When Your Customers Set the Price

Posted by: Today's Tip Contributor on August 16, 2010

On the morning of her 41st birthday, author Danielle LaPorte posted a promotion on her blog and then went to the spa in her home city of Vancouver, B.C. She had prepared something special for her readers that day—a "Pay-what-you-will" offer for her Firestarter Sessions help package, a digital strategy session for entrepreneurs, which normally retails at $150. How would it go over? She hoped it would do well, of course, but it was an unusual experiment.

An hour later, Danielle couldn’t resist the urge to see what was happening. Leaving her spa appointment, she flipped open her iPhone—and flipped out. From all over the world, offers to purchase her Firestarter were streaming in by the hundreds.

Danielle is a smart marketer ("I came out of the womb with a press release," she likes to say), but she didn’t expect the response to be as great as it was. How great? Based on previous offers and a moderate but growing readership, she expected about 70 offers. Instead, over the course of 24 hours, Danielle received more than 700 offers, for a total of $30,000 in new income.

How did this experiment work so well? What went on behind the scenes to create such a big success?

Offers were made through public comments. Danielle encouraged her readers to post comments on the site containing their offer. Anonymity was available for those who wanted it, but 500-plus comments proved that most people were comfortable going live. The comments also provided social proof ("everyone’s doing it") and public validity.

All offers accepted … almost. The smart marketer in Danielle didn’t tell people what amount to offer, but she did make clear that she wasn’t giving the goods away for free. "One person offered to pay $10 on their Visa card," she said. "I told them, ‘Thanks but no thanks.’" By making a clear value proposition in the blog post, she set expectations for high offers without disqualifying most lower ones.

Community reigns supreme. Several of Danielle’s first readers proposed creative offers, which in turn encouraged other creative offers. Someone kicked off a trend of donating on behalf of others; someone offered $40 and a shipment of vegan baked goods; someone offered one amount to Danielle along with another contribution to Gulf cleanup efforts. The variety made it fun and interesting.

Danielle’s pay-what-you-will experiment was a big hit based on a risky principle: Throw out a creative idea, and let your customers loose. By embracing risk—while carefully defining a few parameters—she earned a nice payday while also strengthening the bond with her readers. If you’re willing to follow Danielle’s lead and take a creative risk in your business, watch out. You’ll definitely send a signal that business-as-usual is changing, and you might even end up starting a fire of new sales.

Chris Guillebeau
Blogger and owner
UnconventionalGuides.com
Seattle

Reader Comments

josephmartins

August 27, 2010 11:15 AM

Very risky. I wouldn't call Danielle's experiment a success, but clearly it depends on how she measures success.

Yes $30,000 might be a huge improvement over what she normally might earn during the same period for that package, but she has definitely eroded her value. She's trading long term value for short term gains...not unlike many of today's CEOs.

There's a reason songs and iPhone software apps sell for as little as $1.00 each. Too many people sell on price because they don't understand how to sell on value. In the process, they set user expectations lower and destroy their value.

The fact that she chose to reserve her right to accept/reject offers also meant it was not a genuine "pay-what-you-will" offer. I'm curious what % of the 700 offers was accepted, and contributed to the $30,000. That is to say, what was the average sale price?

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