Pay what you want

In a recent NYT Business article, Alex Mindle writes a bit about some businesses in Frankfurt that have taken a clue from Radiohead’s business model of “pay what you want”. It is amazing to see some of the statistics. Apparently, face to face time creates more value for customer as seen by the statistics of the deli. This test were done at an all-you-can-eat buffet, a movie theater and a deli.

At the buffet people were paying an average of 86% of the full price at the buffet, but the “buzz” of an all-you-can-eat place that lets you “pay what you want” drew in far larger numbers than what they were orginally getting.

At the movie theater people were “stingier” because they felt that the price to see a movie had been inflated. I have to agree with this, I feel like theaters charge SO MUCH MORE than what they need to. $12.50 for 2 hours?? Come on!!

At the deli people were paying 9.8% MORE than the regular price for hot beverages. When I read that, I was like WHOA!? really? But the longer I thought about it, the more it made sense.

When you see that people are being nice to you, they’re actually hand-making you a cup of coffee or sandwich, ask you how your day is, flash you a smile, you’re automatically going to feel a little more connected to them and care about them. That isn’t to say I feel extra connected or adore the 15 year old high school boy that sold me a cup of joe, but if I pay more for the coffee, that will, in a roundabout way, pay him more which makes him happier, and thus makes me happier. 

I like this model, because it calls on people to self monitor and practice a modicum of integrity. It expects us to not cheat the system and pay out what people deserve. I hope to see more of it in the future.