What Should We Make of “Pay What You Want”?
The no-price price tag blends a purchase with a donation, turning the conventional transaction on its head. Could "pay what you want" work for association membership dues?
Could alt-rock band Radiohead be responsible for an emerging trend in the financial models of U.S. synagogues?
It might be hard to draw a direct line between the two, but consider the impact of the release of Radiohead’s seventh studio album, In Rainbows, in 2007. The band made headlines around the world for what the album lacked: a price tag. On October 10 that year, In Rainbows was offered as an online, “pay what you want” download. Time called it then “easily the most important release in the recent history of the music business.”
Like a lot of people, I’d never heard of pay what you want (PWYW) before the Radiohead announcement. Not being a big fan of the band, I didn’t download the album for any price. But I definitely remember hearing about it.
Eight years later, The New York Times told the story of PWYW making its way to religious institutions, in an article last week, “The ‘Pay What You Want’ Experiment at Synagogues.” In the last five years, about 30 synagogues in the U.S. have traded their traditional dues models for PWYW, according to the Times. One Hebrew scholar says PWYW is a clear effort to appeal to modern buying behaviors:
“The dues system has fallen out of alignment with the zeitgeist,” said Rabbi Dan Judson, an expert on the history of the financing of American synagogues who teaches at Hebrew College Rabbinical School in Massachusetts. “People want to feel that whatever they want to give to a religious community should be valued as a gift,” he said. “They don’t want to feel like they’re giving money and still it’s not good enough.”
Joan Eisenstodt, chief strategist at Eisenstodt Associates LLC, shared the NYT article and sparked a lengthy discussion in ASAE’s Collaborate discussion forum last week [login required], as she wondered aloud about the viability of PWYW for association membership models. Some fellow association pros said they saw some interesting possibilities for PWYW, while others called it a gimmick or a “parlor trick.” One executive shared a success story of using PWYW as a limited offer to reinstate lapsed members.
What makes PWYW intriguing and perhaps controversial, or even just confusing, is its hybridization of business models. It blends a transactional purchase (money in exchange for goods) with a donation (money to support a cause). The former usually involves a set price, while the latter is discretionary and usually does not involve goods received in return. PWYW turns all of that on its head. And that might be exactly why it can work in a nonprofit setting.
The Impact of the Price You Pay
In an experiment conducted by researchers at University of California Berkeley in 2010, roller coaster riders at an amusement park were offered a PWYW option to buy a photo of themselves from their ride. The average price paid was low: 92 cents. But, when riders were told that half of their PWYW payment would be donated to charity, they paid $5.33 on average. (Though, interestingly, fewer people purchased a photo.)
In a purely transactional context, PWYW wouldn’t be sustainable. For my monthly internet service, for instance, I wouldn’t give those clowns at Comcast a dime if I didn’t have to. (It likely worked for Radiohead, more than anything else, as a marketing ploy to generate buzz and downstream revenue via sales of physical albums and concert tickets.) But, as evidenced by the UCB experiment, paying for both a product and to support a higher good can lead buyers to consider the impact of the price they pay.
Synagogues that have tried PWYW have reported positive experiences thus far, according to a study by the UJA Federation of New York:
“It seems clear from our study that the synagogues that have adopted the voluntary commitment model believe this model to be a success. It has positively impacted their experiences with membership, revenue, and giving. It promotes engagement and an open and transparent culture around money, it lowers barriers to entry, encourages membership retention, and it values everyone as sacred members of the community.”
But, as the Times noted, PWYW can bring some new challenges. Not knowing exactly what members will pay means annual budgeting can be tricky. Transparency takes on new importance, as synagogues report to members the average cost per family of its operation, to show them where their money goes and suggest a “sustaining” level of giving. Some also find themselves adding recognition and perks for the most generous donors, “anything from a mention in a newsletter to a barbecue at the rabbi’s house.”
PWYW is not unprecedented in associations. In 2012, Associations Now shared the story of the American Alliance of Museums, which introduced a tiered membership model, the bottom tier of which is a PWYW level. After its first year, membership had grown, without seeing a major “free-rider” problem; membership in AAM’s highest price-specified tier had actually exceeded its projections.
Janet Vaughan, senior director of member services, confirmed the notion that tiers and PWYW drive a greater level of contemplation from the buyer: AAM noticed members were taking longer than usual to renew. “We promptly implemented a process to call museums the month after they lapsed to answer questions and help them find their place in the new structure,” she said.
Both AAM and another association that launched a tiered model around the same time—AIGA, the professional association for design (with a $50 bottom tier—not PWYW, but close)—cited a desire to cast a wider net in their industries. The same theme comes up in stories of associations that have offered free membership options. (PWYW is of course a “free” offer that just includes an ask.) Associations like these see lowering the barriers to entry as a primary method for drawing more people into their spheres of influence.
The Best of Both Worlds?
Right around here is where debates about association business models tend to get messy, because there’s no clear consensus on whether an association should focus on a narrow niche of core members or open its doors to as many relevant stakeholders as possible—or both. There’s no clear consensus on whether associations should sell membership as a package of products or as an opportunity to belong to and support a community—or both. Of course, lots of people might argue that there shouldn’t be a consensus on these questions, because every association serves a unique market and faces a unique set of business conditions.
In a blog post published just before the PWYW discussion arose, Kevin Holland, senior vice president at Air Conditioning Contractors of America, urges associations to get a clearer understanding of the difference between selling membership and raising funds. He asks associations to consider what their members get in exchange for joining:
Do they gain access to something that is not available anywhere else? Is it something that provides a genuine return on investment (ROI)? By ROI, I mean only something that saves the member a significant amount of time, or puts money in the member’s pocket at a rate higher than the dues you charge. Now, if your honest answer to those questions is, “Well, not really,” then you’re not really selling membership. You’re raising funds. … You see, members pay for benefits. But donors support causes.
He makes a strong case for picking one or the other. Pay what you want, though, blends the two. In one stroke, it asks the person paying for a benefit to also consider supporting the cause. So, does that mean PWYW is weak and wavering, unable to commit to one or the other? Or is it a powerful fusion of the two?
Your answer probably depends on your thoughts about what associations should be and do, whether they should choose between niche and open or can succeed doing both.
Or, maybe, it just depends on how much you like Radiohead.
Could pay what you want work at your association? How would it change how your association recruits and serves members? Let us know in the comments.