Does a ‘pay-what-you-want’ business model work?

- April 15, 2017 3 MIN READ

Cash flow is the core of any business, so imagine what would happen if you let your customers choose how much they wanted to pay for your product or service.

Some businesses, particularly in the U.S, have experimented with pay-what-you-want pricing strategies where the customer can opt to pay nothing or more/less than a suggested price.

A yoga studio in Camberwell will be the first in Melbourne to offer 100 percent donation-based classes.

As of September 2016, Jessica Dewar Yoga will offer all yoga classes as a donation-based payment model, meaning participants can attend classes and donate an amount at their discretion.

Founder Jessica Dewar said the donation-based classes would allow students to support and reward only the highest quality classes, ensuring that the class fit within their expectations and

Dewar has been practising yoga for more than 10 years and has completed teacher training in Mysore, India. She pursued a range of yoga styles before finding her true love in Hatha and Ashtanga.

“We are happy for people to donate what they feel the class is worth. They will never feel pressured to donate as we believe that if money is given, it should be voluntary,” Ms Dewar said.

“We want to make our yoga classes as welcoming as possible.”

Dewar said offering donation-based yoga classes was about giving back to people and creating a community.

“I want to live in a kinder world. And I think if there’s a little way that I can contribute to helping people feel happier in their lives, then I will. It’s about contributing to a greater good.”

A donation-based payment system also empowers people, Dewar said.

“I believe yoga shouldn’t be restricted to only the people who can afford expensive classes. We need to create a community and a way of thinking where a healthy lifestyle can exist for people who might not have the financial means of accessing it,” she said.

“I think it’s important not to guilt people into paying for classes but rather empower them to give what they want or what they can afford.”

Dewar said despite offering a donation-based model, she was committed to providing students with the highest quality of teaching.

“It’s not just about making yoga accessible, it’s about offering quality yoga,” she said. While Ms Dewar is well aware of the risks associated with offering donation-based classes, she said she was driven to do it because she felt a responsibility to lead by example and create change in the community.

“I began yoga for the purpose of being able to share it with everyone. And offering the traditional payment model of memberships and class passes at a set fee has never sat well with me. Making a business about the money is not what excites me. Making a business about the people has always excited me,” she said.

“Watching people connect with one another is also another special part of this concept. It’s about people from all different cultures sitting together, laughing and sharing ideas. This is not just about yoga – it’s about connection and feeling part of something bigger.”

Advice for a pay-what-you-want business model

  1. This model is not for all businesses and requires a strong business plan. It works better with service based and education businesses but has been used in restaurants and sporting businesses.
  2. Set parameters. People need guidance of what they might pay. For instance, if you run a restaurant you may need to suggest at least $12 per meal.
  3. Create a connection. It is human nature to pay more when we value and understand a company and it’s ethos. This is why crowdfunding campaigns either take off or crash and burn. Build a community around your business and people will return, refer you to friends and rate you well!

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