What does Everlane have in common with Radiohead?
The company is letting consumers decide how much to pay for silk camisoles, infinity scarves and more as part of a temporary promotion. Until Dec. 31, customers can pick from three prices points for each item in a select group of products in overstock, with some items selling at no markup.
The strategy may seem naive in the extreme: Why wouldn't every customer opt to pay the lowest possible price, if that's an option? Yet the move makes sense in the context of Everlane's brand of "radical transparency." Explaining the math behind prices of the company's fashion merchandise and how items are produced is how Everlane markets itself. And the company believes its customers will respond in the same spirit.
"Instead of offering a traditional sale, we found that Choose Your Price gave us the opportunity to be completely transparent with our customers about our inventory process and our profit markups," CEO and founder Michael Preysman told Inc. in a statement. "By giving our customers three choices we are able to give them a true sense of value on each item and help inform their decision."
When customers hover their cursors over the price points, bubbles pop up explaining that the lowest price point is equivalent to cost of production plus shipping and the middle price includes that plus overhead. Basically, the lower price points are a wash for Everlane.
For the highest price point, the bubble explains, "This helps cover production, shipping, our team, and allows us to invest in growth. Thanks!" Normal prices are a few dollars over the highest promotional price points and run roughly double production costs -- a fraction of the markup at most competing retailers.
Oh, and there's no cap on how many items in stock can sell at the lowest price point or something like that.
So where did this unorthodox idea come from? Radiohead's 2007 online release of In Rainbows on a "pay what you wish" basis was a key inspiration, said Preysman. "We found the results (of the band's experiment) extremely interesting since few listeners actually paid the lowest price."
Radiohead and Everlane aren't alone in putting the power of pricing in the hands of consumers. 7-Eleven let customers decide how much to pay for Slurpees on Nov. 7 as a benefit for organizations fighting hunger. While name-your-own price strategies don't lead to competitive bidding wars that can drive prices sky high as can happen on Ebay, there are benefits to the approach you might not expect.
Letting customers decide how much to pay can tell you how much they value your product. If customers pay lower than you can stomach, maybe it's time to rejigger your marketing strategy.