Question

1. A recent business trend is participative pricing, which allows customers to participate in setting the price of goods and services. One form of participative pricing is “pay-what-you-want” (PWYW) which allows a customer to pay whatever they want, including $0. In one relatively well-known example, the band Radiohead sold its In Rainbows album on the band’s website, and allowed fans (customers) to pay as much (or as little) as they wished.

1. Suppose you worked for the band, and wanted to figure out how many units of the album needed to be sold in order for the band to break even. How would the pay-what-you-want pricing strategy complicate the break-even analysis?

2. Another form of participative pricing is “name-your-own-price” (NYOP), made popular by Priceline. With NYOP, sellers can set a minimum price, below which they will not sell their good or service. Typically, sellers set a minimum price that is greater than $0. (Note that if seller sets the minimum price at $0, then NYOP is the exact same as PWYW.) Suppose Radiohead used NYOP instead of PWYW for its In Rainbows album. Would this change your answer to part a? If so, how?

Answer 1

Answer:

Pay what you want (PWYW) is the most recent new business model.

a)

There are three guidelines by and large acceptable by the person. In the event that we think about the above model, at that point ,

• First category will be on the off chance that you can't pay what you figure, at that point it will be alright and show proactive kindness elsewhere.
• The second category is on the off chance that you can pay what you think its value satisfies doing it, it is a business opportunity.
• The third category is on the off chance that you can pay more than what you might suspect its value please give liberally. It will make a difference.

Assume I worked for the band, the break-even points will be after second category. It implies on the off chance that we sold 100 units of the band and cross second category we will accomplish the break-even. On the off chance that we partition in 3 categories, at that point it comes to 33 units every then after 66 units we will accomplish the break-even and balance 33 units will be our development.

b)

Name your own value model. Right now, merchants fix the minimum cost. On the off chance that it sells more than the minimum value, at that point it will be development of the business entity. It for the most part relies upon the different variables the demand aggregation, the knowledge worker profitability, Networks, Connectivity, Value innovation, Empowerment and self-leadership, Continuous learning, Quality, and brand.

On the off chance that Radio head utilized Name your own value model or price model, at that point growth will be moderate on the grounds that the price won't change. If the item is in high quality the demand is more than the cost or price may go up for the client need and it will expand the development or growth.