As I work, I generally enjoy having music in the background. My favorite local station here in Minneapolis is The Current, a contemporary music station with a more eclectic mix than the local commercial stations. As a service provided by NPR, The Current had a member drive in the run up to Memorial Day, asking listeners to donate money to keep the station light on advertisements, high on value. While they are quick to point out the risk of closure if they do not receive enough donations, they made it clear that if you couldn’t afford to give, that was fine, and they were happy to have you as a listener anyway.
I always found this unusual pricing method interesting; through the rigid lens of neoclassical economics, it doesn’t make sense – why would you pay for something when you can get the service for free? This problem is termed the “free rider effect,” meaning that if there is no way to implement a price, why would anybody pay? I feel the answer is important to every business: If you provide a product or service of unique value that impacts the strategic direction of your customers – your customers want you to succeed.
I wouldn’t recommend this pricing structure in a B2B setting; procurement would have no problem hitching a free ride. When it comes to the decision maker, if your solution impacts their P&L in a positive manner, they not only want you to survive but to keep innovating and are generally willing to pay a fair price to keep things moving forward. After all, as we move to supply chains competing against supply chains, working with suppliers who help deliver the right solutions to their customers will become more and more important as your customers strive for competitive advantage in their markets.
If you know your solution is valuable to your customer, don’t believe procurement when they say you’re a commodity. Use your backbone in negotiations to deliver the best solution for your customer at a fair price; this will ensure the entire supply chain stays in a healthy state to stay ahead in an ever more competitive environment.