If a business is experimenting with voluntary pricing (‘pay-what-you-want’ pricing), to increase sales and profits give a portion of voluntary payments away to charity (and advertise the fact, naturally).
That’s the conclusion from a study by researcher Ayelet Gneezy comparing a number of pricing plans involving–in various combinations–voluntary payments, fixed prices and charitable donations:
At a theme park, Gneezy conducted a massive study of over 113,000 people who had to choose whether to buy a photo of themselves on a roller coaster. They were given one of four pricing plans. Under the basic one, when they were asked to pay a flat fee of $12.95 for the photo, only 0.5% of them did so.
When they could pay what they wanted, sales skyrocketed and 8.4% took a photo, almost 17 times more than before. But on average, the tight-fisted customers paid a measly $0.92 for the photo, which barely covered the cost of printing and actively selling one. [â€¦]
When Gneezy told customers that half of the $12.95 price tag would go to charity, only 0.57% riders bought a photo â€“ a pathetic increase over the standard price plan. [â€¦]
But when customers could pay what they wanted in the knowledge that half of that would go to charity, sales and profits went through the roof. Around 4.5% of the customers asked for a photo (up 9 times from the standard price plan), and on average, each one paid $5.33 for the privilege. Even after taking away the charitable donations, that still left Gneezy with a decent profit.
The researcher calls this “shared social responsibility” (in comparison to plain old corporate social responsibility).