The Internet's New Pricing Model: Set Your Own Price
I was intrigued by yet another in a line of "set your own price" products, this time a game called World of Goo by 2D Boy. I'm not a gamer but I actually bought this game because of the pricing model. Between now and October 25th, World of Goo is available for whatever price you want to pay, even if you want to pay nothing! I paid $2 which seems to be slightly below the average. (am I cheap?!)
This model gets serious play in the media while it isn't all that common but I would caution that this impact will lessen with time. It is interesting though because the model seems to combine real-time market research with sales. Your customers can give you real-time "worth" feedback as they buy. It also keeps the company clearly focused on delivering what the customer wants because they can't rely on, for example, the pain it would be for a customer to move to another solution.
The heart of this model is essentially a renamed "donate" button. By calling it the "price" of the product, you imply that it must be paid. Allowing the customer to set the price rather than the merchant truly makes this a "market economy" type of model. Maybe it is a bit too far for some products, especially those with high development cost, but then you could always just let the merchant set a "minimum price" and let dedicated customers pay more if they want to. I would probably have done that for some earlier U2 albums that were worth to me far more to me than the price paid.
I think this could easily become the prevailing pricing model for the Internet. If your distribution system doesn't significantly cost on a per unit basis, this kind of a model becomes possible. I can easily see a big move to this model amongst the independent content production industries on the Internet. "Pay what you want", after all, seems to be the Internet's version of a pricing model.
Thinking back to Radiohead's "In Rainbows" album which was among the first to use the "pay what you want" model, I'm struck by the fact that the music industry might actually have been in front of the market on this!
Isn't it interesting how "give the customer what they want" actually turned out to be a good idea?
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To send a trackback, use the URL of this story appending ?page=tb at the end.Comments (2)
Scott B from Raleigh / NC / USA
I agree. I would also say that as a company you can see how much people are willing to pay, and then see what those higher paying users think is most important in terms of the parts of the applications they use.
You can then use this information to break your product offerings up into a few categories:
Free - The low value things that most everyone uses, but are not interesting
More - The next set of features added in that people seem to be willing to pay more for
Premium - The features that are not often used, but deliver high value to the user when used ( i.e. features a user cannot live without once they see it )
I think you can have things like 'Did you know that if you only paid $2 more a month, you could have this!', and give them free trials, etc.
So, just because I set my price doesn't mean I set the value for the product. It just determines how much value I get out.
Anders from NY
@Scott: Very interesting, I hadn't thought about the feedback loop prioritization or the concept of using the "set your own price" thing in a recurring model. I suppose you could also set a minimum price on plugins and prioritize the updates for them as well. Good points, all.
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