GTM Dictionary

The Go-to-Market Dictionary: Pay-what-you-want pricing

Learn all about pay-what-you-want pricing and how it can impact your go-to-market strategy in this comprehensive guide.

In today's ever-evolving marketplace, businesses are constantly seeking innovative ways to differentiate themselves and attract customers. One such pricing strategy that has gained popularity in recent years is pay-what-you-want (PWYW) pricing. In this article, we'll explore the concept of PWYW pricing, its benefits and drawbacks, and how businesses can effectively implement it into their go-to-market strategy.

Understanding Pay-what-you-want pricing

Definition and concept

Pay-what-you-want pricing is a pricing strategy that has been gaining popularity in recent years. This innovative approach allows customers to pay any amount they wish for a product or service, giving them complete control over the value they place on the offering.

One of the main advantages of PWYW pricing is that it empowers customers, making them feel more connected to the brand. By giving them the freedom to choose how much they want to pay, businesses can tap into their customers' emotional connection with their products or services and foster a sense of goodwill towards the brand. This, in turn, can lead to increased customer loyalty and positive word-of-mouth marketing.

History and origin

The concept of PWYW pricing is not a new one. In fact, it has been around for centuries and was first used in the arts and entertainment industry. For example, street performers and musicians would often rely on the generosity of their audience to make a living.

However, it wasn't until the digital era that PWYW pricing became more mainstream. In 2007, a band called Radiohead released their album "In Rainbows" using a PWYW pricing model. The album was a huge success, with over a million downloads in the first few days. This success led many other businesses to consider adopting PWYW pricing.

Key components of Pay-what-you-want pricing

There are several key elements that businesses need to consider when implementing a pay-what-you-want pricing strategy:

  • Clear value proposition: Customers need to understand the value they are receiving from the product or service in order to place a fair value on it. This means that businesses need to clearly communicate the benefits and features of their offering, highlighting what sets it apart from the competition.
  • Freedom to choose: Customers should have complete freedom to decide what they want to pay for the offering, without any coercion or pressure. This means that businesses should avoid using any tactics that could be perceived as manipulative or pushy.
  • Minimum price: Businesses should set a minimum price to ensure that they cover their costs and generate some revenue. This price should be based on the actual costs of producing and delivering the product or service, as well as any other overheads associated with running the business.
  • Effective communication: It is important for businesses to effectively communicate the PWYW pricing model to customers to avoid confusion or misunderstandings. This means that businesses should clearly explain how the pricing model works, what the minimum price is, and what the customer can expect to receive in exchange for their payment.

Overall, pay-what-you-want pricing can be a powerful tool for businesses looking to build stronger relationships with their customers and increase their revenue. By empowering customers and giving them more control over the value they place on a product or service, businesses can create a more positive and engaging customer experience that can lead to long-term success.

Advantages of Pay-what-you-want pricing

Customer satisfaction and loyalty

One of the primary benefits of PWYW pricing is that it can lead to increased customer satisfaction and loyalty. When customers feel that they have control over the value they are receiving, they are more likely to feel positively towards the brand and return for future purchases.

For example, imagine a small coffee shop that offers PWYW pricing for their coffee. A customer who regularly visits the shop may feel more connected to the business, knowing that they have the ability to pay what they feel the coffee is worth. This sense of connection and control can lead to increased customer loyalty and repeat business.

Market differentiation

Another advantage of PWYW pricing is that it can help businesses stand out in a crowded marketplace. By offering a flexible pricing model, businesses can differentiate themselves from competitors and attract customers who are drawn in by the uniqueness of the pricing strategy.

For instance, consider a clothing store that offers PWYW pricing for their clearance items. This pricing model may attract customers who are looking for a deal, but also appreciate the ability to pay what they feel the item is worth. This can set the store apart from other retailers who may only offer fixed discounts.

Increased sales and revenue potential

Despite the potential for customers to pay less than the regular price, PWYW pricing can actually lead to increased sales and revenue potential. Research has shown that customers are willing to pay more than the regular price when PWYW pricing is offered, as it creates a sense of reciprocity and fairness.

For example, a restaurant that offers PWYW pricing for a special menu item may find that customers are willing to pay more than the regular price, knowing that they have the ability to choose their own price. This can lead to increased revenue potential for the restaurant, as well as increased customer satisfaction.

Encouraging word-of-mouth marketing

Finally, businesses can benefit from increased word-of-mouth marketing when using PWYW pricing. Customers are more likely to share their positive experiences with others when they feel that they have received value for their money, leading to greater brand awareness and customer acquisition.

For instance, a small bookstore that offers PWYW pricing for a special author event may find that attendees are more likely to recommend the bookstore to their friends and family if they feel that they received a fair value for their ticket price. This can lead to increased brand awareness and customer acquisition for the bookstore.

Disadvantages of Pay-what-you-want pricing

Potential for lower revenue

The biggest disadvantage of PWYW pricing is the potential for businesses to generate lower revenue compared to traditional pricing models. This is because customers may choose to pay less than the regular price, leading to a decrease in overall revenue.

For example, a restaurant that implements PWYW pricing may find that some customers only pay a fraction of the regular menu price, resulting in lower revenue for the business. This can be especially challenging for small businesses that rely on consistent cash flow to cover their expenses.

Difficulty in predicting income

Another challenge with PWYW pricing is the difficulty in predicting income. Since customers have complete control over the price they pay, it is impossible to know exactly how much revenue will be generated from each transaction.

This can make it difficult for businesses to plan for the future and make informed decisions about investments and expenses. For example, a business may not be able to accurately predict how much inventory to purchase or how many employees to hire if they cannot accurately predict their revenue.

Challenges in cost management

Cost management can be a challenge with PWYW pricing, especially if businesses are not able to accurately predict their revenue. This can lead to cash flow issues and difficulties in covering fixed costs.

For example, a business that operates on a PWYW model may struggle to pay rent or cover employee salaries if they do not generate enough revenue from customer payments. This can lead to financial instability and even bankruptcy if the business is not able to manage their costs effectively.

Risk of devaluing products or services

Finally, there is a risk that PWYW pricing can lead to a devaluation of the product or service being offered. If customers consistently pay significantly less than the regular price, it can signal to others that the offering is of lower value.

This can be especially damaging for businesses that rely on their reputation and brand image to attract customers. If customers perceive the business as offering lower quality products or services, they may be less likely to return or recommend the business to others.

Overall, while PWYW pricing can be an effective strategy for some businesses, it is important to consider the potential drawbacks and challenges before implementing this pricing model.

Implementing Pay-what-you-want pricing

Choosing the right product or service

When considering PWYW pricing, businesses should carefully evaluate which products or services are well-suited to this pricing model. Products or services that have a high perceived value or an emotional attachment to customers tend to perform better with PWYW pricing.

For example, a local artist may choose to offer their artwork at a PWYW price point, as their customers may feel a personal connection to the pieces and value them highly. On the other hand, a business offering a more commoditized product, such as office supplies, may not find as much success with PWYW pricing, as customers may not have the same emotional attachment to these types of products.

Setting a minimum price

Setting a minimum price is crucial for ensuring that businesses can cover their costs and generate some revenue. The minimum price should take into account the cost of production and any other associated costs, such as marketing or distribution.

It is important to strike a balance between setting a minimum price that is too high, which may deter customers from making a purchase, and setting a minimum price that is too low, which may not generate enough revenue to sustain the business. Businesses should also consider offering suggested price points to help guide customers towards an appropriate price.

Communicating the pricing model to customers

When implementing PWYW pricing, it is important to effectively communicate the pricing model to customers. This can be done through product descriptions, marketing materials, and at the point of sale.

Businesses should clearly explain the PWYW pricing model and how it works, including any suggested price points or minimum prices. It may also be helpful to provide examples of what other customers have paid for the product or service, to give customers a sense of what is appropriate.

Monitoring and adjusting the strategy

Finally, businesses should constantly monitor and adjust their PWYW pricing strategy based on customer feedback and revenue performance. This can help to optimize the pricing model and maximize revenue potential.

For example, if a business notices that customers consistently pay more than the suggested price point, they may consider raising the minimum price to better align with customer willingness to pay. Alternatively, if a business is not generating enough revenue with PWYW pricing, they may consider switching to a different pricing model altogether.

By carefully evaluating which products or services are well-suited to PWYW pricing, setting an appropriate minimum price, effectively communicating the pricing model to customers, and monitoring and adjusting the strategy as needed, businesses can successfully implement PWYW pricing and potentially increase revenue while building customer loyalty.


Pay-what-you-want pricing is a unique and innovative pricing strategy that can offer businesses several benefits, including increased customer satisfaction and loyalty, market differentiation, and increased revenue potential. However, there are also several challenges to consider, including the risk of lower revenue and difficulties in predicting income. By carefully evaluating their products or services and effectively implementing and monitoring PWYW pricing, businesses can take advantage of this pricing model and stand out in today's competitive marketplace.