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There is a better way to profit with SSR.

Who do you think profits more?

A guy who sells an item at a fixed price OR the one who sells an item with a price which depends on the customers (or pay-what-you-want).

If we say both guys tell their clients that they give the same percentage of profit to charity, would their income change?

In a recent article in Science [1],  A. Gneezy et. al.,  say that the pay-what-you-want (PWYW) pricing strategy with social charity gives the most profits.

The authors used 113, 047 participants.  They divided the participants into four groups with each group experiencing different scenarios in buying a photo souvenir taken when they are enjoying an amusement park ride.  These scenarios are: 1) a person buys with a fixed price and no charity component;  2)  a person buys with the PWYW strategy with no charity component; 3) a person buys with a fixed price with charity component; and 4) a person buys with the PWYW strategy with charity componet.   In technical terms, this is called  a 2 x 2 between participants design.

They found out that when an item was fixed priced (scenario 1 and 3), the rate of purchase is almost the same with or without the charity component.  However with scenario 2, the rate of purchase increased to 4.49% and with scenario 4, the rate of purchase was almost doubled to 8.39%.   Buyers pay more if they know that half of the revenue would go to charity.  The concept of  PWYW pricing strategy is relatively new and hinges on the fact that more people do not care that much about money (they do care but they are not greedy) and that they actually frequently pay more in practice [2].

a company can best serve its cause by sharing its social responsibility with its customers who determine how much they would pay  (as opposed to forcing them to pay ) for an item that has an advocacy tag.

The amusement park ride increased its profit on souvenir photos using the PWYW + charity strategy or as the author would like to call shared social responsibility (SSR).  With this strategy, they circumvent the problems usually associated with corporate social responsibility (CSR) of companies.  These problems are the perception that the company has ulterior motives, and the perception of weak advocacy of the buyer. The PWYW strategy exposes the company to greater financial risk and hence reduces the perception that the company has ulterior motives.  Buyers with advocacy want to be strongly associated with a cause.  With SSR, a purchase means a support for both the company and the cause which solves the second problem.

CSR’s are not profitable for companies because of the reasons above.  Many companies in the Philippines say that they have CSR arms. It would be a pity if these companies fold because of no profit.  The authors suggested SSR instead which not only pursue social good but also does not neglect its profit.