You are on page 1of 125

The COMPLETE Guide to

Pay What You Want Pricing

How you can share your work

And still make a profit.


By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 1

Table of Contents
Table of Contents .................................................................................................................................................................. 2
The Goal of This Guide ...........................................................................................................................................................................4
Section 1: PAY WHAT YOU WANT and Why it Matters..................................................................................................... 8
The Power of Asking...............................................................................................................................................................................9
7 Reasons You Should Care About PAY WHAT YOU WANT ........................................................................................................ 17
Section 2: PAY WHAT YOU WANT 101 ................................................................................................................................ 22
PAY WHAT YOU WANT Defined ............................................................................................................................................................. 23
PWYW: Marketing Strategy or Sales Strategy? ........................................................................................................................ 24
The Psychology Behind PAY WHAT YOU WANT ............................................................................................................................. 26
Section 3: Putting PAY WHAT YOU WANT to Work........................................................................................................ 35
The 5 Essential Components of PAY WHAT YOU WANT.............................................................................................................. 36
The 6 Step Perfect Pitch Framework .......................................................................................................................................... 52
What eCommerce Solution Should I Use? .................................................................................................................................. 70
Section 4: Applying PAY WHAT YOU WANT to Your Business, Art and Writing .................................................. 82
Using PAY WHAT YOU WANT to Increase Reach ............................................................................................................................ 83
Increasing Revenue per Purchase Using PAY WHAT YOU WANT............................................................................................ 87
Maximizing Customer Value Through Pay What You Want ............................................................................................... 90
How to Monetize Your Art through Pay What You Want..................................................................................................... 93
How to Use Bonuses to Incentivize Pay What You Want Contributions ....................................................................... 96
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 2

How to Use Creative PWYW Invoicing to Create More Revenue ...................................................................................... 99


Monetizing Your Writing through PAY WHAT YOU WANT ..................................................................................................... 101
How to Apply PAY WHAT YOU WANT to Your Brick-and-Mortar Business ..................................................................... 107
Charging a Premium for your ConsultingUsing PWYW ................................................................................................. 111
How to Create Sustainable Income Using PAY WHAT YOU WANT....................................................................................... 113
Section 5: Frequently Asked Questions About Pay What You Want .............................................................. 115
Closing Thoughts ............................................................................................................................................................................... 125

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 3

The Goal of This Guide


As research for this guide, I conducted a survey of hundreds of creators to see what concerns they had
regarding PAY WHAT YOU WANT (which Ill also refer to as PWYW in this guide) pricing.
My reason was simple: I wanted to find out what was keeping creators from using PAY WHAT YOU WANT
pricing.
The question I posed was open ended (what concerns would you have about using PAY WHAT YOU WANT for
your products or services), and allowed me to discover a diverse range of fears.
After hours of compiling and reviewing answers, here is what I found:
1. People are most afraid of not making enough money from their PWYW product or service to cover
overhead and other basic expenses. They believe customers will undervalue their work and pay very little
or nothing.
2. The biggest hurdle for creators regarding PWYW is technical know-how: they dont know what
eCommerce solution to use, theyre not sure how to accept payments, etc.
3. The majority of responses believed PWYW only works for digital products (not physical products or
services)
In this guide, I plan to address all of these concerns (and more).
The goal of this guide is to:

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 4

1. Teach you about PWYW pricing what it is (technical details), why it works (psychology behind it), and
how it works (in practice)
2. Show you how to apply PWYW to your business, writing or art so you can:
1. Increase revenue
2. Expand your reach
3. Increase your impact
Im going to show you how to do that by sharing with you results from PWYW experiments and extensive
studies done on the topic of PAY WHAT YOU WANT, combined with real life case studies to show you this stuff
isnt just theory it really works.
Here are just a few examples of successful PAY WHAT YOU WANT offers Ill dissect in this guide (and in greater
depth in our bonus interviews and video tutorials for those who purchased The Complete Package):
TheHybridAthlete.com (PAY WHAT YOU WANT fitness products bringing in $400+ per day on average)
Panera Bread (a restaurant that has experimented with PWYW for several of their stores successfully)
Perlin Winery (an entirely PWYW based winery in Berlin)
Joosts Proun (a PWYW video game side project that made over $20,000 in profit)
Paid to Exist (an online education and personal development website that uses PWYW occasionally
throughout the year to great effect)
Jennifer Blanchard (used PWYW instead of giving her product away for free, creating new passive
income streams)
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 5

Maria Popova of BrainPickings.org (an incredibly successful monthly donation-based PWYW model)
Stephen King (a PWYW serialized book that brought in close to $500,000)
Paulo Coelho (not quite PWYW, but he did encourage people to pirate his book and became a
bestseller because of it)
Amanda Palmer (made a record-setting $1.2 million on Kickstarter and funds her music using PWYW
pricing)
Radiohead (their PAY WHAT YOU WANT album made millionsplural).
Tara Joyce (has run an entirely PWYW based consulting business for the past 5 years)
Paste Magazine ( PWYW donation campaign that raised over $275,000, grew their subscriber base by
30,000, and kept the magazine from bankruptcy)
Libboo (a software as a service based business that runs on PWYW)
And many, many more
There are hundreds of other examples, but you get the point.
If you come away from this guide understanding PAY WHAT YOU WANT as a pricing technique and how to apply
it successfully to your business, writing or art, then I consider this guide a success.
And so should you.
If for any reason you have any questions, comments or concerns about anything in this guide or
anything regarding PWYW, please email me: tom@tommorkes.com
Im always looking for feedback to improve the work I do for you.
Oh, and one last thing before you dive in: thank you so much for contributing and for reading. Your time and
attention mean the world to me, so THANK YOU!
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 6

Keep creating,
Tom Morkes

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 7

Section: 1

Section 1: PAY WHAT YOU WANT and Why it Matters

Pay What You Want and Why it


Matters
Progress, whether in business, an economy or science, comes
through experimentation and failure.
- Charles G. Koch

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 8

The Power of Asking


My Personal Story and How PAY WHAT YOU WANT Changed the Way I Create and
Share Content Forever
I started writing and publishing online in the fall of 2012.
At the time, I wasnt sure what I was doingI just knew there were ideas in my head I wanted to share with
other people.
I started with no audience and no connections.
In November of 2012, I wrote and published my first book: The Art of Instigating. I gave it away for free, just
like my blog posts.
People liked it and spread the word. My list grew by dozens (an incredibly small amount, compared to many
large, established blogs).
In January of 2013, I started a podcast, In the Trenches. I gave it away for free.
Shortly after that, I created a couple guides to help people start, finish and ship their own creative projects
(much like I had with my blog, book and podcast).
I gave it all away for free.

What to do as an Unknown Author


By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 9

Around the spring of 2013, I was ready to publish my second book: 2 Days with Seth Godin.
Like with the Art of Instigating, I felt there was a ton of compelling content in 2 Days, and I wanted as many
people as possible to have access to it.
But this time I didnt want to simply give the content away for free and let that be that.
To be completely honest, I wanted validation. REAL validation.
Of course, the only ways to get real validation is through an exchange of money. You find out pretty quick
what people think of your product or service when you start charging.
But this presented a problem because I really didnt want to charge for this book I wanted people to have
access to the same game-changing information that I did, regardless of their financial situation.
There was a second problem too: I was an unknown author. No one knew me. I had no connections and a
limited network. So how does an unknown author successfully market and sell a book?
Thats when I stumbled across the Gumroad platform and their PAY WHAT YOU WANT option.

Putting PWYW to Work


I originally heard about PAY WHAT YOU WANT about a year ago, after listing to a podcast interview on Smart
Passive Income.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 10

The person being interviewed was Anthony Vennare of The Hybrid Athlete. Anthony and his brother started
The Hybrid Athlete earlier that year. But in a short amount of time, they had created a website that brought
in, on average $400 per dayusing PAY WHAT YOU WANT.
I was blown away.
Here was a real business, with real products and services, and real employees, making a killing using an
unconventional pricing model.
I loved it.
This interview stuck with me.
Ever since starting my, I wanted to incorporate PWYW into what I created. I wasnt sure exactly how I
should use it, I just knew I wanted to.
So as I sat looking at the finished PDF of 2 Days next to an open browser of Gumroad and their PAY WHAT YOU
WANT feature, Anthonys interview came back to me. This is how I can easily apply what I learned in that
interview to my art.
The next day, I sent Seth Godin an email asking if I could share this PDF. He generously said yes.
The next day, I uploaded the product into Gumroad, created a simple page on my website, and sent out an
email to my loyal readership (about 150 subscribers at the time), letting them know the book was available.
But this time I gave them the opportunity to contribute to my creative work. I let them know the book was
PAY WHAT YOU WANT they could take it for free or treat me to a cup of coffee. The choice was theirs.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 11

In the first day I made close to $80 enough to pay for a nice dinner for twonot bad
By the first week, I made $340 enough to cover groceries for the monthawesome
By the first month, I was closing in on $500 almost enough money to pay the rentincredible
All for a product I had planned to give away for free.
This is the power of generosity.
This is what happens when you put your work out there, when you give freely, and when you give others the
OPPORTUNITY to give back to you.
*For more details from the launch of 2 Days with Seth Godin, below is a portion of the article I wrote for
Think Traffic. For more details, check out the original article here.
Metric

First Week

First Month

Total number of people who actually viewed my product on Gumroad

203

282

Total Sales

55

69

Conversion

27.1%

24.5%

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 12

Total who took the product for free

28

35

Total who contributed some amount of money

27

34

Percentage of people who contributed some amount of money

49%

49%

Total Dollar Amount Contributed

$340

$493.50

Range of Dollar Contributions

$5 - $50

$2-$100

Average Dollar Contribution (all sales)

$6.18

$7.15

Average Dollar Contribution (of those who contributed money)

$12.59

$14.51

First Week:

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 13

First Month:

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 14

Why These Numbers Matter


I give you my personal story to prove a couple points:
1) You dont need to be a marketing genius or have a huge following to make money from your art.
I had no idea how to launch a product.
I had a subscriber base of 166 people a lot of people would laugh at that number and say you cant make
money off of a list of 166 people. I released my product randomly on a Sunday evening with no big
announcement, no strategy, and no connections to other bloggers, yet I made $340 in the first week.
All from a product I gave away for FREE - but with one big difference: I GAVE PEOPLE THE CHANCE TO GIVE
BACK.
I know, all capital letters might seem like a bit much, but trust me it makes all the difference in the world
2) PAY WHAT YOU WANT works
In my case, in a very small way; Im not going to retire on $500.
But in many other cases (in dozens of examples and case studies that Ill analyze throughout this guide), in
very big ways.
It works because generosity works.
I gave a lot of my stuff away for free. I figured that was the most generous thing I could do. Give and expect
nothing in return.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 15

What I didnt realize is that this wasnt the most generous thing I could do. I kept all the generosity to
myselfI was hoarding it, so to speak. Thats not very generous at all
It took me some time to finally understand, but the truth is, the most generous thing we can do as human
beings is give OTHERS the chance to be generous.
Simply by asking for help, accepting a donation, or letting people contribute to our work, we give the
gift of letting OTHERS be generous.
And yes, this is a gift.
If youve ever donated to a cause you care about, contributed to someones creative work, or left a big tip for
incredible service, you know the good feeling you get from being generous.
Why on earth would you keep this feeling to yourself?

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 16

7 Reasons You Should Care About PAY WHAT YOU WANT


1. PWYW is ethically based
PWYW is arguably the most ethical pricing model possible; it allows those of means to contribute as much as
theyd like, without restriction, and it also gives those with limited resources access to products and services
that would normally be off limits.
And because PWYW is based on the concept of volunteerism (YOU decide how much to contribute), it is
intrinsically fair to all parties involved.
2. PWYW is good for consumers and producers alike
Unlike conventional pricing systems that generally benefit either the consumer (discounts that are
unsustainable for the producer) or the producer (artificially high prices to maximize profit margins at the
expense of the consumer), PWYW allows BOTH consumers and producers to benefit from the exchange.
When applied properly, the exchange is fair-value based. The producer is generous in letting the consumer
choose his price, and the consumer is expected to be generous in return. Both parties benefit because
neither party is exploited.
Since I've been doing [PAY WHAT YOU WANT pricing], 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 perengagement price (when I'm asked to give one). I know charge roughly three times what I would have
quoted before my pricing experiment began. Matt Homan, Speaker, Facilitator and Consultant

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 17

3. PWYW builds relationships that last


Every PWYW exchange is much more than a give-and-take transaction - its a micro-partnership that lasts.
The act of being generous inspires generosity in return. Instead of the customer being a number in a sales
funnel algorithm, shes a person you know by her first name (or at least it feels this way when PWYW is
offered the correct way more on that in Section 3).
4. PWYW increases sales
In literally every single case Ive researched, PWYW has increased sales for both products and services.
5. PWYW lets you validate products and services rapidly
Giving away a product for free is great for getting early adopters to use your product or service, but its
generally useless for validation. Conversely, charging out of the gate can validate a products worth, but can
also deter early adopters, especially when the product or service is unconventional or unproven,
PWYW helps solve this problem by encouraging early adopters to get on board but still requiring them to
put skin in the game (the price they choose), validating what you create.
6. PWYW increases reach and exposure
In almost every industry, PWYW is an underused pricing technique. By simply using the model, youve
created a unique selling proposition that will help you stand out in a noisy crowd.
The result is a pricing method that inspires sharing and word of mouth marketing, something that would
cost 10 times as much on a conventional advertising budget (a great example of this is Paste Magazines
PWYW campaign, which Ill break down step by step for you later in the guide).

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 18

7. PWYW increases revenue


At the end of the day, this is probably what most people care about: does PWYW actually make money (at
least enough to cover expenses)?
When applied correctly, PWYW dramatically increases revenue per sale (by 60% to 200% in some cases).

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 19

An Interview with Jennifer Blanchard, creative wellness and writing coach


www.jenniferblanchard.net | Follow on twitter: @InkyBites
Why did you decide to use Pay What You Want?
Every year for National Novel Writing Month (NaNoWriMo), I offer 30 Days of NaNo Tips, to keep writers
inspired and motivated to finish the 50,000-word challenge. I usually offer my NaNo Tips for free... but the
last few years there have been a lot of people on my list who really didn't want to be on there anymore, so
they would mark my emails as "spam" instead of just unsubscribing. This was causing me to get
"complaints" with my email marketing company. Too many of those and they kick you out. I spend a lot of
time putting these annual tips together and making sure that they are extremely valuable, so it bums me out
when people do rude things like that.
Rather than continue to devalue the tips by allowing people like that to remain on my list, I decided to
charge "Pay What You Can Over $1" for the tips this year.
What is your philosophy behind offering items as PWYW?
The "philosophy" is two-fold:
1. Ensure that the people on the list actually want to be hearing from me every day for a month, and having
them pay something for it naturally weeds out the people who were only on the list because the tips were
"free."
2. To get paid something for all the time I spend putting the tips together. Since I charged this year, I
revamped all the tips so they are even better than ever before, and I offered a bonus month of planning tips
to former subscribers, as a way to entice them to re-sign up and stay on my list.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 20

What specific tactics or techniques do you use that have led to a successful PWYW offering...versus
people just taking the product for free and walking away?
As I mentioned above, I offered a bonus month of planning tips, on top of the NaNo Tips, as a way to keep my
old subscribers on my list. I offered this exclusively to past subscribers. I also used testimonials from past
subscribers to highlight just how valuable these tips really are.
For PWYW it's a steal.
How has it worked out for you financially?
So far it's worked out pretty good. I've gotten an average of $2 a person, but I've had PWYCs all over the
map, ranging from $5 to $30!
Pretty good for something I used to offer for free ;-)

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 21

Section: 2
Section 2: PAY WHAT YOU WANT 101

Pay What You Want 101

The man who grasps principles can successfully select his own
methods. The man who tries methods, ignoring the principles,
is sure to have trouble.
- Ralph Waldo Emerson

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 22

PAY WHAT YOU WANT Defined


The definition of PAY WHAT YOU WANT from Wikipedia:
PAY WHAT YOU WANT is a pricing system where buyers pay any desired amount for a given commodity,
sometimes including zero. In some cases, a minimum (floor) price may be set, and/or a suggested price
may be indicated as guidance for the buyer. The buyer can also select an amount higher than the
standard price for the commodity.
PAY WHAT YOU WANT is a style of selling that allows the customer to choose his or her price in return for the
product or service being offered.
In essence, it flips the conventional fixed-price model on its head: instead of the producer setting the price,
the consumer sets the price.
For the sake of this guide, the term PAY WHAT YOU WANT (or PWYW for short) is equivalent to other variations
of the name, including: Choose Your Price / Pick Your Price / Pay What its Worth, etc. unless otherwise noted.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 23

PWYW: Marketing Strategy or Sales Strategy?


Ive had a lot of conversations with a lot of people on the subject of PAY WHAT YOU WANT pricing, and this
comment always gets brought up in some form or fashion:
PAY WHAT YOU WANT pricing works as a marketing strategy but not as a sales strategy.
What they mean is PAY WHAT YOU WANT works like advertising: it gives you exposure, visibility and reach. It
helps you stand out in a noisy crowd. Its good PR if you do it authentically and honestly.
I agree 100%. PAY WHAT YOU WANT is a powerful marketing strategy.
They also argue that PAY WHAT YOU WANT is ineffective as a sales strategy because it doesnt bring in
additional revenue unless you have a loyal, existing audience.
I agree 100% with this statement too. PAY WHAT YOU WANT doesnt work if you dont have a loyal audience.
If your audience is disloyal (or they dont know who you are because youre a lifeless corporation), they
probably wont care to give more than the minimum.
But neither of these arguments actually proves that PAY WHAT YOU WANT cant be used as both a
marketing strategy AND a sales strategy.
With the right presentation, your PAY WHAT YOU WANT offer will draw attention.
With the right pitch, people will share your work and talk to others about what youre doing.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 24

With the right relationship, your happy readers will contribute much more than you could possibly imagine.
And in this guide, Ill show you exactly how to make this happen.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 25

The Psychology Behind PAY WHAT YOU WANT


Before I explain HOW to make PAY WHAT YOU WANT work, its important to understand exactly WHY it works.
Understanding the psychology behind PAY WHAT YOU WANT is important if you care about crafting and
creating a PWYW offer people cant resist.
There are 4 psychological reasons in particular PAY WHAT YOU WANT works:
1. PAY WHAT YOU WANT lowers the barrier to entry
2. PAY WHAT YOU WANT encourages impulse buying
3. PAY WHAT YOU WANT promotes sharing
4. PAY WHAT YOU WANT creates generosity in the customer
Lets get to it:

1. PAY WHAT YOU WANT Lowers the Barrier to Entry


[Barriers to Entry] are obstacles that make it difficult to enter a given market. The term can refer to
hindrances a firm faces in trying to enter a market or industrysuch as government regulation and
patents, or a large, established firm taking advantage of economies of scaleor those an individual faces
in trying to gain entrance to a professionsuch as education or licensing requirements. - Wikipedia
Barrier to entry also applies to consumers trying to purchase a product or service.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 26

When price is high, a barrier to entry is created.


The XBOX One released on 21 November, 2013 at a price point of $499 in the United States. Thats a barrier
to entry for the consumer - not every teenager (or even adult) can afford to purchase the system.
Over time, the price will predictably fall. As the price falls, the barrier to entry lowers, and more consumers
will purchase.
This concept is simple, sure, but its important to understand.
When you use PAY WHAT YOU WANT pricing, consumers arent blocked by a high price point. Because
consumers can choose their own price, theyll be more willing and able to purchase than if the product had a
fixed price that was too high.
Whats interesting to note is that many times people will still pay full retail price for a PWYW product, yet
would have been turned off from purchasing had the product retailed at fixed-price.
Heres a quote from Gabrielle who purchased tickets to a conference that offered PAY WHAT YOU WANT pricing:
the main reason I signed up was because it was PWYW. Normally, I feel like I cant afford or justify the
expense of attending something like that, but PWYW made it much more accessible. The irony was that I
ended up paying the 'suggested' price, because once I had decided I was going, I mentally adjusted
(increased) how much I thought I could afford.
A price that is too high is relative to the individual but the beauty of PWYW is that it eliminates too high
from the consumers vocabulary.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 27

Now, instead of it being a matter of money: can I afford this, its a matter of desire: do I want this?

2. PAY WHAT YOU WANT Encourages Impulse Buying


A susceptibility to value and apparent discounts isnt just down to the loss aversion switch; many of us
have an innate desire to save. Retailers and manufacturers play on this by telling us how much money we
could save by buying and using their product.
Source: Psychology Today
Impulse buying refers to purchasing a product or service immediately after seeing it, rather than thinking
about the purchase, weighing pros and cons, considering other options etc.
Like Mel Gibson from Conspiracy Theory (every time he enters a bookstore, he has to buy The Catcher in the
Rye), were all predisposed to making impulse buys. Its in our nature.
PAY WHAT YOU WANT takes advantage of this predisposition by leveraging our innate desire to save.
In most cases, fixed prices keep the consumer from purchasing immediately.
Can I really afford this? Is it worth the money? Will I regret this purchase later?
But with PWYW, the pricing question is removed.
If your product or service is compelling, PWYW makes the customer more likely to purchase on impulse.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 28

* There are ways to create an even stronger impulse buying desire, which I cover in Section 3: The 6 Step
Perfect Pitch Framework

3. PAY WHAT YOU WANT Promotes Sharing


By being generous and offering your products or services as PWYW, people are much more willing to spread
your work to their friends and family.
Humans are sharing more content, with more people, more quickly than ever before. Our reasons for
doing so generally fall into at least one of these five categories, the study found.
1. We share to bring valuable and entertaining content to others
2. We share to define ourselves to others, and to receive social validation
3. We share to strengthen and nourish our relationships with one another
4. We share for self-fulfillmentWe enjoy getting credit for it
5. We share to advocate for causes we believe in, and less commonly, brands we want to support
Source: blog.bazaarvoice.com
PAY WHAT YOU WANT products and services naturally lend themselves to ALL these criteria when applied
correctly.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 29

People are more likely to share PWYW products and services because its a no-lose situation for them and
their audience. A PAY WHAT YOU WANT offer is always a great deal and its often attached to a charitable cause,
which makes it easy to advocate for.

4. PAY WHAT YOU WANT Inspires Generosity


Heres what an article from the National Academies of Science has to say about generosity (*highlighted for
emphasis):
human generosity, far from being a thin veneer of cultural conditioning atop a Machiavellian core, may
be a bedrock feature of human nature... Intuition and economic theory both suggest that economic
behavior follows economic belief: If an investment will have zero, or even negative, return, the mind
should prompt us not to invest. Surprisingly, however, evolution favors a mind that does not follow the
logic of economic maximization when cooperating, but rather one designed to be generous even when
rational assessment indicates that ones generosity will most likely never be repaid.
Source: The evolution of direct reciprocity under uncertainty can explain human generosity in one-shot
encounters
Generosity is a part of our human nature.
When given the opportunity, were more likely to be generous than self-serving. This is especially true when
others show us generosity first.
PAY WHAT YOU WANT works because it taps into the generosity of the buyer. Instead of the sales process
being a win-or-lose, scarcity-mindset exchange, it becomes a way for the producer to generously give to the
consumer, no strings attached, which ultimately inspires the consumer to return the favor.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 30

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


When the Rule Is "PAY WHAT YOU WANT," Almost Everyone Pays Something
The article continues
During two years of observation, only 0.5% of patrons took advantage of the opportunity to eat free at
the pay-what-you-want Wiener Deewan self-service Pakistani restaurant in Vienna, say Gerhard Riener,
of the University of Jena, and Christian Traxler, of the University of Marburg, both in Germany. By the end
of that period, payments for meals had stabilized at an average of 5more than enough to cover
costsand the number of daily customers had increased by more than 50%.
Source: Harvard Business Review
So you know generosity inspires reciprocal generositybut what does that look like?
Walt Kania, a freelance writer and consultant has used PWYW extensively for his work. Heres what hes
witnessed:
Sometimes (as one client confessed to me) theyll reflexively crank up the fee when filling in the blank.
Sort of like the way we reflexively and fearfully crank down the price when the client says How much will
it cost?
Source: The Scariest Pricing Idea Ever. That Works.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 31

Thats the practical application of generosity consumers almost automatically choose to pay more when
given the opportunity (much like we as producers almost automatically lower the price when offering a
product or service).
When it comes to PAY WHAT YOU WANT, the old adage is true: what goes around, comes around.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 32

Interview with Tommy Walker, online marketing strategist


Tommy.ismy.name | follow on twitter: @tommyismyname
How long have you been using Pay What You Want pricing?
I started a "Name your own price" offer in December of 2009 as a way for people who couldn't normally
afford my rates to jump-start their online marketing for the new year. I've been doing it every year since :-)
What inspired you to use Pay What You Want pricing in the first place?
Honestly, I don't know if it was one single thing. It just seemed like the right thing to do. I saw a lot of other
online marketing people stay fixed in their rates, or doing product launches, and I wanted to do something
different. It seemed like a good way to give back to the people who helped me grow throughout the course of
the year.
How much money have you made from your Pay What You Want offerings?
A respectable amount, and it's grown proportionally every year. I very rarely make offers to my email list,
and the "Name your own price" offer is one that is a mainstay, so it's been easy to track growth.
How has Pay What You Want changed your business, career or life?
It's allowed me to connect with really cool people who really want to grow, but were not at a place where
they could pay thousands of dollars to get advice that put them on the right path. The money aspect for me
isn't so important as it is that I can help people who might not otherwise be able to afford it or be
apprehensive about taking on a consultant.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 33

What did you do that helped people pay fair value versus gaming the system and taking your product
or service for free?
I never really had that problem. In fact, people would ask me how much they should pay and were afraid
they would be paying "too little". I think that's a by-product of not skimping on the content throughout the
year and making every effort to help without charging a dime. I've been really fortunate to not have a lot of
people try to take advantage, and in many cases the pay what you want offer has turned into full price
consulting deals because the initial barrier was so low.
What have you learned about PWYW that you wish you had known before you started?
That people's biggest apprehension was that they didn't want to feel like they would be taking advantage.
Also, that it's good to have some sort of price point set so they have some guidance as to what they should
pay. Without direction, many can become overwhelmed with their own fears, and it's those fears (not price)
that hold people back from making a decision to help them take things to the next level.
That has helped me in my full price offers just as much as the pay what you want offers, and it's been an
incredible lesson :-)
What was the biggest surprise since you've been using PWYW?
The amount of people willing to take me up on the offer. Even though online is a two way form of
communication, people don't talk back nearly as much as you would expect. So when someone takes
advantage of the offer and says "Wow, I can't believe you are doing this!" it's a really neat thing to see how
many people you've really helped through the year. Getting to work with them one on one and help them
bring their amazing idea to the next level is always a great way to end the year!

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 34

Section: 3
Section 3: Putting PAY WHAT YOU WANT to Work

Putting Pay What You Want to Work

We are what we repeatedly do. Excellence, then, is not an act,


but a habit.
- Aristotle

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 35

The 5 Essential Components of PAY WHAT YOU WANT


How to Determine if Your Product or Service Will Work With PAY WHAT YOU
WANT
According to the book Smart Pricing, for PAY WHAT YOU WANT to work, it must meet 5 criteria:
1. A product with low marginal cost
2. A fair-minded customer
3. A product that can be sold credibly at a wide range of prices
4. A very competitive marketplace
5. A strong relationship between buyer and seller
In the following chapters, Ill explain what these criteria are, how they affect your potential PAY WHAT YOU
WANT offer, and an example of how to apply these criteria to pre-screen an offer before you jump right into
PWYW (and leave disappointed because you didnt do your homework).

1. Choosing a Product with Low Marginal Cost


First, lets take a look at marginal cost:

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 36

In economics and finance, marginal cost is the change in the total cost that arises when the
quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In
general terms, marginal cost at each level of production includes any additional costs required to
produce the next unit - Wikipedia
So low marginal cost is where the total cost to produce one extra unit is low (as close to zero as possible,
ideally).
Heres a quick diagram to show marginal cost as a factor of price and units produced:

Cost to produce 1 extra unit


A hand tailored suit has high marginal cost.
Adding 10 or 100 suits to the tailoring line-up doesnt decrease expenses substantially the time investment
continues to increase with each additional unit, and material cost can only decrease so much if you order in
bulk.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 37

Artisan, then, is not low marginal cost.


On the opposite end of the spectrum are digital products.
What does it cost to produce an additional mp3 or PDF document? Essentially zero.
Heres the thing: with physical products, there will always be a cost associated with creating an additional
unit. That cost might decrease, but there will always be a cost associated with physical goods, much higher
than digital goods.
Thats why digital products work best for PWYW (although physical products also work, which Ill cover in
Section 4).
While Ill cover PAY WHAT YOU WANT for both physical and digital products in this course, the emphasis is on
digital products as they have the greatest chance of success because of their extremely low marginal cost.

2. Finding Fair Minded Customers


A fair minded customer is someone who understands that theres someone on the other side of that product
or service who put his/her sweat and blood into creating itand the fair minded customer wants to give
fair-value for this creators work.
Its true some people will take things for free and not think twice. But this type of person is actually quite
rare.
In reality, the majority of people are fair minded they just need to be SHOWN the value of what you create.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 38

While there may be certain markets more generally fair-minded than others, its possible to find fair
minded customers in ANY industry, even where pirating is common. For example, in online videogames and
music.
Case Study: Proun
Joost van Dongen is the developer of an indie PAY WHAT YOU WANT game called Proun.
He worked on this game in his spare time for several years and chronicled his work on his blog.
When he finally released the game, heres what happened:
1. The vast majority of people didnt pay anything (they downloaded or pirated for free)
2. But the average price per paid download was $5.23
All in all, Joost netted over $20,000 for his offering.
An incredible success considering this was a hobby project in a heavily pirated industry.
Source: Joost Blog
Case Study: In Rainbows
In 2007, Radiohead, newly released from their publishing contract, decided to try something
unconventional: they released their new album In Rainbows as a PAY WHAT YOU WANT download.
Music, like videogames, is a heavily pirated industry. Many people expect music for free.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 39

Because of this, you might expect people to download Radioheads new album and contribute nothing.
Thats not exactly what happened...
"In terms of digital income, weve 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 thats nuts," said Thom
Yorke in December 2007, when interviewed by David Byrne for Wired Magazine.
Source: NME
Radiohead made millions from their PWYW album.
Think about that: Millions from something that people could have taken for free, no questions asked, if
they wanted to.
Even in areas and industries where pirating is common, you can find fair minded customers you just have to
build a relationship with them first (more on that later on).

3. Choosing a Product or Service with a Wide Range of Credible Prices


Credible pricing refers to a price that is reasonable from the point of view of the customer.
A wide range of credible prices means the good or service could be priced at many different levels and still
be reasonable from the customers standpoint.
Other than commodities, just about anything can have a credible range of prices but it requires the
producer to show and demonstrate the value to the customer.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 40

False claims and inauthenticity dont work.

4. Finding a Competitive Marketplace


A competitive marketplace is any market with a vast array of competing products or services.
In a very competitive marketplace, PAY WHAT YOU WANT works as a marketing strategy and allows your good
or service to stand out in a noisy crowd.
In a noncompetitive marketplace, PWYW loses its marketing power. Worse still, it is more likely to fail
because its more difficult to judge fair-value from the customers perspective.
The more competitive the market, the more likely PAY WHAT YOU WANT will be successful.

5. Developing a Strong Relationship with your Buyer


This is THE most important component of PAY WHAT YOU WANT.
Without a strong relationship with your buyer, PWYW is likely (almost guaranteed) to fail.
But WITH a strong relationship, PWYW can work even if you miss judge the market, product or customer.
PAY WHAT YOU WANT doesnt work for the lifeless corporation. If a corporation is offering something as
PWYW, the majority will take it for free (or pay the minimum), assuming its some sort of marketing trick or
scheme (it probably is).
BinaryNow tried this with their software: Kingsoft Office and Kingsoft Internet Security.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 41

Both products retailed at $39. For their PWYW experiment, BinaryNow let customers have the software for
a minimum offer of $2.
Here are the results: 82% of purchasers picked the cheapest option and paid the minimum payment of $2
required ($1 per application). The second largest group (8%) paid $10 per order. In the end only 0.6 %
paid the full retail price of $39.95. The average price per order was $3.32.
Source: binarynow.com
Not the best results in the world
Contrast this with Fred Hicks of Evil Hat Productions, a producer of niche RPG games and fiction. Fred tried
out a PWYW experiment for several of his products. Heres what he had to say:
For Fate, weve been building an audience for a decade. Our fans are pretty damned dedicated, and the
audience has grown to a very respectable size. The Fate Core Kickstarter is one way weve managed to
tap into that. Our PWYW release of Fate Core and Fate Accelerated is another way. Over on
DriveThruRPG, Core and FAE both went up on the 5th of this month. Were 5 days later and weve grossed
$2000 between the two of them (before DriveThrus cut). Core itself has seen just shy of 300 paying
customers, averaging a little more than $5 per purchase. These are folks paying $5 because they want to,
not because they have to.
If we see your PAY WHAT YOU WANT offer as something lifeless, robotic or corporate, we wont contribute.
If you want to create a successful PAY WHAT YOU WANT product or service, you need to establish a
relationship with your customer. This means making direct contact with your readers, clients and
consumers.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 42

Some ways to do this:


1. Send a personal email to new subscribers
2. Start a dialogue with your audience; get to know them and let them get to know you
3. Be transparent and vulnerable show people that youre human
The point is, when a prospective customer knows theres a person behind the product, theyll be more
willing to contribute
But you need to take it one step further and actually get to know them personally (this is even more
important when offering a service).
After a few painful scorchings, and several delightfully lucrative wins, here is the bottom line.
This technique works only when:
- You have a long-term relationship with the client. Youve done work for them before, at your usual
rates. They trust you. They know your work. And most likely they need to work with you again.
Dont try this with one-time clients, clients who dont use this work often, or clients who didnt seek you
out. Been there, done that, lost shirt. - Walt Kania
Remember, the person on the other side of the product or service is a human being this cuts both ways.
Connect with your customers (like a human being), let them connect with you, and theyll treat you like you
deserve to be treated (and contribute generously to your PWYW product or service).

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 43

Using this Criteria to Pre-screen Your Offer


During the research phase for this guide, I had a conversation with an entrepreneur who was experimenting
with PAY WHAT YOU WANT.
She was offering a 30 minute 1 on 1 consultation on how to go on Safari in Africa. Several people took her
up on her offerbut ended up paying nothing.
After a few weeks of the offer, she called it quits.
Whats wrong here?
To find out, we can use the 5 essential components of PWYW to pre-screen (or in this case, post-screen) the
market and subject matter to make sure its viable for PAY WHAT YOU WANT pricing:
1. Is this a good or service with low marginal cost?
Yes as far as services go. I assume such a consultation (done via phone or skype) doesnt require any
additional resources beyond the expertise of the consultant. Booking extra consulting gigs takes up time,
but doesnt necessarily incur additional costs (like running an in person seminar might, for example).
2. Was she working with fair-minded customers?
Clearly she wasnt (who doesnt leave even a small contribution for someones time and knowledge?).
But the more important questions is: why didnt we know if they were fair-minded before she started?

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 44

One simple way to vet clients is to get to know them first (and then develop a relationship with themsee
#4 below). Once you (the creator/producer) become a real person to your customer, how could we possibly
NOT compensate you for your time and knowledge?
3. Was this a service with a credible range of prices?
Yes. If she is able to explain how much money someone can save by taking her advice, she can price anchor
the service (a guided safari can cost you $10,000+, but you can do it yourself safely for a quarter of the cost if
you follow my advice such an offer could be worth hundreds or possibly thousands of dollars with the
right pitch).
4. Had she established a relationship with her customers?
After some further inquiryno. She had never spoken to them before. This was her first time really
engaging with them and she left the price up to them (people she didnt know personally) to decide their
contribution, tip-jar style.
5. Was this a competitive marketplace? Are there many people (if any) in the safari consulting niche?
After doing a quick search online, it doesnt seem like there are more than a handful of people / companies
that offer such a service (and all of those seem to be booking agents, linking people up with safari guides).
No, this is not a competitive marketplace.
Conclusion:
Based on this information, this probably isnt the market or the subject matter to use PAY WHAT YOU WANT.
But lets say she had chosen a competitive market (business or weight loss, for example), had established a
relationship with her prospective customers before approaching them with the offer, and had a credibly
priced, low marginal cost product she wanted to try.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 45

Would this guarantee her success?


Not exactly.
While the 5 components of PAY WHAT YOU WANT can determine whether your product or service is a good fit
for PWYW pricing, it doesnt dictate whether it will actually SUCCEED at creating more income, expanding
your reach, and increasing your impact.
That all depends on the pitch

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 46

An Interview with Leah Hynes, Founder of The Game Changers Live Series
www.thepursuitofpurpose.net | Follow on twitter: @HynesLeah
How long have you been using Pay What You Want pricing?
This was our first foray into PWYW pricing so only since October 2013.
What inspired you to use Pay What You Want pricing in the first place?
In October 2013 we hosted our first ever paid event The Circuit Breaker Series. As a speaker became
available at very short notice we decided to make the
event happen despite the tight deadline. We had 3
weeks to organize it, promote it and fill the 64 person
theatre. After two weeks of minimal movement on
registrations we decided to use a Pay What You Want
ticketing option. In 10 days we went from 3
registrations to 47.
At the start of those 10 days we implemented a
number of strategies all at once including:
1. a Pay What You Want ticketing option
2. a change of venue from the outskirts of Melbourne
to inner city

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 47

3. a change of day and time from a Saturday evening to a Saturday morning


4. we partnered with another organization with an established list of like-minded people and offered them
an affiliate program of 30% commission on ticket sales, giving us access to their list of passionate and
inspired people in Australia and them financial gain for sending out 3 pre-written emails. Its interesting to
note that the first email our collaborating partner distributed resulted in zero registrations. Once we
implemented PWYW, the emails started generating much more sales.
Financial gain is not our number one driver.... serving people is. By giving the power of choice back to those
we serve it has helped us to find the market price. Funnily enough by using this method we managed to
bring in more income than we had expected to.
I remember saying to my business partner, Nazrin, at the start of the 10 days when we were seriously
considering canceling Even if 3 people show up, thats 3 peoples lives we could impact and what an
amazing experience for those people to have hands-on coaching at an intimate event.
We are committed to serving people and we knew that encouraging people to show up was the most
important strategy. It worked; and the success of the strategy speaks for itself.
Over those 10 days we saw significant results:
An 1466% increase in registrations from 3 to 47 registrations
22 Early Bird registrations (56% of tickets)
19 Pay What You Want registrations from $5 - $49 with an average ticket price of $20 paid (23% of
tickets)
9 full price tickets sold (19% of tickets)

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 48

How much money have you made from your Pay What You Want offerings?
At this event we made AUS $368 from PWYW offerings.
How has Pay What You Want changed your business, career or life?
Now that we have seen the results, we are less afraid of using this as an option. It will become a option for all
Game Changers Live events because it means that they are accessible to all attendees, not just those that can
afford to attend. How can we possibly change the world if we preclude those without access to the finances?!
We are currently trialing a higher early bird price to see if it impacts the perceived value of the PWYW
option.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 49

Also, for a new business like ours that is still building its following, PWYW allowed those uncertain about
who we are a chance to see for themselves for a cheaper price. In these early days where we are building
credibility its important people can check us out.
The other major lesson we learnt is that so long as we are very clear about the benefits of attending and the
value that will be gained, PWYW is a fantastic feature. If we can identify a real pain point for people then its
up to them to decide how much value they place on having that pain removed.
We are now looking at how we can incorporate this offering into our small group and one-on-one coaching
services.
What did you do that helped people pay fair value versus gaming the system and taking your product
or service for free?
This is a great question. The main thing that we did was use transferred credibility from the organization we
collaborated with as it took some of the unknown element out of the equation for the attendees.
Someone even commented [Collaborator] sent out three emails about this event so I thought it must be worth
attending.
I think that if we are doing our job correctly in terms of marketing and defining our target audience, this
should not be too much of a concern. We dont feel like anyone gamed the system. Everyone paid something.
The lowest was $5 but as we were there to help people, giving someone in a more difficult financial position
this option was important.
Of course this is always a risk, however if someone was to take advantage of the system, it means we need to
work harder at defining who our services are for, and who theyre not for. We believe the majority of our
people will do the right thing and this should protect us.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 50

What have you learned about PWYW that you wish you had known before you started?
1. That the majority of people will pay a fair amount for your services, and in some instances more than you
think.
2. That it requires people to really stop and think about what they are purchasing, instead of being on
automatic with little connection to the product or service. This is powerful.
3. That its a great way to test the market for what your service is worth.
4. That it is especially powerful when people arent familiar with you and your services and that it lowers the
risk for the purchaser.
What was the biggest surprise since you've been using PWYW?
That some people still pay full-price despite having the PWYW option available.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 51

The 6 Step Perfect Pitch Framework


In the previous chapter, I analyzed the 5 essential components of PAY WHAT YOU WANT. These criteria allow
us to pre-screen whether our product or service can work using PWYW.
If your product or service doesnt fit the criteria, PWYW will be ineffective as a sales strategy (it may still
work as a marketing strategy by spreading your brand reach and awareness).
But if your product or service meets all the criteria, this still isnt a guarantee that your PWYW offer will work.

Youve still got to give your customers a REASON to pay more.


Thats why I developed the 6 Step Perfect Pitch Framework.
This framework will show you exactly how to frame your offer so that people not only pick up your
product, but pay you more than they would if you used fixed pricing.
*You may want to get out a pen and paper or open up The Quick-Start Workbook that comes in The
Complete Package before you read this section. Getting these steps right is crucial to making PAY WHAT YOU
WANT work.

1. Clarify the Offer


Your customers job is not to figure out what youre offering, and its not to decipher the value of your good
or service.
Thats your job as the producer.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 52

Remember the example I gave in the last chapter on safari consultations? Thats an example of not
clarifying the offer before you ask for the sale.
You need to show your customer exactly whats being offered, demonstrate the value, and include a reference
point for what your product or similar products would sell for if it had a fixed price.
You can clarify your offer by explaining, in detail, the product or service youre offering.
This means hitting on features (what does the buyer get when he purchases) and benefits (why do these
features matter how does it improve the buyers life?).
This topic itself deserves its own book (and actually, many have been written: I recommend Michael
Mastersons Ready, Fire, Aim or Ash Mauryas Running Lean), but if youre brand new and just trying to sell
your art or writing, all you need to know is:
1. Keep it simple
2. Be straightforward and specific about what youre offering

2. Show the Customer Youre Human


Whatever youre creating, make sure its got your energy and passion behind it. We want to hear your
voice. We want to know about you.
PAY WHAT YOU WANT doesnt work for corporations it only works for people.
Heres how you can let your personality shine through and show youre human:
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 53

a. Add your picture to your site, or include it near the sales page.
Just having an image of you will help readers connect with you.
Louis C.K. doesnt offer his products as PAY WHAT YOU WANT, but he does a great job of selling a product that is
easily pirated.
On his website, Louiss voice
shines through. His message
on the sales page lets people
know hes a real guy doing
hard
work
to
bring
something incredible to life
and that people should
simply pay their $5 little
dollars and let other people
know they should do the
same.
How well does his pitch
work?
In less than two weeks,
hed earned $1 million.
Source: TED

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 54

b. Add a video of yourself to


your site.
Video leaves an even greater
impression on people than a
picture.
The most impactful way to use
video is to show us your face and
tell us a story about what youre
doing (explain exactly what PAY
WHAT YOU WANT means) and WHY
youre doing it.
Joe and Anthony Vennare of The
Hybrid Athlete do an incredible
job with video; theyre authentic,
personable and funny.
After watching the video, you feel
compelled to contribute to their work.
This personal engagement with their audience has done wonders for their business:
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.
Source: Pay What You Want With Anthony Vennare
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 55

c. Write in a casual but passionate voice


Echoing the advice from the last couple
points, you need to come across as a
human, and the best way to do that in
writing is through a casual but passionate
voice.
If your writing is stiff, people wont relate.
When in doubt, write like you speak
(unless youre really articulate, and then
write like other people speak).
Amanda Palmer does an exceptional job on
her website letting her personality shine.
She does this by including lots of pictures
of herself (theyre on basically every album
cover), but also through a casual,
passionate voice.
Heres the sales copy she uses for her PWYW sales page:
this store is built on a pay what you want philosophy for my digital music.
i firmly believe in music being as free as possible. unlocked. shared and spread.
i believe that in order for artists to survive and create, their audiences need to step up and directly

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 56

support them. honor system. no judgment. if youre broke take it. if you love it, come back and kick in
later when you have the money.
if youre rich, think about who you might be karmically covering if you really love this record.
Couple things worth pointing out:
1. She doesnt capitalize letters
2. Grammar is questionable
3. Spacing is odd
4. And all of the above are essential for letting her personality and voice shine through
I wouldnt recommend stealing Amandas style, but do seek out ways to be yourself online and work on
creating copy that lets your personality shine through.
When in doubt, write casually and passionately.

3. Appeal to Idealism
Its human nature to strive to be, do or have more.
Thats probably why someones looking at your product in the first place: to be better, do better, or have
more [place name of thing here] in their life.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 57

This is the perfect opportunity to tap into their idealism.


By making appeals to virtue, charity, generosity, karma, etc. you give people a reason to look
OUTSIDE themselves. Now, youve suddenly shifted the conversation from what am I getting out of this?
to I can help others benefit too.
This frame change has been proven to make people more generous and thus contribute more.
How do you appeal to idealism?
1. Tell us a story about how you created the product
Remember, people contribute to humans, not corporations. So tell us about the blood, sweat and tears you
put into your product or service.
2. Make a reference to the ideal or virtue specifically.
Talk about karma, generosity, paying it forward, helping others out, etc. Reminders about idealism and
virtue get us into the right mind frame to start thinking beyond ourselves to those around us.
3. Add pictures or stories of others who have been helped because of the idealism and virtue of others.
If people are generous, whats the impact? If you contribute a portion of the money to a charitable cause
show us the results!
4. Create a common enemy
Explain how publishers are evil, or your old production company wanted you to do something one way, but
you believed in your art too much, etc. If we can rally behind a common enemy, were more likely to
contribute (to support the good guys!).
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 58

4. Anchor the Price


Anchoring is a technique used by marketers
to get customers comfortable with a high
sales price by focusing their attention on
higher priced alternatives.
They do this by showing expensive variations
of the same product to make the lowest cost
solution seem like a deal (think iPad 16GB vs
32GB vs 64GB variants), or by referencing
competitors higher cost products (think
Microsoft advertising the Surface versus the
iPad).

Price Anchoring at work

Todd Sattersten, author of Every Book is a Startup, shows us exactly how price anchoring works in his eBook
Fixed to Flexible:
Take a minute and answer this two-part question:
1. Is the percentage of African nations in the United Nations higher or lower than 65?
2. What is the percentage of African nations in the United Nations?
This was one of the queries that Amos Tversky and Daniel Kahneman posed in their 1974 paper in
Science called Judgment Under Uncertainty: Heuristics and Biases. It turns out that the answer you
provide to the second question is heavily swayed by that first question.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 59

The average estimate for question two was above 45 percent. When question one was lowered from 65
percent to 10 percent, the average estimation of question two was dropped to 25 percent. This effect that
Tversky and Kahneman described is known as anchoring and has been confirmed in hundreds of
experiments.
Real estate agents value homes based on the asking price. Negotiators make more profit on their
transactions when they provide the anchor and then make the first offer. And retailers are smart to show
the original price alongside the sale price than show the sale price alone.
We also remember anchors for a long time. Remember one dollar gasoline? Amazon in many ways has
already won the battle with publishers
having sold millions of eBooks for $9.99,
creating the de facto price point.
A great example of price anchoring a PAY WHAT
YOU WANT product is done by ittybizs
Turnaround Emergency Clinic small business
development course.
The image to the right is a screen capture from
their website. Notice how they state the price
and then give you the opportunity to choose
your own by saying or pay what you can.
Below is ittybizs sales copy for their eCourse:

Excellent use of Price Anchoring

How much does it cost? Whats sliding

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 60

scale tuition mean?


The full price of the 5-part intensive clinic is $375.
However, we know that some ittybiz owners for whatever their reasons are not in a ready position to
pay full price, so were going to test out a sliding scale tuition model for this course. This means that you
can adjust the price of the clinic to pay whatever amount youre ready to pay. If you can pay $375, you
can do that now. If you need to adjust the price to fit your situation, you can do that too.
In other words, no matter what position your business is in, we want to make sure you have access to this
clinic. Its that important.
This is powerful stuff you see what the value of the course is. The price is anchored in your mind before
you ever go to purchase the product.
And by setting the top price so high (but still within reason), ittbiz is more likely to get higher contributions
than if they had listed the price at $150 or $50.
Proof of this can be found by examining Linda Formichellis PWYW eCourse.
Linda is a copywriter, content market, author of Write your Way Out of the Rat RaceAnd Step Into a Career
You Love. She tried PWYW as an experiment egged on by her husband.
Prior to offering the course as PWYW, Linda was selling two variations: a premium version for $247 and a
basic version for $120. As Linda explains, the basic version wasnt selling very well, so she decided to try
offering it as PAY WHAT YOU WANT.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 61

Heres what happened:


I got my first sales almost immediately, and over the course of a few weeks I sold 128 Basic spots. Usually,
I would sell a maximum of three (for total sales of $360). Instead, I made over 10 times that much.
And something funny happened: Many people paid $35 and $40. Several paid $50. One paid $75.
Then, I offered my next e-course session for a pay-what-you-want pricing model, and got similar results.
Ive now offered the course with this payment model three times for a total of $10,134 from 228 students.
Thats an average of $44.45 per student. Which means students paid an average of $14.45 over the
minimum asking price.
Now, if I actually charged $44.00 from the get-go, would I have gotten as many students as did? I dont
think so. I think people are intrigued and attracted by the idea of choosing what to pay. Even better,
people feel good about themselves for offering an extra 5 or 10 bucks.
And, if youve spent months or years building an audience that knows, likes and trusts you , this model
should work even better. Your audience wants to support you, why not let them?
Source: CopyBlogger
Ittybiz and Linda Formichelli both prove that price anchoring is the most powerful technique you can use to
encourage people to contribute more to your PAY WHAT YOU WANT offering.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 62

5. Steer the Customer to the Right Choice


Remember, your potential customer will be doing
math in her head: Is this worth even a single dollar
of mine? Am I getting real value from this? What
would people like me pay for this?
You need to help steer the customer to the right
decision.
PAY WHAT YOU WANT makes it difficult, in many
ways, to determine what ought to be paid for the
product.
The best way to steer a customer to a certain
price is by showing what they would pay for
your product or service if the price wasnt
discretionary.
Just like you dont want your customers guessing what your product is and does, you dont want them
guessing for the price.
Remember the survey I wrote about at the beginning of this guide? The one that asked what concerns
creators might have regarding the use of Pay What You Want? Their number one fear was being
undervalued and underpaid.
Why did they think this would happen?

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 63

Heres one response that was echoed by several creators:


I feel an upfront offer to "pay what you want" would make people think a lot - What is its value to me?
How much can I afford? What's the minimum I can pay so that I don't seem cheap? It might lead to
people saying, "let me think about this; I'll buy later". Which might never happen.
This is a reasonable fear. If youre not clear, the customer may walk away.
But if you clarify your offer, set the right price anchors, and show the customer what a retail price of
the product or service should sell for, you
eliminate all the mental juggling.
Now the customer has a pre-established price
range and reference points for what a reasonable
price might be and what a generous price might
look like.
One of the best ways to do this is to give a retail or
standard price for what youre offering.
Better yet, set the price for the consumer like
Techdirt did when they started selling eBooks.
Techdirt released several eBooks as PWYW this
way, setting a default option for their customers at
$5.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 64

Heres what they had to say about their results:


The thing we noticed right away was that a lot of people were choosing to pay, even though you can
download all the books for free. Almost half of all book downloads were paid, with most people choosing
the default $5 per bookeven when buying four or five books at onceand several going above and
beyond, with a few even paying $20 for a single title.
Source: www.techdirt.com
By simply setting the price for the consumer, you encourage more purchases at that price point.

6. Add Charity to the Mix


Using a charitable cause with your PWYW product or service is essentially using the appeal to idealism and
taking it to its extreme.
One of the best examples of this is the Bridge Hotel just outside of Melbourne, Australia.
Every Friday at 5pm sharp, the Bridge Hotel sells a keg of beer using PAY WHAT YOU WANT pricing. They call it
The Karma Keg and donations go to local charitable causes.
So how well do these kegs do?
Over the last three Fridays, the Karma Keg has raised $800, $860 and $700 not to mention a load of good
word of mouth PR, some good Karma, and on the back of todays newspaper article probably a load more
customers.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 65

Normally a keg would raise about $650 in revenue, so its clear that in this case people are paying more
than they would otherwise have to if they bought the normal draft.
Source: Richard Blundell
By connecting the keg to charity, people pay 10 25% more than fixed price.
Another great use of charity is demonstrated by Humble Bundle.
A Humble Bundle is a collection of digital video games that are sold and distributed online. Its entirely PAY
WHAT YOU WANT. You can pay nothing to receive some games, or pay over the average to receive all the
games in the bundle.
Whats most interesting is Humble Bundles use of Charity. They promote these bundles as ways to raise
money for charity, which
they do, but not all money
goes to the charity.
The default split of where
your money goes as a
consumer actually breaks
down like this:
65% to the developers
20% to charity

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 66

15% to Humble Bundle Inc. (the group that facilitates this transaction)
Source: Humble Bundle
While this is the default, Humble Bundle allows the buyer to decide where his or her money goes: all to
charity, all to developers, or choose their own mix,
This is powerful because the focus is still charity without all the money going to charity.
So if youre wondering: how can I incorporate charitable giving yet still cover expense and make a profit, the
Humble Bundles solution is the answer.
Its also important to note that none of this is deceiving the customer. Its still very clear and entirely
transparent. The person purchasing can see exactly where every dollar is going and even has the
opportunity to adjust as she sees fit.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 67

Interview with Fred Hicks of Evil Hat Productions


www.deadlyfredly.com | Twitter: @fredhicks
How long have you been using Pay What You Want pricing?
Just under half a year at the time of this writing. (More below)
What inspired you to use Pay What You Want pricing in the first place?
We've been offering some of our products free in digital form for a number of years now. While we've paired
that with a "virtual tip jar" at various times, the jar's usually gone fairly empty. With Fate Core, we had
something we knew was a big draw for a lot of people, and we wanted to give people the option to get it for
free, but position it more strongly for a "pay what you think it's worth" buyer philosophy. So we worked
with DriveThruRPG to get them to launch the PWYW pricing model on their site, with Fate Core as the
leading initial offering using that model. It took off like a shotthanks in great part to our existing, large
audience.
How much money have you made from your Pay What You Want offerings?
Over $9,000. Probably over $10k now the $9k was in the first two or three months.
How has Pay What You Want changed your business, career or life?
I don't know that it has. It's more that our business has changed over time to where Pay What You Want was
a smart match for our core offering instead of a simpler Free model. We've always been strongly oriented on
a "populist" perspective at Evil Hat, where gaining audience for our stuff is a higher priority for us than
profit. The profit comes as a side-effect. We don't offer PWYW on all of our things, but as a way to get our
foot in the door with new fans, and as a way to "retire" back catalog items that are already well past earning
their nut, it's a solid digital strategy for us.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 68

What did you do that helped people pay fair value versus gaming the system and taking your product
or service for free?
Folks taking it for free has always been part of the equation, so we don't mind it when it happens. Some folks
come back to pay for it after the fact, after all. It's hard to evaluate the quality of something you might or
might not want to pay for until after you've downloaded it (for free) and consumed it.
That said, the surest things to help people pay fair value are a) suggest a price, b) provide something of real
value and quality.
What have you learned about PWYW that you wish you had known before you started?
Suggesting a price really heavily defines the average contribution level, but that price needs to be small
enough that it fits easily inside an "impulse buy" rationale on the buyer's part.
What was the biggest surprise since you've been using PWYW?
Audience really is a super strong determinant of success with the model, just as is the case with
crowdfunding and other strategies that put a lot of power in the buyer's hands. We came into our use of
PWYW with a demonstrated audience of over 10,000 folks. That's gotten us thousands of dollars because
you only need a small fraction of that audience to decide they want to pay for it. I've seen other publishers
with much smaller audiences make very little using the strategy. This is what led me to put forward the idea
of PWYW as more of a marketing strategy than a sales strategy. It CAN work as a sales strategy if you've got
the audience size to support it. But more than anything, I think, it's a way to lower the risk barrier to all
those buyers who might be on the fence. Remove price as the obstacle, and there are plenty willing to climb
over to the other side.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 69

What eCommerce Solution Should I Use?


By now, you understand PAY WHAT YOU WANT, how it works, and why it works. You know how to pre-screen
your product or service to see if its a good match for PWYW, and youve crafted your perfect pitch
But how do you actually put your offer out there so you can start accepting payments?
Thats where a good eCommerce solution comes in.
There are literally hundreds of eCommerce solutions out there (from fully integrated eCommerce website
platforms like Shopify, to Wordpress plugins like eShop, to 3rd party eCommerce solutions like Gumroad and
Paypal).
Of course, not all of these solutions offer PAY WHAT YOU WANT options (without hacking them). And those that
do arent created equal.
In the next sections, Ill explain what makes a good PWYW eCommerce solution and Ill analyze and critique
several options so you have a good idea of what to look for and what to choose for your particular needs.
*note: if you grabbed The Complete Package, theres a video tutorial included to show you exactly how to set
up your eCommerce platform and start selling your products or services in under 5 minutes).

Whats Important in an eCommerce Solution:


1. Ease of setup
Our solution should be easy for you, the creator, to set up quickly and easily, without a degree in IT.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 70

2. Ease of use
Our solution should be easy for the customer to choose his or her price. The experience should be pleasant
and intuitive.
The more difficult a sales page is to navigate or a shopping cart is to execute a purchase, the less likely
people will contribute (people are usually busy and easily distracted dont make the buying experience
difficult, it will only turn off potential customers).
At the end of the day, though, what we really care about is an eCommerce solution with a high conversion
rate (amount of people who view the eCommerce shopping cart and end up completing the purchase).
If shoppers have committed to buying a product, your job is to get them through checkout as swiftly as
possible. To do so, ask as little of them as possible.
Source: Kissmetrics
So lets get to it:

iThemes
iThemes is a Wordpress solutions website. They create a whole suite of software solutions, from backup to
eCommerce solutions.
They just recently rolled out a new PWYW function

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 71

Its a $150 add-on or you need to become an


annual member.
Im a big fan of iThemes as a company (I use
their BackupBuddy plugin for my website), but
their PWYW solution leaves some things to be
desired.
1. Its an extension
Which means its not a native part of the utility,
and thus will lack the refinement of an organic
PWYW optin form.
2. $150 is expensive
At least compared to free alternatives that are
available.
3. Presentation leaves something to be desired
Its just not the best looking payment solution out there.
Source: ithemes.com

PayPal

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 72

Paypal is an e-commerce solution that allows for a range of transactions including; selling, buying,
transferring money, and a credit/debit card service through Paypal. Paypal has varying fees for transactions
and slight limitations on pricing options.
Pros:
1. Buying something is always free.
PayPal is free whenever you use it to buy something or make a payment in the US. The seller pays a small fee
to securely handle payment, but as a buyer, you never pay a fee to use PayPal.
2. Sellers fee is small.
PayPal charges a 2.9% transaction fee on the total sale amount plus a $0.30 fee per transaction.
3. Widely used and recognized
Most people online recognize the PayPal logo. Its generally trusted to handle purchases, which means
people wont be turned off by your buy now buttons or eCheck out page.
Cons:
1. Must complete purchase on PayPal.com
To make a purchase, buyers are taken away from your website to PayPal. While it doesnt seem like a big
deal, moving to another page to confirm a purchase lowers conversion rate (more people drop off and dont
complete the payment than had the checkout been integrated into the website).

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 73

2. File transfer is your job


Once the purchase actually goes through, you have to send the file. PayPal does not do this automatically for
you like other solutions.

Topspin (for musicians and filmmakers)


Topspin is an artist/musician/filmmaker focused eCommerce solution. In a lot of ways, its just like
Gumroad, but instead of taking a portion of proceeds from every product, it charges $9.99 per month for the
basic solution.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 74

If, however, you want to offer pre-orders or get advanced email marketing, the price quickly escalates to
$49.99 per month.

Whats unique to Topspin is their fulfilment center. If youre selling physical products, their fulfilment
warehouses can take care of it (if you choose to use them), automating even physical distribution of your
products.
Because of their full-service solution for artists and filmmakers, it seems like a great platform for those
looking to sell their music or films online (especially if you sell a high volume of physical products as well). I

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 75

have yet to test it, but Amanda Palmer, Arcade Fire and many other large bands use their services, so theyre
obviously doing something right.

Gumroad
Gumroad is an e-commerce solution that offers a platform specific to sales. Gumroad was designed to be
used as a way to sell directly to your audience, quickly and intuitively. Of all the choices, Gumroad is my
eCommerce platform of choice.
Heres why:
Pros:
1. Beautiful design
Yes, design matters. When the sales page pops
up, the minimalist design attracts attention to
whats important purchasing and avoids
information overload.
2. Intuitive user interface (for buyers and
sellers)
Setting up Gumroad to sell your product takes 5
minutes (see the video tutorial I created on the
subject available to people who purchased The
Complete Package). You dont even need a
website to start selling things online.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 76

3. Seamless integration
Gumroad allows transactions to take place right on your website. No switching to their website is necessary
(like PayPal).
4. Automates delivery of digital items
Once your digital product is uploaded, you dont have to do anything else. Gumroad takes care of the w hole
process. If youre selling physical goods, however, youre responsible for fulfillment.
5. Powerful for statistics tracking, maintaining records and receipts, and gathering information from
your customers
Gumroad has an incredibly robust dashboard where you can track views, sales, and income over time, as
well as where the buyers came from (twitter, direct email, etc.). All information is stored digitally for future
use. And by asking for your customers email and name, you can then use this information to send personal
notes or integrate them into your newsletter (very powerful for bloggers).
6. Extensive options
Gumroad has extensive pricing options and flexibility, including free offerings, pay what you want, and
minimum price points, as well as the ability to sell subscriptions, and pre-orders.
Cons:
1. More expensive per transaction than PayPal
Gumroad charges 5% + $0.25 per transaction (flat rate). On the positive side of this, if you sell a product for
$0, it costs you nothing.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 77

2. Only accepts credit cards


Lots of people use PayPal online, so this is a pretty big negative. That said, you can always do a hybrid
model, offering the purchase via Gumroad or Paypal (still, its a pain).
3. Gumroad holds onto funds for 2 weeks
This is a big deal for some businesses and solopreneurs who need access to their capital quickly. If you
make a sale then have to wait 2 weeks, this could crush a new business.
This hasnt been the game-changer for me personally, but I do know people who have said no to the platform
for this reason.

Summary
This is just a brief overview of whats out there.
There are probably a dozen more options available that offer PAY WHAT YOU WANT pricing, and new ones are
constantly being developed (having a PWYW pricing option has become incredibly popular over the past
year).
If none of these seem right for you, I encourage you to do your own due diligence to see if there are better
solutions out there for your particular situation.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 78

An Interview with Anais Bock, personal branding consultant


www.meetanais.com | follow on twitter: @meetanais
How long have you been using Pay What You Want pricing?
I have been using Pay What You Want pricing for roughly 6 months.
What inspired you to use Pay What You Want pricing in the first place?
I was getting a bunch of requests from people who wanted to work with me although they did not fit the
profile (I am not an entrepreneur but bulls*** elimination sounds like exactly what I need) or who were
not (yet) ready to commit to one of my larger programs.
I decided to develop a one-time session for intense business bullshit elimination. I had no idea how to price
it because the value of the session would vary greatly depending who I was speaking to. This could be the
clarity breakthrough for the passionpreneur, who had been stuck trying to create an online presence that
resonates with the right people!
So I thought: if I cant tie a number to the value of the session, why not let the client do it?
I loved the idea of just being able to lean back, be super-confident about what I have to offer and let the
client decide.
How much money have you made from your Pay What You Want offerings?

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 79

I havent actively promoted the session. I have been offering it to clients who approach me and made almost
3,500 EUR, with an average of 90 per session and a happy outlier who paid me 500.
How has Pay What You Want changed your business, career or life?
I have become increasingly confident about what I offer. The trust in the value of my work has increased.
The entry barrier to working with me has been lowered because a Pay What You Want session is basically a
way of saying if you dont try this its because you dont WANT to. You cant blame the price or convince
yourself you will give it a try later.
I feel that a Pay What You Want session is like daring people to go for what they want.
What did you do that helped people pay fair value versus gaming the system and taking your product
or service for free?
I believe that there is always an energy balance and I simply trust that I will get back what I invest. I havent
taken any active precautions to protect myself. I simply tend to attract the right people.
I do reserve the right to only work with people who I feel are a 100% match because I want to make working
together awesome for both sides.
What have you learned about PWYW that you wish you had known before you started?
I wish I had started it earlier.
Now I am looking for ways of applying PWYW to bigger things.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 80

What was the biggest surprise since you've been using PWYW?
I have been surprised by the immense gratitude I have received for offering this payment plan and $500
for a single session did knock me off my socks

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 81

Section: 4

Section 4: Applying PAY WHAT YOU WANT to Your Business,


Art and Writing

Applying Pay What You Want to Your


Business, Art and Writing
Be different, but make sure your difference matters.
- Ash Maurya

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 82

Using PAY WHAT YOU WANT to Increase Reach


Free spreads faster than expensive, low cost items are purchased more often and in larger quantities than
luxury goods, and when price isnt a barrier, more people buy (and share).
Common sense, right?
So if you want to reach more people, you should lower your price. Free is the best option.
But free has some seriously negative side-effects:
1. It destroys revenue
2. It lowers the perceived value of the offering
3. It does nothing to validate the good or service being offered (people take things for free even if they
dont particularly care for them for proof, just browse Costco on the weekend to see how people
consume free samples but rarely buy any sampled products).
So where is that fine line between free and paid, where we can spread an idea to as many people as possible
without all the nasty, negative side-effects?
Enter PAY WHAT YOU WANT.
PAY WHAT YOU WANT leverages the power of free without sacrificing profit.
Paste Magazines PAY WHAT YOU WANT campaign proves this point.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 83

Paste Magazine is an independent music magazine. In 2008, Paste was getting hit hard (along with just
about every magazine around the world at the time). So hard, in fact, that they wouldnt have enough
income to make it through the year. They would have to shut down and declare bankruptcy.
Closing their doors, cutting their losses, and saying goodbye to their 200,000 plus subscribers was the only
option
Or was it?
Instead of closing up shop, the owners of Paste Magazine tried something unconventional: a PAY WHAT YOU
WANT campaign to resurrect the sinking magazine. They rolled out this offer along with the support of
hundreds of artists who recorded limited edition songs just for their PWYW campaign to help get the
magazine in the red.
The response was incredible: Paste raised over $275,000 and gained 30,000 additional subscribers, which
more than paid for itself through advertising.
Advertisers immediately became concerned [with our use of Pay What You Want]. Fortunately the
campaign was so successful so quickly that I was able to begin to tell a story whether somebody was
asking or not. One advertiser, as soon as they heard about the campaign, called up and asked to buy an
additional ad. Another said they liked us, but theyd be back when things stabilizedand theyre back
now.
We want our advertisers to know that we have this chapter because it demonstrates a level of
engagement we dont think many other magazines could talk about.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 84

The good news is the sales activity is very strong right now, were getting lots of RFPs and it appears as if
its not really an issue, were publishing the magazine and its great and were here and advertisers want
to hear about our creative ideas that weve got going forward. In the last week Ive gotten i nquiries from
four or five advertisers weve never had before. All non-endemicliquor, fashion, consumer electronics,
across the board.
Source: Audience Development
Paste not only survived the year, but made it through one of the industrys worst years with a profit. The
additional income put them comfortably in the black, kept their printing schedule on track, and inspired
many new advertisers and investors to jump on board the magazine.
All because of the clever application of Pay What You Want.

How You Can Use This:


1. Create a Limited Time Offer
Paste Magazine only offered Pay What You Want for a limited time. People could either take advantage of
the offer now, or lose it forever. If youre a music lover and you knew of Paste Magazine, their promotional
campaign would be the ideal time for you to become a subscriber.
2. Include Bonus Material
Paste Magazine probably could have run a successful Pay What You Want campaign without any bells and
whistles, but by teaming up with artists for exclusive songs, they compelled new readers to not only
subscribe, but PAY for the added bonus content. Paste made a profit during one of the worst years in the
magazine industries history. By offering a bonus, Paste incentivized readers to contribute because the
perceived value of the magazine increased.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 85

3. Anchor the Price


Paste Magazine had been around for a while and magazines in general are priced within a particular range.
The average reader understood the value of the magazine without thinking about it, either by assuming its
retail price was industry standard, or by actually seeing how much Paste normally charges for an issue.
Because the value of the original offer was clear, new readers didnt have to guess fair-value (which can have
disastrous consequences for a PWYW offering). The anchored price of a magazine subscription removed
pricing ambiguity and encouraged people to pay at or above fair-value.
4. Use Multiple Revenue Sources
Pastes PAY WHAT YOU WANT offer inspired 30,000 new subscribers who paid an average of approximately $9
per subscription (raising $275,000), but their long-term profit came from new, higher paying advertisers.
By expanding the audience, Paste could charge more for their ads. Remember, just because you use PWYW
for some things doesnt mean you need to use it for all things. Paste used PAY WHAT YOU WANT for their
readers, not for their advertisers.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 86

Increasing Revenue per Purchase Using PAY WHAT YOU WANT


In September 2013, I sat down with Ryan Delk of Gumroad to talk PAY WHAT YOU WANT.
Gumroad is my eCommerce platform of choice and allows me to run Pay What You Want offers right from
my website with ease (in The Complete Package I show exactly how to use Gumroad to start selling your
product or service in minutes). By talking with Ryan, I was able to get some behind-the-scenes info on what
theyve witnessed from vendors whove used the platform to sell PAY WHAT YOU WANT products and services.
The information Ryan revealed regarding the performance of PAY WHAT YOU WANT products was incredible
(although, based on my own results, I wasnt surprised).
In just one example of many that hes witnessed, Ryan tells a story of an author selling his eBook through
Gumroad. The author originally priced his eBook at $3. After three weeks and limited revenue, he decided
to experiment with PAY WHAT YOU WANT (a feature seamlessly integrated into the Gumroad platform). He
changed the price of his eBook to $1+ (pay anything at or over $1 for the eBook).
Can you guess what happened?
In the following weeks, the author made more sales than he had in previous weeks and the average price
paid increased to $5.
Thats a 60% increase in revenue.
In this story, Ryan sheds light on a common truth: that by simply giving people the opportunity to
contribute more, they will.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 87

Heres what Ryan had to say:


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
What happens when you release fixed price products is youre capping how valuable [your
customer can say it] is to them. Because youre saying Im selling this for $100 or $10 or $1 and thats
the price for this
So what weve seen is that when someone releases a PWYW product, the average price paid...will increase
pretty dramatically. There are a couple products that started at $3 and when they went to $1+ (PAY
WHAT YOU WANT anything over $1), the average price paid went up to almost $5. So thats about a 60%
increase in the average price paid (which is also equal to total revenue)
Weve seen in a lot of cases where the average price pays goes up significantly after switching to
PWYW because youre letting people value the product for themselves.
If this doesnt show you the power of generosity in business, Im not sure what will.

How You Can Use This:


1. Apply it to Low Cost Items
The difference between $1 and $5 is an inconsequential amount of money for most people, especially in
regards to online purchases. The greatest hurdle here is getting someone to put in their credit card
information for such a low contribution level. Once the credit card info is entered, however, the purchaser is
much more willing to pay fair amount for a low priced item than choose the lowest option of $1.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 88

A higher priced product may not have the same success in the switch to PWYW.
2. Clarify Your Offer (Clear Value Proposition)
The average eBook on Kindle is anywhere from $3 to $10. When you let someone choose their price for an
item where the average price is clear, most people will choose to contribute the average. In this case,
around $5.
3. Develop Personal Relationships with Your Customers
The writer in question had an audience he wrote for. He had established a personal connection with his
readers. When he offered the book at a fixed price, he capped the amount his happy readers could
contribute. By releasing the cap and lowering the barrier to entry, he encouraged more people to pick up
the book and simultaneously inspired them to be more generous. Because he had established a
relationship with his readers, the writer was able to leverage the generosity of what Ryan describes as the
top 1-3% of his audience.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 89

Maximizing Customer Value Through Pay What You Want


Customer Value Maximization (CVM) is a marketing term that means getting as many sales as possible, for as
much money as possible, from as many potential customers as possible.
Companies and individuals do this by offering the right things to the right people at the right time.
[Wikipedia]
For most companies, their CVM strategy includes lots of discounts, clearance sales, group purchase deals,
limited time offers, upsells, etc. In some cases, there are hundreds of people in a marketing department
working year round trying to increase this number.
With PAY WHAT YOU WANT, though, you dont need a marketing team the pricing technique itself maximizes
customer value.
How?
1st, by removing the upper-cap on your price, the top 1-3% of your audience will pay more. Your top 3% of
customers (the statistical outliers) will always pay more than where you would reasonably set a fixed price.
2nd, by giving fence-sitters a reason to purchase. Price is no longer a barrier, so the question is one of WANT
versus ABILITY. By removing the pricing barrier, you maximize the number of people paying for your good
or service people who would never have bought had the price been even a few dollars more expensive.
Pay What You Want, by its nature, offers the right thing (you choose the price) to the right people (anyone
interested in your product or service) at the right time (any time you offer it).

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 90

Leah Hynes, the co-creator of The Game Changer Series in Australia, launched her conference series at a
fixed price.
In order to get more traction, she priced the conference affordably at $49 (many conferences run $300 or
more). She figured this would differentiate her from similar conferences, while also lowering the barrier to
entry for those who werent financially capable of paying for an expensive conference (people who
nonetheless needed to hear the message Leah was delivering).
The first week brought only 3 paying customers.
Clearly, thats not enough people for a conference.
The whole thing would have gone bust, except Leah decided to try something unconventional. She kept the
suggested retail price the same on her website, but also gave an option for people to pay less if they didnt
have the means to afford the sticker price.
According to Leahs own words:
we went from 3 registrations to 50 in 10 days. Some people commented that this option gave them
access to something they would have otherwise not been able to afford.
What might be most surprising, however, is that of those who registered, many still paid full price.
Gabrielle was one of those who registered after the price changed to PAY WHAT YOU WANT. I asked her what
she thought of the PAY WHAT YOU WANT pricing and if it affected her decision to go to the conference.
Heres Gabrielles response:
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 91

I was at that Circuit Breaker event and the main reason I signed up was because it was PWYW.
Normally, I feel like I cant afford or justify the expense of attending something like that, but PWYW made
it much more accessible. The irony was that I ended up paying the 'suggested' price, because once I had
decided I was going, I mentally adjusted (increased) how much I thought I could afford.

How You Can Use This:


1. Remove Price Barriers
A conference can be a fairly expensive splurge activity. It takes a compelling reason to justify the high price
tag generally associated with conferences (not to mention travel and accommodation costs). For the
average attendant, price is THE deciding factor can I justify paying X amount for this? By simply offering
PAY WHAT YOU WANT, you immediately remove the psychological barrier to entry for the consumer (even if
they end up paying full price when they purchase).
2. Create a Congruent Message
Leahs Circuit Breaker Series is all about helping people create positive change in their lives what could be
more congruent than giving anyone, regardless of means, access to this event? This is important to note, too,
because a congruent message means those with means will still pay full price to support those who cannot
(Amanda Palmer does this to great effect when selling her music online)
3. Focus on the Important Metrics
For a new conference series, the most important thing a conference organizer can do is maximize (the
appropriate level of) attendance. If this means sacrificing margin, its probably a good trade off. However,
based on the response of conference goers like Gabrielle, it doesnt have to be an either - or trade off.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 92

How to Monetize Your Art through Pay What You Want


Paulo Coelho is the best-selling author of The Alchemist. He makes a living from his writing because people
buy his books.
Yet hes one of the most vocal supporters of torrenting (downloading for free) books online:
"The good old days, when each idea had an owner, are gone forever. First, because all anyone ever does is
recycle the same four themes: a love story between two people, a love triangle, the struggle for power,
and the story of a journey. Second, because all writers want what they write to be read, whether in a
newspaper, blog, pamphlet, or on a wall," he said. "The more often we hear a song on the radio, the
keener we are to buy the CD. It's the same with literature. The more people 'pirate' a book, the better. If
they like the beginning, they'll buy the whole book the next day, because there's nothing more tiring than
reading long screeds of text on a computer screen."
Source: The Guardian
Paulo makes a living from getting customers to pay for his books, but he ENCOURAGES people to pirate his
stuff.
Isnt this the OPPOSITE of what an author should encourage?
Conventionally, yes.
But Paulo realizes that by giving his stuff away for free, he can reach a broader audience. The more people
he can reach with his work, the more people he will impact with his work. And the more people he can

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 93

impact, the more hell end up making in the end (in this case, due to people wanting to eventually buy the
physical version of the book).
Its almost a karmic philosophy on giving (what goes around comes around), which is a nice thought, but is
there any support that such a thing works?
Again, Paulos story proves the point. In Russia, Paulos work sold so poorly that his publisher dropped him.
So Paulo, recognizing the limitations of traditional marketing in Russia, released his book on bittorrent (a
peer to peer sharing tool that allows people to download books/movies/software for free).
Within three year of releasing his book for free online, Paulo sold over a million books in Russia. Today, over 13
years later, hes sold over 12 million copies.
All because he gave his stuff away for free.
Paulo isnt the only artist who has used this approach.
The rock band Nine Inch Nails, after being inspired by Radioheads 2007 PWYW experiment, decided to do
something unique with their next album. In 2008, they released their new album, Ghosts of Nine Inch Nail,
under a Creative Commons license. This license allows anyone to legally copy, distribute, display and
perform the work. They also sold the track for $5
The first volume of the 2008 album Ghosts, on BitTorrent with a Creative Commons license. The entire
four-volume album was available as a $5 download on the bands website.
The results: A week after the release, Trent Reznor reported that hed gotten more than $1.6 million in
orders and downloads.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 94

Source: blog.ted.com
$1.6 million from a free download (and they beat out bands like Coldplay and Kanye West for #1 on Amazon
that year).
This is the power of giving away your content.

How You Can Use This:


1. Offer a Physical, Fixed Price Item as an Upsell
Not everything you sell needs to be PWYW. You can (and probably should) have a mixture of both PAY WHAT
YOU WANT and fixed price products and services.
By including a fixed price item in your lineup, you can create powerful upsell opportunities, encouraging
those who grab your PWYW product or service to look into your fixed priced products.
Simply offering the same product in different forms and formats is enough to encourage purchases at a fixed
price. I give all my stuff away as PAY WHAT YOU WANT on my website, but I also publish on Amazon. People
still buy my fixed price books on Amazon mostly because theyre in the Kindle format and easier to read
for those who prefer kindle books. This isnt a physical version of the book, but the format is different
enough to warrant another purchase if the reader likes the book and would prefer this alternate format.
By having a physical version of your book, music, etc., you incentivize those who downloaded your work for
free to contribute eventually to get the physical version of what you sell.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 95

How to Use Bonuses to Incentivize Pay What You Want Contributions


Larian Studios is a video game production company. In 2012, the company tried an experiment they
bundled 3 of their video games together and offered them as PAY WHAT YOU WANT.
There were, however, a couple catches.
First, if the contribution was below the average contribution price, the customer only got one of the games.
Second, to get the Directors Cut (the third game in the bundle), the buyer had to be in the top 10% of
contributions.
As you can see, both these numbers would adjust based on how much people contributed.
Larian Studios expected the majority of people to pay $.01 to get the first game. This was fine with them,
because they werent using PWYW as a sales strategy, but as a marketing strategy trying to get new
customers and new players. They wanted awareness of their games and brand to spread and would be fine
taking a loss on their products to make it happen.
When the PAY WHAT YOU WANT offer went live, what ended up happening is quite different than what they
expected:
When the PWYW was conceived, we thought that wed have a lot of sales at the absolute minimum, which
basically is 1 cent, and this assumption was actually never challenged. The idea of the PWYW campaign
was to on the one hand celebrate 10 years of Divinity and offer Divinity virtually for free (1 cent really is
low), thus increasing the installed base of Divinity fans, but on the other hand also to put the Developers
Cut in the spotlight.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 96

The Developers Cut (and Beyond Divinity) were made part of the campaign as a kind of bonus and to not
completely ruin ourselves, we introduced the rule that to access the Developers Cut, you needed to be in
the top 10% of customers. Whether or not that was a sound strategy is a different matter and open for
debate, but that was the idea.
What happened however is that for some reason, people started looking at this like some sort of
Kickstarter (this was the very first time something like this was done on GOG), and in the very first hours
of the campaign, we saw the average pricing go to heights we never expected. Somebody even paid a
1000US$ for one of the games!!! (Thanks again Alquist for ruining our plans btw )
A consequence of that was that by the time the press took note, the average price for the three games
offered had risen above the actual price of the games on other channels, which definitely wasnt the
intention. And so when the articles talking about the campaign appeared (e.g. this one on Joystiq), the
pricing quoted for Developers Cut had risen to 21US$, much higher than we expected.
Source: Larian Studios
Sounds like a good problem to have, doesnt it?

Why it Worked (or didnt, in this case)


There are three elements at play:
1. Giving a bonus for contributing above a certain amount
Larian Studios isnt the only company thats tried this. Humble Bundle is a famous example of offering
bonuses for contributing over a certain amount, and there are dozens of other companies like Humble
Bundle that do the same.
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 97

The power of offering a bonus after a certain level is obvious it incentivizes higher contribution, plus
it rewards the more generous people in your audience.
Plus, because they had to be in the top 10% to get the bonus, the price-matching escalated quickly.
In this case, it backfired for Larian Studios, but you could easily apply the same incentive to your PAY WHAT
YOU WANT product by having tiers or bonuses for those contributing above the average (or a set amount).
2. Passionate audience
One of their supporters donated $1000 on the first day. Clearly, Larian Studios had developed a powerful
following of supporters.
Theres no hack for this: building a passionate audience takes time, energy, and patience.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 98

How to Use Creative PWYW Invoicing to Create More Revenue


If youre still concerned about offering your services as PAY WHAT YOU WANT, there is a way to test out your
offer in a small way (and possibly make big bucks in the process).
Heres an incredibly powerful split-test you can run if you have consistent customers. It almost guarantees
youll make more money than through fixed pricing methods (and show you how your customers value your
work in the process):
In Brians business, he provides a service which includes hardware as well as his time and expertise. Since
most of his customers are regulars, he makes friends with many of them. Also, many of his customers are
relatively well off. When Brian finishes providing his service, the customer typically asks, How much do I
owe you?
Brian responds in one of two ways:
1. He hands them an invoice which includes the price of the parts and his service.
2. He hands them an invoice which only includes the price of the parts. No service charge. He says
something like, The parts come to $147.84.
As you might imagine, when he uses technique 2 for his wealthy friends, his customers tend to pay him
more for the service than if he had given them a price. One thing I love about Brians overall strategy is
he can try this technique with any customer. If they dont pay him more than he would have charged, then
the next transaction with that customer he invoices for the service component as well. The customers are
completely unaware that Brian is choosing which pricing strategy to use based on his expectations of
their payment behavior. After all, both of these pricing strategies are extremely fair.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 99

Source: Pragmatic Pricing Segmented Pay as You Wish


The beauty of this model is that the client or customer will never know what youre doing either pricing
method is entirely fair. Yet by split testing, you give your best customers the opportunity to generous. And
for the cheaper customers, you can continue to charge them your fair-value.
An incredibly powerful technique for any service where you have repeat customers.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 100

Monetizing Your Writing through PAY WHAT YOU WANT


Make Money as You Write
In 2000, Stephen King was one of the first mainstream writers to publish a mass-market fiction eBook online
(with his novella Riding the Bullet).
Later that year, Stephen attempted something even bolder: he began publishing a serialization directly from
his website using a donation-based honor system.
Readers were expected to pay $1 per installment.
Apparently, Stephen threatened to quit writing if less than 75% of readers contributed. A bit harsh, perhaps,
but for Stephen, it was an important experiment challenging the existing publishing paradigm.
On his website at the time he wrote:
"My friends, we have the chance to become Big Publishing's worst nightmare."
Forward thinking, for sure, but how did the experiment pan out?
More than 200,000 customers downloaded free copies of the story in a 24-hour promotion through the
Barnes and Noble book-selling site.
The book received more than the desired 75 percent for its first installment, but it fell to 70 percent after
installment two. With the third installment, the numbers surged back to 75 percent. All told, after six

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 101

installments, King revealed that he'd made nearly half a million dollars from the release of The Plant in
what has been called his e-book experiment.
King decided to double the cost of the fourth part of the novel to $2, while at the same time doubling the
number of pages to 54. He also promised to cap the cost of the entire book at a total of $13. Paying
readers dropped to 46 percent of downloads. The number of downloads decreased overall as well.
The last installment was published on December 18, 2000. The book has yet to be completed.
Source: Wikipedia
$.5 million - not too bad for a serialized novel that was never completed
Of course, this probably left his readers extremely upset how would you feel contributing to something that
never finished?
While Id avoid the actual tactics Stephen used (threatening to cancel the series, raising the pricethen
actually canceling the series), there is a lot of power in serializing your content:
1. You get paid as you create. The worst thing for a writer is working for months or years before
getting paid. By serializing, you give people more content more rapidly, you get paid in the process,
and everyone is happy.
2. You can rapidly validate the work youre doing. Do readers like it or hate it? Do contributions
increase, decrease or stay the same?

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 102

3. You can sell the finished work at a fixed price when you finish. Just because you use PWYW for
the serialization process doesnt mean you cant sell the finished book for retail price (and have a lot of
reviews and testimonials ready to go when you publish).

Leverage One Day Deals


When you think of making money from your writing, poetry rarely comes to mind.
While many people are passionate about
poetry, there are very few fulltime poets in
the world.
That said, PAY WHAT YOU WANT is the perfect
solution for new poets.
If youve spent time building an audience
and sharing your work with them, giving
them the opportunity to support your
poetry is an incredibly powerful way to
raise awareness of your work, spread your
reach and increase your income.
Natalie Fee is one such author and poet
who has experimented with PAY WHAT YOU
WANT.
She gave her audience the
opportunity to choose their price back in
2011 for a one day event.
The
requirements: choose a poem (or poems)
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 103

you want, choose your price (pounds not pennies), and smile (waiting for your reward).
In the comments section, its clear Natalie reached several readers who hadnt made the splurge to pay for
her poetry just yet, but now that the price was flexible, they were all in.
Prices ranged from 4 to 30 pounds. Not a bad result for poetry that normally retailed at 8 pounds.
Natalies not the only one to implement this strategy: big name companies and websites do it to, like Paid to
Exist, an entrepreneurship and lifestyle design website that releases all their products as PAY WHAT YOU WANT
for one day a year.
The results:
In one day, they had cumulative offers for over $2500 for their digital products (eBooks mostly).
Thats $2500 that they wouldnt have made by keeping their pricing fixed because it gave people in tough
financial situations the ability to buy at a discount (check out the comments for proof).
So even if you use fixed prices for your products and services, you should sincerely consider offering PAY
WHAT YOU WANT once a year.

Increase Your Freelancing Rate


Walt Kania, a freelance writer, has used PAY WHAT YOU WANT extensively for his work.
In a very powerful blog post, Walt explains how he uses Pay What You Want pricing to increase his income
per project:
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 104

A client of mine was knee-deep in redoing all her companys web site content. She was getting raw
material from the various divisions that was ugly, undeciperhable and unusable. The go-live date was
looming. She called me in to figure out how to fix it all.
But she had no idea how many sections wed be doing, how many pages, nor how bad the raw material
would be, so it was impossble to estimate any sort of fee.
I said, Let me just concentrate on getting this done for you, and well settle up later. I trust you to be
fair. She agreed.
I did the work as it came in over a couple of weeks, revising, re-writing, re-building the content. We came
up with a neat and tight format, a solid voice, sharp messaging. Everybody loved it.
I then told the client to let me know what she felt was a reasonable fee for the project. It was entirely her
call.
Meanwhile, I went back and parsed out the work based purely on hours spent. Had I been pricing
conventionally, it would have come to 3800 to 4200 bucks, depending on how I counted.
Next day, I get an email from the client. She says Im thinking $9,500. How does that sound?
I wrote her back and said Fine. Sold.
Source: TheFreelancery.com
This was one of Walts lucrative wins but hes also experienced his share of less than generous payments.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 105

Heres his criteria for vetting clients before hell use PWYW:
1. Only work with people youve had a long term relationship with. Avoid one-time clients. Avoid
clients who dont ask for your type of work often. Avoid clients who didnt seek you out.
2. Make sure your clients have skin in the game. If your client could care less about your work,
avoid him. If your work is life or death for him, take him as a client.
3. Only take work that looks hard, impossible and indecipherable. Your clients will value your
work more if theyre intimidated by the work themselves.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 106

How to Apply PAY WHAT YOU WANT to Your Brick-and-Mortar Business


The idea of using PAY WHAT YOU WANT for a brick-and-mortar business can be intimidating.
After all, theres very real overhead every month that needs to get paid, from utilities and mortgage, to
employee costs, to never ending taxes.
Letting your customers pay can be a scary prospect.
But believe it or not, many brick-and-mortar stores have used PAY WHAT YOU WANT successfully some have
run their businesses for over 10 years entirely on PWYW.
Here are just a few examples of brick-and-mortar businesses that use the PAY WHAT YOU WANT model:
1. Panera Bread Caf runs five PAY WHAT YOU WANT locations (every item is pick your price). They make
about 70-80% of a regular store, but are still viable.
2. Just Around the Corner restaurant in London has used PAY WHAT YOU WANT for over 10 years
successfully.
3. The Dock Caf in Belfast uses a PAY WHAT YOU WANT business model and continues to be profitable.
4. Little Bay restaurant in London is using PWYW for a month long experiment with great success so
far.
Source: The Guardian and Credit Crunch Lunch with no Bill

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 107

So what do these brick-and-mortar stores do that make them succeed, even in relatively high marginal cost
industries?

Ways You Can Apply PWYW to Your Brick-and-Mortar Business


1. Make the payment public
There are strong psychological reasons for this people dont want to look cheap in front of others. By
making the donation bin or tip jar public, contributors are held accountable:
Sam Lippert, owner of the pay as you wish Java Street Caf in Kettering, Ohio, makes customers pay him
directly. Well, you know, they have to look me in the eye and say that thats what they think is fair. And,
you know, thats a big incentive. When someones at the counter and you say, You get to pay what you
think is fair, very few people are going to take advantage of that situation, he says especially if you
know them by their first name.
Source: Smart Pricing
Heres another example of the power of in person donation systems (taken from Paste Magazines use of
PWYW with their :
Weve learned that people wont subscribe at a festival, but theyll come over to our table and pay what
they want and take their first issue with them. It had a strange mystical power. And the shame factor
drives the subscription price higherthe average Internet order was $7, versus $10 face-to-face. For a
while it became a core strategy at festivals. We gained a few thousand more subscribers that way.
Source: Back in Black

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 108

2. Make it a limited time offer


Often, its not feasible to run your entire brick-and-mortar store as PWYW.
You dont have to.
PAY WHAT YOU WANT is most effective for limited-time offers.
Little Bay restaurant in London is using PWYW for a month long experiment. So far, its working:
"Customers have already paid 20% more than the original price," he said, confident that he will more
than cover his expenses for the month.
"People want to be polite and would be embarrassed not to pay enough."
Mixing PWYW with fixed price items gives loyal customers a reference point for the value theyre receiving
(it clarifies the offer)
3. Add a charity to the mix
Adding charity to the mix for any PAY WHAT YOU WANT offer works wonders especially for brick-and-mortar
stores.

Location Matters
Not every brick-and-mortar store can succeed using a PAY WHAT YOU WANT model.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 109

The Terra Bite Lounge, a cafe in Kirkland, Wash., operated as a pay-what-you-want restaurant for a
year or so. But Ervin Peretz, its owner and a lead technical designer at Google, said the cafe now charges
for its meals. He said he dropped the model in part because of issues particular to its location it is in a
neighborhood popular with teenagers.
Source: NY Times
Due to this restaurants location (being in an area frequented by teenagers), the establishment couldnt
sustain itself on PAY WHAT YOU WANT. Teenagers dont have access to the same income and credit cards that
working adults do. Teen, therefore, are more likely to pay less (or nothing).
This isnt to call out teenagers; you might have the same results using PWYW in lower income
neighborhoods or in low-density populations. The success or failure of a PWYW store relies on its location,
so take this into consideration before you try (and test it in a small way like Bridge Hotels Karma Keg).

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 110

Charging a Premium for your ConsultingUsing PWYW


Matt Homan is a speaker, facilitator and consultant.
The majority of his work is with lawyers and law firms (and also bigger corporations like Microsoft).
In Matts own words: I always hated time sheets, and kept experimenting with ways to price my services that
werent tied to the time it took me to provide them.
Thats when Matt stumbled across PAY WHAT YOU WANT pricing (which he refers to as You Decide Invoicing):
I always give clients the option to pay me what they think I'm worth at the conclusion of the engagement.
I explain to them that once we've gotten to the pricing discussion, I trust them to treat me fairly. When
they agree to my novel approach, they get my "You Decide" invoice that asks them to write in an amount
for my fee and give me an explanation for why they paid what they did. And even when clients would
rather pay me a quoted price, I still give them a money-back guarantee.
Source: You Decide Invoicing
Novel approach, but does it work?
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.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 111

Contrary to popular belief, letting people choose their price for your services CAN workand actually better
than you expect, if you follow the principles laid out in this book.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 112

How to Create Sustainable Income Using PAY WHAT YOU WANT


When it comes to PAY WHAT YOU WANT , next to the fear of not being paid enough is the fear of not being paid
enough in the future.
In many ways, this is a legitimate fear PWYW almost always encourages a one-time boost in sales. Later
on, sales will dry up, revenue will fall, and you could be caught paying the bills with reserve funds.
Newsflash: this happens to every business.
Essentially every business, no matter what the model, experiences greater first day / first week sales than
later on in a products lifecycle. Thats why an opening weekend makes or breaks a blockbuster, or why
preorders are so important for books almost all the money will come in all at onceand then dry up.
There are ways to solve this, though, and PAY WHAT YOU WANT is actually an incredibly powerful way to create
CONSISTENT income, when applied the right way.
Heres the secret: continually remind people of your Pay What You Want pricing
Every time I make a concerted effort to remind people about my business model (essentially everything is
PWYW), I always come away with new contributions.
And this concerted effort usually isnt anything more than a subtle reminder that everything I do is for my
readers and I can only continue doing what Im doing if my readers support my creative work by contributing
a few dollars.
Im not the only one who uses this model:

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 113

At the end of every post, Amanda Palmer asks people to contribute to her work by stating donating =
loving.
She actually stole the line donating = loving from Maria Popova, who employs a similar technique. Maria
Popova brilliantly implements a monthly recurring donation option for her readers.
By making it very easy to see (and giving constant reminders at the end of blog posts), readers are much
more likely to donate to Maria every month its automatic and it supports a good cause.
Pat Flynn from Smart Passive Income did an incredible interview with Anthony of The Hybrid Athlete that
really shed light on the possibility of creating a sustainable PAY WHAT YOU WANT offering:
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.
If you do the math thats anywhere from $146,000 to $219,000 a year from PAY WHAT YOU WANT products.
The point is, creating sustainable income is possible with PAY WHAT YOU WANT, just like its possible with
fixed-pricing.
But youve got to make it (1) easy for people to contribute and (2) constantly remind them that what y ou do
is generosity based.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 114

Section: 5

Section 5: Frequently Asked Questions About Pay What You


Want

Frequently Asked Questions

Give me a fulcrum and I shall move the world.


- Archimedes

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 115

This section is designed to be used as a quick-reference section for the rest of the guide. Where appropriate,
Ill answer the questions, but most of the detail has already been covered throughout the book, so Ill simply
hyperlink to the section where your question can be answered in more depth.
Please let me know if you have any other questions Id be happy to include them here in future editions.

1. How do I identify if my product will work for PAY WHAT YOU WANT?
Essentially any product will work in a PAY WHAT YOU WANT capacity as long as its not a commodity.
However, in Section 3 I explain the 5 essential components of Pay What You Want, which examines the
criteria that must be met for Pay What You Want to work:
1.
2.
3.
4.
5.

A product with low marginal cost


A fair-minded customer
A product that can be sold credibly at a wide range of prices
A strong relationship between buyer and seller
A very competitive marketplace

Commodities will always sell for the commodity price. But if you can differentiate your offering by making it
premium/unique/special, you can credibly sell your product at a wide range of prices.

2. How do I know if my audience will respond positively to PAY WHAT YOU


WANT?
You dont until you try.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 116

In several of the case studies, people have referenced tourist and teenage populations as demographics that
cant support a PAY WHAT YOU WANT offering but there are even cases where this is proven wrong:
This is something Chris Bennet seemingly overlooked when he opened the Dock Cafe, a faith-based
community cafe, which runs an honesty box system at the Titanic Quarter of Belfast. By Ilic's estimation,
the Dock Cafe's location in a newly renovated tourist hub, opposite a college, should be a perfect storm of
freeloading. Yet several months on, it's still going strong, offering tea, coffee, cakes and soups, all priced
at the discretion of the customer, although Bennet (one of the resident Chaplains) admits the student
effect is noticeable: "You can see the income spike go up and down, depending on whether it's term time
or not."
Source: The Guardian
Chris mentions he notices the student effect but hes still able to run a successful PAY WHAT YOU WANT
business.
Your best bet: test out a one-time / limited-time product or service with your audience that fits the 5
essential components of a successful PAY WHAT YOU WANT offering. Based on the response and reaction,
adjust accordingly.

3. How do I overcome/ avoid feeling like Im begging?


Understand that youre not begging. Youre giving. And youre letting others give back.
For some inspiration, check out Amanda Palmers TED talk all about how she uses PAY WHAT YOU WANT and
generosity to fuel her business and music: www.ted.com

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 117

4. How do I implement this into my business?


Check out Section 4 for over a dozen examples of how to strategically apply PWYW to your business.
For additional in depth case studies, check out the bonus case studies in The Complete Package.

5. How do I use this even if Im not selling anything?


On Amanda Palmers blog, she asks for donations at the end of her blog posts, not just for music, but to
support her art. Maria Popova is another famous example of this.
You can do the same thing: include a call to action to ask people to contribute and support your art /
writing / work etc.

6. Why does PAY WHAT YOU WANT work?


The psychology behind it is explained in Section 2: the Psychology of Pay What You Want.
Practically speaking: people are more generous than you think; the top 1-3% of your audience want to give
more than you let them with fixed pricing; PWYW maximizes customer value, increases reach, and sales
(and when done right, increases revenue per purchase).

7. How do I use PAY WHAT YOU WANT?


You can use PAY WHAT YOU WANT in dozens of different ways. It depends what your goals are and what youre
selling.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 118

One of the most effective ways to leverage the power of PAY WHAT YOU WANT is to do a PAY WHAT YOU WANT
offering periodically for one or all of your existing products (this works especially well if your products are
digital), or to release, in a limited offering, one of your products as PAY WHAT YOU WANT.
PAY WHAT YOU WANT can often increase traffic/viewership/readership because its a unique offering. Since
not everyone does it, when you do, it draws attention (it has marketing built in).
Refer to Section 3 for specifics on HOW to actually implement PAY WHAT YOU WANT into your business.

8. Do I have to do it with every product I offer?


No, absolutely not.
PAY WHAT YOU WANT often works best when all your products / services are fixed price. But of course, it all
depends on your attitude. I make almost everything at my website PAY WHAT YOU WANT its because I
believe art and knowledge should be free, but I also believe that those who are impacted by said art and
knowledge in a powerful way ought to have the opportunity to contribute to my creative work. It works for
me but I also couldnt retire off of it.
The guys at TheHybridAthlete.com do a great job of having some PAY WHAT YOU WANT products and several
other premium products and services that they charge for. In this way theyre still democratizing health and
fitness, but theyre also keeping themselves in the black (which is important for a business if you want it to
survive and keep making you products).
My advice? Test it. Try it with a product or service and see what happens.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 119

9. Does PAY WHAT YOU WANT work with physical business and physical products
/ services?
The answer is a resounding yesat least, it CAN work when done right.
Why do these businesses succeed? Check out this chapter on brick and mortar PWYW businesses for the
framework necessary for creating a successful PAY WHAT YOU WANT offering.

10. What if everyone takes my product for free?


This is possible but unlikely if youve met the 5 Essential Components of PAY WHAT YOU WANT. If people are
taking your product for free and no one is donating, its probably because:
1. They dont know who you are
2. They dont know why youre making the product PAY WHAT YOU WANT
3. They dont have a frame of reference for what to pay you (you havent price anchored or steered the
customer to the right decision)
4. Youre catering to a very selfish demographic
All of these are fixable except 4 if youre catering to a selfish demographic, your best bet is to stop offering
PAY WHAT YOU WANT. For more on this subject, review The 6 Step Perfect Pitch Framework chapter it will
show you how to offer your PWYW product or service so you actually make money.

11. How much can I make from PAY WHAT YOU WANT?
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 120

That depends on what youre selling, the value customers attach to it, and how big your customer base is.
With my first PAY WHAT YOU WANT offering, I made about $500 within the first month (from only a tiny list of
about 150 people). Not bad but obviously not enough to pay the bills. Then there are bands like Radiohead
who make millions from their PAY WHAT YOU WANT offering (but have an audience of millions around the
world).
Income is only restricted by size of audience and your reach (which PWYW helps to increase).

12. Will I make more with PAY WHAT YOU WANT than conventional pricing?
Jennifer Blanchard makes anywhere from $1 - $30 per download of her NaNo writing tips thats a lot more
than the zero she used to make by giving the tips away for free.
Radiohead made more from their PAY WHAT YOU WANT offering than their last albums total sales - combined.
In an interview with Ryan Delk of Gumroad, Ryan explained its not uncommon for someone using PAY WHAT
YOU WANT to increase revenue per sale by 60% (!!!).
Matt Homann is a consultant and doubled his rate when he started letting his clients choose how much to
pay him.
Yes, you can make more using PAY WHAT YOU WANT than conventional pricing.

13. Will PAY WHAT YOU WANT grow my audience?


Yes.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 121

PAY WHAT YOU WANT is most effective from a marketing perspective. Whether it encourages people to check
out your bar because youre offering a limited edition, one keg micro-brew as PAY WHAT YOU WANT, or youre
releasing your next album as PAY WHAT YOU WANT for the first 30 days, youre almost guaranteed to have a
spike in traffic. The key is to leverage this spike into something sustainable and to make sure people still
contribute to your work.
One of the best ways to do this is to offer a chance for people who check out your work to subscribe to your
newsletter. While not everyone will contribute to a PAY WHAT YOU WANT offering, those who dont may still
want to be a part of your newsletter and new things you release and these members, while they might not
contribute monetarily, could be great advocates of your work and spread the message.
So yes, PAY WHAT YOU WANT will get you more traffic/eye-balls on your work. Your job is to CAPTURE that
traffic and turn them into loyal fans.

14. How do I know if my product or service would benefit from PAY WHAT YOU
WANT? Is this a good fit?
Just about anything can work with PAY WHAT YOU WANT. Music, games, movies, fiction, nonfiction, comedy,
coaching, taxi services, teaching
Some things that wont work: extreme premium products where scarcity matters (Gucci wouldnt benefit
from PWYW), and commodities (fuel, oil, etc.)

15. Can PAY WHAT YOU WANT be successful without a large following?
I think my personal experience can answer this question: I only had about 150 subscribers on my list when I
released my first PAY WHAT YOU WANT eBook. With just 150 subscribers (and only about 50 actually

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 122

downloaded the book), I made $500 in the first month. Since then, Ive made over $2k through my PWYW
offerings. Not bad for a small (but growing) audience.
Yes, you can make money even if you have an audience of ONE person who wants to hear from you (chances
are that person wants to pay you for your work).
The best people to ask? Your friends and family. If you write, create, or design something, I should hope
your friends and family will want to experience itand if they do, then theyd probably like to contribute to
your work.
If you come from a truly horrible family or have an awful, selfish group of friends, your miles may vary. In
which case, make new friends and new family.

16. What are examples of successful PAY WHAT YOU WANT offerings?
TheHybridAthlete.com (PAY WHAT YOU WANT fitness products bringing in $400+ per day on average)
Panera Bread (a restaurant that has experimented with PWYW for several of their stores successfully)
Perlin Winery (an entirely PWYW based winery in Berlin)
Joosts Proun (a PWYW video game side project that made over $20,000 in profit)
Paid to Exist (an online education and personal development website that uses PWYW occasionally
throughout the year to great effect)
Jennifer Blanchard (used PWYW instead of giving her product away for free, creating new passive
income streams)
Maria Popova of BrainPickings.org (an incredibly successful monthly donation-based PWYW model)
Stephen King (a PWYW serialized book that brought in close to $500,000)
Paulo Coelho (not quite PWYW, but he did encourage people to pirate his book and became a
bestseller because of it)
By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 123

Amanda Palmer (made a record-setting $1.2 million on Kickstarter and funds her music using PWYW
pricing)
Radiohead (their PAY WHAT YOU WANT album made millionsplural).
Tara Joyce (has run an entirely PWYW based consulting business for the past 5 years)
Paste Magazine ( PWYW donation campaign that raised over $275,000, grew their subscriber base by
30,000, and kept the magazine from bankruptcy)
Libboo (a software as a service based business that runs on PWYW)
And many, many more

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 124

Closing Thoughts
Thanks so much for reading.
I hope this guide gave you a deeper understanding of PAY WHAT YOU WANT, as well as powerful tactics you can
put to use today to start sharing (and making money from) your work.
If you have any questions, concerns, thoughts, ideas, jokes, cool stories, or just want to say hi, drop me a
note:
tom@tommorkes.com
If you liked this product, you should join The Resistance; youll get new blog posts sent directly to your inbox
(about 1 per week), exclusive content not seen on the blog, and special discounts and offers just for
subscribers.
This is Tom Morkes,
If youre reading this you ARE the Resistance.

By Tom Morkes | Follow him on Twitter here

The Complete Guide to Pay What You Want Pricing | 125