As we all know, the price of a certain good or service usually remains unchanged. Sometimes it may change, but the premise is that financial departments of firms have to collect data and figure out there is a new price can be set. In contrast, Shayne Greer, the owner of Focus 4 Development Company, comes up with his unique way to set the price, which is ‘pay what you think it’s worth’.
In his business, Greer basically lets his customers to pay what they want by determining the value of his work. Through this model, Greer believes he can participate more with customers and build better customer relationships. Therefore, he can gain more profit in the long run. There is also some discordant sound towards this price setting method. Most people argue that company cannot make profit in long term since customers tend to pay less in this situation.
As far as I am concerned, ‘pay what you think it’s worth’ is worth experimenting, because it can appeal to more people. Since the price is not fixed and people can pay the amount of money they want, everyone is able to afford the cost of such services or goods. The traditional principle of supply and demand is broken. Taking further step, I admit there are some problems in this model, such as hard for companies to record revenues and companies receive the revenue which is less than cost. With more explores, I believe problems can be solved.
At the end, I forget to tell you that Greer had already begun his new price setting strategy in car wash. The outcome was pretty good and customers paid an average of $22, which is about double the going rate. This is a nice beginning. I hope this approach can be adopted by other companies and test it in different ways.
Sources:
- http://www.cbc.ca/news/canada/calgary/pay-what-you-think-it-s-worth-is-calgary-businessman-s-new-motto-1.3245145