Pay What You Want: The Ultimate Sales Strategy

How Letting People Choose Their Price Can Make You a Millionaire

In February of 2013, I heard something that changed the way I approach my business and art forever.

On my daily commute home from work, I was listening to Pat Flynn’s The Smart Passive Income Podcast. The podcast usually focuses on topics like building high converting websites, increasing leads and sales, and using social media to spread your message.

Compelling, useful information for any online entrepreneur.

But this episode was different…

Pat had Anthony Vennare from TheHybridAthlete.com on his show. Anthony and his brother run an incredibly successful fitness website. In less than a year, they had built a business bringing in over $100,000 per year through digital product sales.

Remarkable, but not unheard of.

Except…

Here’s the kicker: they let their customers choose the price they wanted to pay for everything.

According to Pat:

“Their approach focuses on giving away their training programs for free, and by doing so, they make an average of $400 — $600 per day simply by asking people to pay what they want.”

That’s $146,000 to $219,000 per year…FROM FREE PRODUCTS.

Intrigued, I made a mental note and considered ways I could experiment with this unconventional sales strategy myself.

Generosity Sells

Fast forward two months, and I’m getting ready to release a new eBook: Notes From Seth Godin’s Revolution Conference.

The book is essentially a compilation of notes I’d taken while spending 2 days at an intensive business seminar, hosted and run by Seth Godin.

After getting permission from Seth to share the book with my audience, I created a simple splash page on my website, uploaded the file to Gumroad.com, and let my 150 subscribers know I had a new, free eBook for them…

With one catch: for the first time ever, I gave them the opportunity to contribute to my creative work — as much or as little as they’d like.

The next day, I had $80 in my bank account.

By the end of the week, $340.

At the end of the month, I was closing in on $500.

All for something I gave away for free.

Luck? Maybe Not…

You might be thinking this is a one-off example; that my experience was an anomaly, that the Vennare brothers are outliers, or that it can only work in certain niches under certain conditions.

No way this can work for a broader range of goods and services…

I thought this way myself for a while.

After all, if Pay What You Want is really this powerful, why don’t more people use it?

So I started digging.

Turns out, Radiohead had experimented with Pay What You Want for their In Rainbows album back in 2007.

Radiohead’s In Rainbows album made millions using Pay What You Want

The results?

“In terms of digital income, we've made more money out of this record than out of all the other Radiohead albums put together, forever — in terms of anything on the Net. And that’s nuts,” said Thom Yorke in December 2007, when interviewed by David Byrne for Wired Magazine.” Source: NME

Inspired by Radiohead’s success, the band Nine Inch Nails tried something similar in 2008 with their album Ghosts.

In the first week of release, Nine Inch Nails made over $1.6 million (and ended up being Amazon’s #1 bestseller in 2008, beating out Coldplay and Kanye West for top spots that year).

And you've probably already heard of Amanda Palmer, who uses Pay What You Want almost exclusively for her digital music and even in some cases for playing gigs (tip jar, style).

She raised a record-setting $1.2 million through Kickstarter in May of 2012.

All in all, that’s millions of dollars made from a heavily pirated industry — all by giving their music away for free and letting their fans contribute what they want.

Amanda Palmer, who sells her digital music almost exclusively using Pay What You Want, raised a record-setting $1.2 million for her most recent album.

And a Couple (Hundred) More Examples

You’re probably thinking what I was thinking when I first read these stats:

Those are all big name celebrities! This doesn't work for the little guy!

To be honest with you, I never expected to find people other than celebrities (and only in one-off examples) using this model successfully.

But then I stumbled across branding consultant Tara Joyce. She uses Pay What You Want exclusively for her services. And she’s been doing so for the past 5 years.

Obviously, something must be working…

Then I found Paste Magazine’s Pay What You Want campaign that rescued them from the brink of bankruptcy (and made them a profit during a year where most magazines on the planet were in the red).

And they continued to use Pay What You Want pricing at festivals the following year, getting them thousands more subscribers than they had in previous years.

I kept digging.

Pretty soon, as one story led to another, I discovered hundreds of successful Pay What You Want examples, like:

  • Bridge Hotel’s Pay What You Want Karma Keg that brings in 10-25% more than their fixed-price kegs
  • Linda Formichelli’s Pay What You Want eCourse experiment that brought in 10 times more than her fixed price eCourse (and is now a permanent option on her site)
  • Larian Studios PWYW video game compilation experiment that backfired — and brought in more money than they ever expected
  • Panera Bread’s group of Panera Cares Cafe’s that are entirely Pay What You Want based
  • Humble Bundle that raises millions for charity and for video game publishers through their PWYW video game bundles
  • Joost van Dongen’s hobby project Proun that brought in over $20,000 using Pay What You Want pricing
  • Chris Bennet’s Dock Cafe in Belfast that’s run entirely on an honesty-box system
  • Libboo, Zoho, Propellerhead and BinaryNow — all software companies that use or have tried Pay What You Want to sell their products
  • Perlin Winery in Germany that’s run entirely on PWYW…for the past 10 years
  • Little Bay restuarant in London that’s made 20% more revenue using Pay What You Want than their fixed price menu
  • And many, many more…

Heck, even Bon Jovi’s getting into the mix.

Why it Works

Pay What You Want works for a number of reasons, but I want to focus on just the top 3 most important factors that matter to you:

1. Pay What You Want removes the barrier to entry

Fixed-price products by their nature create a barrier to entry for consumers. By lowering the price to zero, you remove the barrier to entry.

Yet, while free destroys revenue, PWYW does not — people still contribute, and often more generously than you’d imagine.

2. Pay What You Want removes the price ceiling, letting your top 1-3% of customers contribute more

In an eye-opening interview I did with Ryan Delk of Gumroad.com, I found out something incredible:

Based on the results of multiple uses of Pay What You Want, Ryan discovered that the top 1-3% of our audiences contribute way over the average — so much so that they often more than make up for those who contribute the minimum.

“The interesting thing about Pay What You Want is that people fundamentally underestimate how engaged and excited the top 1 to 3% of their audience is about the things that they do…”

I found this to be true in my case.

When I released 2 Days With Seth Godin, the majority of my income came from the top 3% of my audience who contributed $50-$100 per download.

3. It inspires generosity

Contrary to popular belief, people are not self-serving by nature.

The title from a Harvard Business Review article says it best:

“When the Rule Is “Pay What You Want,” Almost Everyone Pays Something”

The study goes on to explain that 95.95% of customers contribute money when paying is optional.

The question is…how MUCH do those 95.95% actually contribute.

Matt Homann of LexThink is a consultant for lawyers, accountants and large corporations like Microsoft.

He switched from fixed price invoicing to what he calls You Decide Invoicing.

Here’s what he had to say about his results:

“Since I’ve been doing this, my sense of the value I give my clients has increased. I’ve recognized that my clients don’t care about the time I spend working for them, but rather the results they get from working with me. Quantitatively, my income has doubled in the past year, because clients pay me more on my blank invoices than I would have charged them. I’ve also increased my per-engagement price (when I’m asked to give one). I know charge roughly three times what I would have quoted before my pricing experiment began.” Source: You Decide Invoicing

Double your fixed rate price…

How’s that for generous?

How You Can Use PWYW for Your Business, Art and Writing

That’s the question I wanted answer, and it’s the question that fueled my new free course:

Pay What You Want Pricing 7 Day Email Course (FREE)

In it, I explore:

  1. the psychology behind Pay What You Want pricing (the underlying principles of WHY it works — this stuff is powerful, trust me)
  2. the 5 essential components of PWYW pricing(miss any of these and your offer won’t work)
  3. the 6 step ‘perfect pitch’ framework (get PWYW to actually MAKE you money)
  4. dozens of case studies and exactly WHAT they did right so you can apply it to your business, writing or art

As well as bonus video tutorials, expert interviews (with people like Tara Joyce, Joost Van Dongen and Anthony Vennare among others), and more.

Sign up for the course here (it’s free):

Pay What You Want Pricing — Free eCourse

Oh, and a new book

So, after writing this article, this topic went viral a little bit, with over 20,000 reads. I decided to write a book on the subject, compiling my research and experiments over the past 24 months using PWYW pricing.

Here it is — The Complete Guide to Pay What You Want Pricing: How You Can Share Your Work and Still Make a Profit.

The Complete Guide to Pay What You Want Pricing by Tom Morkes

If you’re interested in the book, it’s Pay What You Want (clever, right?) and you can get your copy here.

Final Thoughts

I would love to hear your thoughts on this stuff — I’ve talked to hundreds of entrepreneurs and artists about this topic over the past 6 months…it’s been all consuming but I love it. I continue to learn something new every day.

So let me know what you think by leaving a comment!

And definitely reach out to me / shoot me an email if you have any questions on the subject — I’d love to connect.

Keep Creating,

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