Pay What you Want or Get What You Pay For?

An interesting debate has been sparked over on Twitter about the merits or demerits perhaps of PWYW by C Sven Johnson of reBang and nithinkd (is he the coolest looking guy on that Enfield or what?) A debate which I will be following with a great deal of interest.
What is PWYW? You may well ask. Well sadly its one of those acronyms like WYSIWYG or FYI for Pay What You Want.

So what is PWYW? Well it’s basically telling your clients that your fee is whatever they are willing to pay. Now you may be thinking that the heck are you talking about man... that's plain crazy, but think about it for a moment...

PWYW has been used successfully for quite some time now in the realm of software downloads. One company reports that whilst most take the software for free, about 10% pay the recommended price; there is a small group of 4% who pay what they believe the software is worth to them for the utility it provides. The end result is that the company earns more than if they had priced their software to be in line with their competitors.

Another example of where the customer can Pay What you Want is eBay. A very different business model, but shows clearly a way of finding the price equilibrium for demand versus supply.

But your in the industrial design sector right... how could you possibly let the client determine the price… you would get 'ripped off' for sure. What if your going rate is let’s say, £30.00 per hour, but your client is willing to pay £50.00. On a small two week project, that could be an extra £2,000.00 helping keep the re-po man away from the front door.

On the other hand, let’s say your £30.00 rate has gone unfulfilled for a couple of lean months... a real possibility in these slower economic times. What would you say to 'some crazy inventor' who can only afford to spend a £1,000 on getting some design work done so he can make his pitch to potential investors? Do you turn him away and slug it out on the doorstep with the re-po man over your 50" Sony flat panel? Or do you say, "hey maybe if I give this guy a brake, I can pay for the TV and he can present to his investors... maybe he'll even comeback with some more cash and I can make that car payment too"

Well both of the above situations have happened to me... even the re-po man bit, though I didn't have to slug it out with him as actually he was quite a nice guy and bought me a little more time with my creditors which allowed me to pay off what I owed without any serious implications.
In the first case, my client discussed terms and conditions with me, he offered more than the tendered amount in exchange for 'on demand' service as he required a fast turnaround working in the automotive sector for such clients as GM, Aston Martin, Bentley, Rolls-Royce et.al

In the second instance, my client (James Williams of Keebunga) was an 'inventor' with a great idea, but no idea about the cost of developing a product. At that time I had a lull after a storm of work. Liking James's ideas and his general demeanour, I decided that I could help him perhaps get his idea a little further along and help me keep the cash flow looking healthy. The premise on which I offered my services as I did at one third of my rate (my rate isn't £30.00 per hour in case your wondering... you'll have to commission me to find that out), was that should I have full rate work, it would take precedence.

Over the course of the last year, my first 'premium rate' client has continued to use my services on a number of projects, whilst James and I re-negotiated various deals to suit his changing needs. On one occasion I did the work 'for free' to be billed at some undetermined date (OK, not actually free then). When Keebunga needed to move more quickly in order to meet criteria for a government grant and investors we agreed a higher more normal rate.

The end result is that Keebunga managed to get a product developed at an affordable price. James Williams says "Had it not been for Buff offering their services at a price that matched my budget, Keebunga would never have come to fruition". With product about to come to market, an investment plan in place and future product releases planned, Buff has already been selected for to design and develop these new projects.

So you see, it's not only the banks and mortgage lenders that can get creative with money. Only is your aim is to stash the cash or help a fledgling company come to life? I suppose there may well be some truth in the old saying 'As you sow, so shall you reap'