Some thoughts on PWYW model

Recently read a couple of posts on Freaknomics blog about 'Pay What you Wish' model , originating from this story of someone starting a taxi service where you can name what you want to pay.
In India also we have similar non-fixed price service , but only issue is the taxi driver doesn't easily agree to your price and we haggle and arrive at what is mutually deemed as the 'right' price.

But what is the right price for any product or service ? who decides it ? isnt it a great step in Customer satisfaction (delight ) to let her/him name the price for the service she/he enjoyed ?

Pay what you Wish Model hence is an interesting model , something which is very bold ,daring, risky , but still if cleverly implemented will be a very successful one !

Recently when i was studying in Singapore , we used to visit this Indian Restaurant called "Annalakshmi" in ChinaTown , which used to serve really good South Indian food , the ambience was also very nice , it was part of a group of charitable institutions in India and was run by volunteers. This restaurant in Singapore , implemented PWYW model , there used to be buffet system , the food was really tasty and of good quality. But they didnt have any price printed in the menu card , the price you wanted to pay for the food consumed was left to you.

Whenever i visited , there was a lady who used to enquire if we were satisfied with the food and service and used to ask us the total number of people , before accepting the money. We used to visit the place often , still by our estimate we used to overpay most of the times as the entire experience was too good that you loosen your purse strings without second thoughts . Again here we didn't mind because the 'profits' from this restaurant was used for charitable purposes only.

It is the social element which is a key factor in this model , we don't want to be seen as the guys who dont pay properly by the patrons of the restaurant . The system works best if you dont know what others are paying for the same service. Also the service/product needs to be good goes without saying !

Another set of people use a variant of this model very successfully in India , the guys who come to collect money for festivals /temples ... they never quote any specific amount as the donation for these causes is always a voluntary one by the public. Though you hardly have a choice and rarely do people say no to a donation for religious cause . These guys were pretty enterprising they always used to carry notebooks / receipts printed with names of certain people who had paid say Rs.100 , when you actually wanted to pay only Rs.10 to the guy. Now even though the guy has not quoted any price for the donation and just asks you money ... you see what some other folks have paid and the social pressure ensures you never underpay him and actually in more instances really overpay !

Tipping in a restaurant , is another PWYW service - the guy never demands it , but its a social convention . The amount of tip depends majorly on the experience in the restaurant.

In normal PWYW model , this tendency to overpay is one bad thing about this model - u logically want to pay as less as possible but you feel guilty about it and your conscience makes you overpay. But is it really overpaying ? We actually end up paying what we think/conclude (at that point of time) is the 'right' price and often there is a satisfaction in paying whatever we wished to pay and even if we got conned into paying that amount ! On top of this there is a tremendous 'goodwill' associated with the concept too , the very fact that someone trusts you to evaluate their performance/value and empowered you to decide the right price itself makes this little extra shelled out worthwhile !!!

It would be really interesting to see this model being extended successfully elsewhere for what is deemed conventional services too . How would it be if you could name your price for whatever you purchase and same way get paid for your work at prices deemed right by others and what if all parties concerned are happy with the arrangement? Possible ? Well then we would be at Utopia right ?!