts with any channel partners.
Your price sends a strong message to your market – it needs to be consistent with the value you’re delivering. If your value proposition is operational efficiency, then your price needs to be extremely competitive. If your value proposition is product leadership or customer intimacy, a low price sends the wrong message. Estimate how sensitive your customers are to fluctuations – it will help you determine the right price and volume combination. Once you’ve finalized your pricing strategy in the marketing plan, it’s time to design your marketing campaigns. The Marketing MO planning app is your behind-the-scenes Chief Marketing Officer, a comprehensive resource that will improve your overall business, whether it’s a consulting practice, start up, or mid-size company. Pricing strategies may be cost based or market-orientated: Differential pricing this gives different prices for different groups or types of customers. Below are external web links provided by Parcelforce Worldwide in relation to their business activities. Subscribe to our newsletter for current business news including lesson plans and activity ideas.
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It is a pricing model that lets customers decide how much they want to pay, including zero, for a particular good or service received. Instead of selling through a music company, as was the norm, they allowed the music to be downloaded from their website for a price to be chosen (including zero) by the customer themselves.
This strategy has long existed in every economy, such as the money paid to the street performers or to a charity.
Yet, giving buyers the freedom to choose what they want to pay can be successful in some industries and in some situations. One such experiment conducted in a large amusement park by selling roller coaster photos to the visitors showed though more people bought them under PWYW, the average price paid by them was very low resulting in no increase in profits.
The researchers also found that this pricing strategy may deter some from purchasing because, “individuals feel bad when they pay less than the ‘appropriate’ price, causing them to pass the opportunity to purchase the product altogether.[1] They conclude, “Our results provide strong support for the PWYW mechanism in different market contexts, by suggesting that this profitability can often be sustained in the long run”. Their optimism stems from their hope that those who do pay might cover those who don’t.
Even to this day, customers are a little skeptical about paying for goods and services online. MarketExpress platform brings together some of the industry's top experts on finance, business, education with a common goal - to provide quality information, insights & analysis. Learn how to set up, manage and improve your distribution channels with this detailed how-to guide from the experts at Marketing MO.
Their consultants come from top schools, and they work with Fortune 100 clients to implement complex, large-scale projects. Their clients are buying the best expertise they can find, and they’re less sensitive to price because they care most about getting top talent. There’s a lot of competition and their product is only slightly better than the alternatives. They regularly review the market, run promotions, and adjust prices to maintain their competitive position.

Their value proposition is operational excellence and they consistently deliver the same product at a better price.
They hire more consultants, but since they’re charging less per hour, they can’t afford the same top-tier talent.
By doing so, you’ll ensure that your pricing reflects your value and reinforces your brand. If you’re perceived as a commodity, you must either change the market’s perception via a new positioning strategy, or compete on price and focus on innovating to keep costs low so you can still make a profit. You’ll be far more effective when considering discount promotions – you’ll know exactly how low you can go and still be profitable.
If your value proposition is operational efficiency, evaluate your competitors on a regular basis to ensure that you’re continually competitive. When tackling any new marketing task, have confidence that we have your back – with the structure and detail you need to get things done right. These include market share, competition, material costs or how the customer sees the value of the product.
Parcelforce Worldwide is able to negotiate prices with business customers (B2B and B2C) based on their exact sending profile (for example, volumes, weights, destinations).
One, the number of downloads was higher and two, they didn’t have to pay anything to a music company.
The strategy continues to exist even today, as can be seen when one visits the flowers (other perishable items) markets at the end of the day, the sellers sell at any price the customers may prefer. The chain operates on the principle of trust in humanity and the patrons are free to pay what they think is appropriate. It can be successful as it arouses curiosity among the people and eliminates their risk of payment. However, when the pricing was coupled with a charitable cause, the average price paid increased remarkably. Three years later, it has proved a success, with a reported 60% paying full price, 20% paying less or nothing, and 20% paying more.
PWYW may promote greater confidence and surely this strategy is at no risk with the products whose marginal cost is zero. If they’re extremely sensitive, you may be better off at a much lower price with substantially greater volume. Parcelforce Worldwide has differentiated its products by offering services that offer a balance and choice between speed and value for money.
Indian Railway’s policy of upgradation of reservation at the time of chart preparation is another kind of PWYW; otherwise the vacant seats are a loss.
This pricing strategy is effective for penetrating into the market and can also be adopted for introducing a new brand. Though this strategy is not new, the digital environment is a fertile ground to experiment.
In the non-urgent market, Parcelforce Worldwide is looking to achieve some degree of price leadership by finding lower cost international delivery models and passing some of this cost saving to its customers. Amongst many, Moshpit Tragedy Records of Canada, Wheatus of US, and Taiwan music platform iNDIEVOX are few who adopted this pricing strategy. Market penetration pricing may be low in order to gain a foothold in a new market or with a new product. To take market share with its new Express service, Parcelforce Worldwide needed to price keenly.

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