I have been Volunteering at Lentils as Anything, a Not for Profit restaurant that has the most amazing food ever. The food is made and served with love, and the best part- You Pay as you Feel.
I got thinking about the concept of ‘Pay as you Feel’ and how it can apply to business. Clearly, it relies on trusting customers to pay what they think the food is worth. The risk is that a customer pays $0, which happens all the time at a restaurant like Lentils.
I suggested a way to the Founder of Lentils, Shanaka Fernando, to optimise the potential of a ‘pay as you feel’ approach to business. There are 3 main ways of improving a customers willingness to donate:
a) Combining a Pay as you Feel Pricing Model with a Charitable Cause: This approach has been tested and documented in the book ‘Freakonomics’ where it was found that donating a certain amount of profits to a charitable cause and educating customers about this improved their willingness to contribute money.
b) Staff Members should educate customers about the values of the organisation and the ‘Pay as you Feel’ concept. It needs to become a habit, just like at McDonalds Staff members always ask ‘Would you like fries with that?” This can be done in a friendly and hospitable manner.
c) Not for Profits like Lentils can be transparent about their financial situation. This makes customers aware about the organisations financial successes and failures and induces them to donate to support the cause of the organisation, if they truly believe in it.
While the pay as you feel pricing model is clearly a risky one, it can offer significant benefits to a new start up, as opposed to offering discounts which can often be perceived negatively by customers. It might work particularly well in cases where you are a brand new start up, trying to win the trust of your first few customers, and later charge them when they become actual longer term customers.
It is certainly an interesting concept and one that intrigues me.