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The “Pay What You Want” Business Model — Can it Really Work?

Today I’m going to discuss the “Pay What You Want” business model and explain whether or not this actually works. Although this is not a very popular model, it is used by some people and it can work very well. 

A little-known fact is that I actually use this for my own business. I'm going to show you how much it made me in 2019, which was a pretty significant amount of money. I want to share this with you guys to encourage you to think about implementing it in your own business.

In this post, I will explain exactly how this model works, how I have used it in my own business, and how much it made me in 2019. I will also give you examples of other businesses that are using this successfully and talk about their strategy. Finally, I will tell you how you can use this in your own business and implement it to make more money and help more people.

WATCH THIS BLOG POST IN VIDEO FORMAT

Exactly How The Model Works

First, let me explain exactly how this model works. It's as simple as providing value in the content that you create. That content can be informational, educational, or just straight-up entertainment. You could really use this model for any content that people find to be valuable on a website, social media, or YouTube. 

In terms of offering the “Pay What You Want” method, it's pretty simple. As long as you have good content and fans, all you need to do is offer the “Pay What You Want” model on a premium upgrade service or a product. 

If you're in entertainment, for example, you might go to them and say, “Hey guys, I want to create a video. Let me know what the topic should be.” They would then vote for the topic, and you say, “Awesome, thank you. I need some money to produce this content, so if you would be willing, please contribute to my account. After I get the money, I will be able to create the content you guys you requested.”

How I Have Used It and How Much I Made From It Last Year

I know some of this seems farfetched, so what I’m going to do is explain to you exactly how I have used it and how much I was able to make last year with it. I'll give you the actual numbers as well, so stay tuned.

First, I want to disclose that this is not a primary revenue stream for me. Some businesses literally build themselves on this, but I haven't done that because that's pretty scary. Quite honestly, I have bills to pay, so for me, this is only a minor income stream. However, it does actually bring in money. As I said, I will be disclosing exactly what that number is later on.

For one of my websites, I have a listings area on it. I can't get too specific about what this is because I know people will try to copy me; I've had that happen in the past. After a listing has been submitted (not fully posted) I then ask them if they would like a premium placement offering. 

Basically, instead of their placement being somewhere in the middle of the page, it would be at the top of the page. In exchange for that, I ask them to pay what they want in order to get that placement up at the top. 

The key to this is that I also give them an average contribution amount. That is very important because it helps them understand what the value is. If you don't have that, they may just say, “Okay, well, here’s a dollar or two.” 

For me, that comes out to about $50 every time this happens. It's a great feeling when it does, but it's really important to understand that you have to have that average contribution amount to help them understand the value.

After they submit the listing, I take it and say, “Thank you,” and push it right up to the top of the page. It's really that simple. It doesn’t require much; I don't speak to people individually. This is all done through email during the process of them submitting a listing. 

Below is a spreadsheet of my financial summary for 2019. This is the best that Gumroad (which is the service that I use for this) has to offer, which isn't great, but it'll show you how much I made in 2019.

I exported this directly from the email that they sent to me. I blacked out the item name, buyer name, and buyer email, because that would give away too much information. 

As you can see, every month I’m getting maybe two to three people contributing. It's kind of interesting that in February and March, I got nothing. Usually, I have people contributing every month.

We have a sale price and sometimes you can see the amount is much lower. I had $2 and $5 here and there, but most of the people are in the $50 range, which is what I suggest as the contribution amount. 

In total, after the Gumroad fees, I ended up making $913.15. Originally, I brought in a thousand dollars in revenue, then they took out their fees and I ended up with $913.15. That’s not too bad for something that passively runs on autopilot. 

Examples of Other People Using it in Their Business

Now let's talk about examples of other people using this in their business. I actually researched this and found it pretty interesting how people are using it. I didn't know this, but Panera, the company that we all know and love and has a really good chicken sandwich, had five locations across the USA where they were using a “Panera Cares” model. 

They had stores that people could walk into and just pay whatever they wanted. I wish Panera had one near me because it's kind of pricey, but they have really good food. At one point they had five different locations across the U.S. and it's possible they were just doing this as a pilot program to see if it would work.

They still had a menu and they still had prices listed, but these were suggested prices. They made sure they had suggested prices so people understood the value they should consider.

Unfortunately, they did close their last store in February of 2019, so maybe it just didn't seem feasible for them. Though, I'm sure that they had good intentions with it. They said the whole purpose was so people could have a good meal and could pay whatever they thought it was worth. 

My guess is, it probably costs less than what Panera normally is, because Panera is pretty expensive. In doing so, it was a failure. However, it's important to understand that Panera is probably the biggest brand that's tried it and had some success with it.

The next example is a small business. This is something I think a lot of you can relate to. It's called Zest Business Consulting. They offer two-hour chunks of consulting time that they do 100% for free. 

When I say “free,” that’s not entirely true. It's more of a “Pay What You Want Model.” Specifically, they say, “This is a two-hour consulting call and this is the recommended amount you should pay, but pay whatever you think is good.”

The thing that's been interesting about this one is that these consulting calls didn't always pay for everything they needed them to, in terms of bills. However, people would end up paying for some of it and would pay a decent amount. It was stated by the owner that she was able to get 30% of the people who took those free consulting calls and turn them into actual consulting clients.

If you don't have clients, it’s a really good way to get them into your business and get them interested in what you're doing. Then, after they're hooked and you provide value, you can ask for more money and actually get a full consulting agreement.

The owner also said that even though the consulting revenue wasn't always there, or the calls didn't lead to clients, the customers did give testimonials for her. Especially in the beginning, if you don't have testimonials, nobody's going to give you the time of day.

If you start with something like this and put in the time, good things will happen from there. 

The last example is a website called headsets.com. They offered products to customers who hadn't tried them before and said, “Hey, it's a ‘Pay What You Want’ model,” but they also gave a suggested price.

Interestingly enough, they said that by the end of it, only 10% of the customers actually paid less than the requested price, which is pretty awesome. Let's say they got 1,000 customers from this, and 100 customers don't pay the full price they were looking for. They would still have 900 customers that will probably become repeat customers in the future.

How to Use This in Your Business

How can you use this in your own business? I suggest that you make this a component of your business, but I wouldn't base a full business on it. I gave you three examples of people successfully did that, but I don't like that because you're not sure what's going to happen. 

If new people are finding you all the time, it's hard to rely on that money. I made it a component of my business after I had found many different ways to make money. I said, “Okay, we can try this and throw it in there for about a month.” 

I saw maybe two people contribute and I was thought, “Wow, this is actually worth it,” and decided to leave it there. If you make it a component of your business, think about how you can work it into what you're already doing. 

Next, where do you collect payment? I know people are probably wondering, “How do I actually do this? You can use the Gumroad, which has “Pay What You Want” built into its platform.

We get the listing and then send them over to Gumroad so they can submit the amount they want to pay. Gumroad has a great setup for this, which makes it really simple. It doesn’t take very long, which is great. If you're going to do this, I would suggest using Gumroad as the platform that accepts the payment.

If you are a consultant just starting out and you don't have many clients, you should offer free consultations. People will take you up on them and they will see the value. Some of them will become clients and others will give you really good testimonials and possibly referrals to other people, which is awesome. 

If you're a consultant, I think this is a big win. Even if you have a website or a business and you can figure out a way to toss this into the mix, I definitely think it's worth doing. You just have to incentivize it for the customer somehow; give them some better value if they do contribute.

The key to this is if to make sure you always give a suggested price. If you don't do this, then as I said, some people may pay a dollar while others may pay a hundred dollars. The suggested price gives people a baseline to understand what people usually pay. 

For my own website, I say to them, “This is the average of what most people pay. If you're willing to pay it, great. If you're not willing to pay it, that's understandable too.” 

Most people do pay the average, which is awesome. Just be careful not to make the average super high because then people will say, “The average contribution is $500? That seems like a lot of money.” Definitely look at different price points and see where you end up.

If you're trying to implement this on a website, one of the best things you can do is just put it into your email list, plug it in as a new email, plug it in as a potential new revenue stream, and see what happens.

The worst-case scenario is that you put it in there and see that you priced it a little too high or a little too low and no one took you up on it at all. You just need to test it as part of your business model.

Think about creative ways in which you can put it into your website or into your business and see if you can make a little bit extra on top of what you're already making. If I can do it with listings on my website, I really think that you guys can do it, too; it's just a matter of trying it and making it work.

That's it—I know it wasn't a topic that you were probably ready for, but I think it's a pretty interesting way to complement current business models. I wanted to talk about it because I've had success with it and I hope you can have success with it, too. 


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