Pay What You Want with a Twist

There is a very interesting pricing experiment that started on Kickstarter this morning.

Dan Provost and Tom Gerhardt, the guys behind the glif, have launched a second product. It is called The Cosmonaut, a wide grip stylus for touch screens. They make a compelling case for their design solution, but the pledging options are more interesting.

Patrons have a choice of pledging whatever amount they like to receive a Cosmonaut and see the project funded. The most famous experiment along these lines with Radiohead’s release of Rainbows with the pay what you want option for the digital release. With no marginal cost, this was a perfect was to release a music album.

For the Cosmonaut, Dan and Tom created pledge goal of $50,000 cover the costs of their initial production run. That is something you see on every Kickstarter project and, in this case, fully recognizes the real marginal cost of producing something made of atoms.

Here is the kicker (pun intended), the project is limited to 3000 patrons. This means while you can pledge whatever you like, there is a finite group who will be responsible for getting the project off the ground.

The two pricing signals the project creators provide are that the stylus will retail for $25 and that the cost of shipping should be included in the pledge.

At the time of writing, there are currently 580 backers that have pledged $8715. The average pledge is $15.02, but to fund the project the average patron needs to be giving $16.67 and the longer the lower pledge is maintained the more later patrons will have to pledge to meet the overall funding goal.

The biggest question in this experiment is whether or not the patrons have a strong enough signal to know what to pledge. The common tiered pledge structure on Kickstarter provides that with varied pricing and rewards. The $25 suggested retail price is meant to provide that anchor, but with the ever shifting break-even point and the lack of visibility to what it is, patrons may not know how much they need to pledge as the project comes to a close.

I am very interested to see how this turns out and will keep updating this post as the project progresses.

UPDATE 3/31/11:

The project reached 3000 people in under two days, but did not reach the $50,000 target with those people.

I collected data most of the first day and have uploaded to a Google Spreadsheet. I have the number of donors and dollars pledged every 15 minutes for the first day and I pulled data as fast as I could for an hour to see what the actual pledges were looking like. From the hour dataset it was very clear that more than a few were trying to get the stylus for a dollar or two and for each those pledges single digit pledges, it took five $20 pledges to offset the effect. It was clear they were not going to make their goal.

Dan and Tom posted an update shortly after the 3000 donor mark was reached and decided rather than try to convince everyone to raise their pledges that they would open two new tiers at $25 and $50, allowing everyone who already pledged to get their stylus. They have accumulated another 1200 backers in two days and have more than $82,000 in pledges.

I really hope they release the whole data set with time stamps so we can see this experiment from the inside.

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