charity

'Pay what you can' works for charity -- what about business?

May 19, 2011 at 7:12 AM ET

Jeff Roberson / AP /
If Panera Bread pay-what-you-can experiment serves as a test for a people's inner goodness, it appears honesty usually wins out. The company says 60 percent of people leave the suggested amount, and 20 percent leave more.

Hungry but short on cash? You might be in luck if you live near one of the three Panera Bread locations that allow customers to pay what they can for their meals.

These cafes, which serve as part of the nonprofit arm for the St. Louis-based chain, rely on customers' sense of goodness and honesty to raise money for charitable programs. Instead of a tradtional menu and cash register, you can leave a lone penny or a fat wad of Benjamins in a donation box. The three locations (Clayton, Mo.; Dearborn, Mich.; and Portland Ore.) each bring in between $3,000 to $4,000 above costs.

This pay-what-you-can form of progressive charity is far from revolutionary: Community kitchens that operate like the Panera locations can be found across the country; a nonprofit gym in Euless, Texas, offers physical therapy without a price tag; and New York's Metropolitan Museum of Art and other musuems have for decades eliminated ticket counters in favor of donation boxes.

There's evidence that the name-your-price model is catching on with for-profit businesses (or at least being used as a marketing ploy):

  • A decade ago, Priceline.com shook up the travel industry by allowing people to name their own price for airline tickets and hotel rooms. The company has de-emphasized this service in recent years, focusing on a standard comparison search format, but it is a still a core part of Priceline's business (and advertising campaign).
  • Early this spring, Gap launched a "say your price" online program where shoppers can bid for clothing and accessories. If the website accepts your bid, you can print out a coupon to use in stores.
  • Progressive has trumpeted its "Name Your Price" program for auto insurance. "Get a quote, then adjust the price to find a package that's right for you," its website says. Sounds great, but what you're really doing is raising or lowering your insurance premium.
  • Delta airlines lets people name their price to be bumped off flights.
  • In 2007, alternative rock band Radiohead released a downloadable album, "In Rainbows," without a price tag. Fans could pay what they wanted or nothing at all.

What do you think? Is a new trend in the making? Can a true pay-what-you-can business model work for a for-profit company?

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