Pay-it-forward and other contribution-based funding models

December 21, 2022

The pay what you can (PWYC) model is a type of hybrid funding model that promotes social impact while also generating revenue. By allowing customers to pay whatever they want or can afford, businesses are able to provide services and products to people who may not otherwise have access.

The biggest advantage of the PWYC model is that it provides greater economic access to those with limited resources, which in turn creates positive social impact and better serves society as a whole. Not only does this approach provide goods and services to people who may not otherwise have them, but it also encourages people to pay what they are able, creating a more equitable and sustainable system and allowing businesses to attract new customers by demonstrating their commitment to social responsibility.

What are some examples of successful PWYC models? One successful example is The People’s Fridge in London, a PWYC refrigerator that helps feed those in need by providing access to food and groceries, allowing people to pay whatever they can, or even pay nothing at all if necessary.

Another example is the PWYC cafe model, which has been implemented by a number of social enterprises around the world. This approach allows diners to pay whatever they want for their meals and provides an opportunity for people who may not be able to pay full price to still access healthy and nutritious food. A fantastic one with delicious, vegetarian meals is the Petit Ney participative cantine in Paris, France.

The PWYC model has been adopted by a number of cultural institutions, including the Metropolitan Museum of Art and The Museum of Modern Art. This approach allows people to pay whatever they want for admission as well as tours and services. PWYC models are also being used to offer free legal services to those in need, with organizations like the Fundación ProBono Colombia providing access to lawyers and other legal professionals.

Pay-it-forward (PIF) initiatives are also becoming popular, particularly in the restaurant and food sector, with many businesses allowing customers to pay for their meals and then pay it forward by buying an extra meal that can be given away to someone in need. In the south of Italy, a tradition of paying for two coffees and offering one, known as the “caffè sospeso” has been in place for many years. In Latin America, the “Café Conmigo” pay-it-forward model allows customers to pay for an extra meal and give it away, with the aim of feeding people in need.

However, while the PWYC model offers a great opportunity to promote social impact, there are also some disadvantages to pay what you can models. One potential downside is the possibility of creating unequal access to services or goods, as those with more resources may pay more and those with fewer resources pay less. Additionally, since customers can pay whatever they want, businesses may struggle to make a profit as it is difficult to predict actual revenues.

That being said, there is tremendous opportunity for profitable businesses (particularly restaurants) to combine both a for-profit model alongside a limited PIF or PWYC model (for example, making the PWYC option available on Mondays, when restaurants are often closed anyway). In this way, PWYC models can be beneficial for both customers and businesses. By providing access to services and goods to people who may not otherwise have them, PIF and PWYC models create positive social impact while also generating revenue.

CPM