Monday, November 2, 2009

The "Pay What You Want" Model

John Locke believed that all people are essentially born good, but what if you were allowed to name your price on your next purchase? Would you feel guilty by opting out and choosing to pay nothing, or would you choose to pay the suggested retail?

The World of Goo, a game developed by 2-D Boy, was released back in October of 2008. For the game's one year anniversary they celebrated by re-releasing the game and allowing the buyers to name their price ($0.01 - $50). Here's what the guys at 2-D Boy noticed:

When Radiohead experimented with this pricing model with In Rainbows it was ludicrously declared a failure by the press because most people paid nothing, despite Radiohead making a whacking great ton of cash for it. It’s that whacking great ton of cash that’s interesting here, rather than how many people nabbed it for free.

There’s people who were getting a second copy. Many bought it on Wii or PC or Mac or Linux and wanted another version. (...) Of course, this isn’t going to account for many of the 16,852 who got it for almost-free.

I think it’s fascinating that then more than twice as many people chose to pay between one and two dollars than chose to pay between one cent and one dollar. In fact, almost as many people chose to pay in this third bracket as chose to get it for free. (...) It’s still important to note that people are choosing to pay when they don’t have to. Not a significant amount at first glance. Until you multiply 15,797 by 2, and put a dollar sign in front of it, for a year old game.

Other interesting spikes appear at $5 and $10. It’s kind of cute that people default to recognisable round numbers. That twenty-three times more people paid $10 than $9 is, well, possibly useful knowledge for those picking pricing. People seem to prefer to pay a round number. This same pattern repeats at $15 and $20, with again thirty times more people paying $20 than $19.

It's really a matter of opinion whether you think this model works or not. It all depends on your goals I guess. There are tons of other graphs and conclusions made from this sale, check them out if you want.

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