Faculty of Economics and Business Administration Publications Database

Kish: Where Customers Pay As They Wish

Natter, Martin
Spann, Martin
Volume: 8
Number: 3
ISSN-Print: 1546-5616
Link External Source: Online Version
Year: 2010

New restaurants often do not manage to succeed within a reasonable amount of time. Exotic restaurants especially face the problem that price promotions may not attract new customers because prospective customers might associate very low prices for unfamiliar food with a high functional risk. This paper describes how Pay-What-You-Want (PWYW), a new pricing mechanism, was successfully implemented at Kish, a moderately priced Persian restaurant in downtown Frankfurt. After the initial testing phase, which had the characteristics of a promotional offer, the restaurant decided to permanently offer its buffet lunch under PWYW conditions. We report the long-term effects of this decision as well as a simulation demonstrating that profitability is mainly based on 'trading up' the continuous inflow of new customers to the more profitable dining offer where prices are fixed.