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Smart Pricing: How Google, Priceline, and Leading Businesses Use Pricing Innovation for Profitability by Z. John Zhang, Jagmohan Raju

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1. “Pay As You Wish” Pricing

“If it’s good enough, people will put a penny in the pot.”Chris Hufford, manager, Radiohead

On October 9, 2007, the English alternative rock band Radiohead began an experiment: Instead of pricing its music the conventional way, the band would let its fans pay whatever they wanted to download its latest 10-song album, In Rainbows. At the checkout page of the inrainbows.com website, visitors came to an empty price box. When they clicked on the box, a message appeared that said, “It’s up to you.” On the next page, another message appeared that said, “No, really, it’s up to you.”

Radiohead’s decision to leave pricing to its fans came after years of frustration with traditional distribution. The Oxfordshire-bred band ...

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