New Ways to Look at Your Pricing

Deciding What Price Makes the Most Cents

Pricing continues to be an interesting point of discussion in the specialized information industry. At the SIPA 2010 Conference, Knight Kiplinger, editor in chief of Kiplinger, said that young people have shown that they will “pay per drink. The challenge for us is to sell small pieces of information that’s comfortable to this generation. If they pay $1 for a song, will they pay for one article? Publishers missed establishing simple sites selling small information, [for] a small amount, a dollar even—a one-click purchasing opportunity where they have my credit card on file and it’s secure (like Amazon). Publishers need something like that.

“An $85 subscription is fine,” he added, “[but] $2 for 2 paragraphs is great.”

Lucretia Lyons, president of BVR, has spoken about that company finding its best Webinar audience by lowering the price point and then making up that difference by selling more products to the new signups.

Now along comes something called PWYW or PWYC (Pay What You Want/Can). In my experience, local theaters have used this model, and continue to use it, to draw audience for early in the run, before publicity and word-of-mouth can take hold. Interestingly—and similar to what Kiplinger was discussing—it is probably most geared to young people. I have seen all denominations of payment given by people in line, and not necessarily dictated by age.

That seems to be the early returns from an experiment by the people behind the much hyped documentary film “Freakonomics.” Last Wednesday they held a one-night, sneak-preview screening in cities across the U.S. with a pay-what-you-want pricing setup.

Writing for the online edition of The New York Times last week, Stephen J. Dubner noted:

“The movie experiment is truly pay-what-you-want, with a minimum of 1 cent (finally, something to do with those pennies!) and a maximum of $100. There was no choice for zero, nor an option for giving some of the money to charity. The choices were:
– From $.01 to $5.00 at $.50 intervals
– From $5.00 to $20.00 at $1.00 interval
– From $20.00 to $80.00 at $5.00 intervals
– $90.00 and $100.00″

In addition, there was a nine-question survey people had to fill out concerning age, gender, income and employment.

Dubner said he saw some of the early data and out of about 5,000 people who “bought” tickets, 18 paid $100. The reason, he surmised, is that those 18 all thought they would be the only ones doing that and thus looked at in glamorous terms. (I will keep an eye out for more results from this “experiment.”)

The Comments section to Dubner’s column was also pretty interesting. Adding credence to BVR’s pricing theory, a reader replied that he and his wife paid $15 for a PWYC play at the Available Light Theater in Columbus, Ohio, and enjoyed it so much that he went back a week later and paid $30 for a ticket. Two friends of his actually put more in the money bowl after the show, which adds a whole other dynamic to the equation.

Another comment apparently came from the producer of the film, Chad Troutwine. “We have already sold out each pay-what-you-want venue, except Denver (and it will likely sell out today),” he wrote. So at the least, the strategy draws people in.

Taking pricing one step further is new media innovator Richard Reisman who has developed a system called FairPay. This lets the buyer set the price for what he or she is buying after the sale. The seller then tracks that price to determine whether to make further offers to that buyer in the future. (His thinking is that he or she will pay in order to get further offers.)

Obviously, this can get complicated, and all of us have plenty to worry about as is. But it’s interesting stuff. I have seen PWYC nights draw sold-out houses, with the manager coming out to give a 10-minute spiel on all the “products” they have to offer—in addition to asking people to tell their friends. That’s certainly worth something. I haven’t seen a bowl passed around after, however. That would be another interesting experiment.

As usual, I’d love your comments. Email me at SIPA or even better go to this message on our website where there is a Comments page.

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Price point is important right now for a very popular
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Maximizing Online Advertising Revenue: Packaging,
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Until Tuesday, Oct. 5, sign up for this Webinar for only $147!
Dan Ambrose will be giving the Webinar, and he has worked
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Smithsonian, Children’s Television Workshop and many others.

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