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November 14, 2005

Pay What You Feel

Sue Pelletier at Face2Face used an example of brilliant customer service on the part of TypePad (the application behind this blog and many others) to propose the concept of "pay what you feel" as a conference pricing strategy.

The genesis of Sue's post was that TypePad has been experiencing a number of technical problems lately.  These are mostly related to their astounding growth and the need to massively upgrade server capacity.  But if your blog is your business, any outage is terribly inconvenient.  Not unlike email going down at critical moments. 

What TypePad did was offer users several options for compensation.  You chose how much they owed you.  No proof needed that you were inconvenienced.  It's all on the honor system.  Some bloggers have already posted they won't take any money.  Others may take the highest amount offered.  We're opting for the least pain (15 free days) because the timing only nominally affected our posting (although there were very s l o w uploads for what seemed like weeks), but it did prevent us from accessing stats on a fairly regular basis.

It was a novel way to handle the situation and one that should bring some love back to TypePad, although perhaps a bit late for those who've already bolted to WordPress (and we were thinking about it here.)

Using this scenario as a foundation, Sue asks the ultimate "what if" - What if we didn't have set registration fees and you simply paid what you thought the education/experience was worth.

It's a brilliant question. 

Magnatune, a music licensing company, built their company around this type of pricing philosophy.  You can order a CD for as little as $5.00 (that's the minimum acceptable price) or for as much as you think it's worth.  Surprisingly (or not) the average price paid is about $8.93.  Less than the $14 you'd pay at Sam Goody for a typical CD, but far above the minimum buyers could get away with.

We practice this with some of our artists in the coffeehouse.  We will often guarantee a performer some agreed upon small amount.  Then, instead of a fixed cover charge, we ask customers to pay us - not the performer - what they think the music was worth.  Once we cover our costs, the performer can keep the rest.  It's like a guaranteed full tip jar for them.  And usually we cover our nut.

Could that work for a conference?  Probably.  It would be an exceedingly difficult sell to the CFO (note how few conferences have money back guarantees) but if someone were to do this, it would certainly raise eyebrows and generate press.  Perhaps this is just the strategy needed for help innovative organizers gain solid, if not equal, footing with bigger cash cow events that are long on reputation and short on innovation.

On the surface it seems a workable strategy.

But we're forgetting something:  cash flow.  We often need that early registration cash flow to fund the final mailings and pay for some of the onsite work.  For many small and some mid-sized events, B/E doesn't happen until the final couple of weeks when 50% or so of registrations are in. 

How comfortable would you be producing an event knowing that you'll have to not only wait for payment from customers (who would have to be satisfied to pay more than a minimum amount) but that you would have no idea what your revenue per registrant is?

I wouldn't be too comfortable.  While an organizer could promote a fairly high minimum payment so ensure they'd exceed B/E, that sort of undermines the whole philosophy.

Nevertheless, it's an interesting concept to ponder and one I imagine we'll see tried in the not too distant future.  Just not by any of the megaevent producers - more likely by the events currently being driven by online communities.

11:00 PM in Trade Show Marketing | Permalink

Comments

Now that I think about it, one group I'm involved with is sort of doing this for its annual meeting, if only accidentally. It's a really small group, and the meeting is limited to less than 40 attendees. There's a very small registration fee, which basically barely covers the costs.

Last year, several people paid more than the fee (double!), voluntarily, without the organizers even bringing the idea up. Some people paid more than the fee even though they weren't able to make the meeting. That's how strongly they felt about the group's mission.

Then again, this group is really passionate about what it's doing, and it's small, and no one even suggested that they do this--it was completely their idea. I have a hard time imagining it happening with larger, less-involved groups.

But wouldn't it be interesting? Talk about motivation to put on a really great event...

P.S. I didn't take any compensation days from Typepad, since I don't really use my account much these days.

Posted by: Sue Pelletier | Nov 16, 2005 10:36:52 AM

I've been thinking about this as a monetization strategy for membership in a business networking group. Right now, Biznik http://www.biznik.com is currently a free business networking group launched 6 months ago in Seattle. I think it would be really interesting to try this "pay what you feel" approach to membership fees. Most business networking groups are way overpriced. A component of this might be publically displaying on users profiles how much they've paid. That way people who are too cheap to contribute would get peer pressure from others who have.

Posted by: Dan McComb | Nov 15, 2005 2:18:15 PM

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