Tuesday, May 17, 2011

Panera Bread experiments with "Pay What You Want" pricing...Is this a good idea??

Some restaurants are experimenting with a voluntary payment system for its food---YOU decide how much you want to pay for your meal. Panera Bread is one such chain trying this at select locations. (HT: Carpe Diem)  It is an interesting experiment in behavioral economics.  They find that 80% of customers pay either the "suggested price" for a meal or actually pay more than the suggested price. Only 20% pay less than the suggested prices.

 I think the strategy is interesting. I wonder how the results would change if payment was completely anonymous.  No face to face contact with an employee to make change or process the credit card payment.  I think Panera is well aware that MOST people who visit their stores would not want to appear to be cheap or dishonest in front of another person.  What do you think? Would people, on average, be just as honest or would those percentages flip---only 20% would pay the suggested prices and 80% would pay less?

: USA Today
""USA Today -- "A Pay-what-you-want Panera in Clayton, MO is being called a success. The menu board lists "suggested funding levels," not prices. Payments go into a donation box, though the cashiers provide change and handle credit card payments.

The majority of patrons pay the "suggested funding level" or more. Statistics provided by Panera indicate that roughly 60% leave the suggested amount; 20% leave more; and 20% less. One person paid $500 for a meal, the largest single payment." Source:
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