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    Panera - A Fail Case Study of Pay What You Want Strategy

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    Tuan Anh
    Panera Bread experimented with a pay-what-you-want model by opening "Panera Cares" cafes from 2010 to 2019. However, the cafes struggled financially, with revenue only covering 60-70% of costs. This was because Panera violated recommendations for successful pay-what-you-want models by offering it long-term for all products without limitations, targeting all customers rather than a subset. To improve the model's sustainability, Panera should have limited pay-what-you-want to certain days/products and made "normal" customers feel generous rather than uncomfortable.

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    Panera - A Fail Case Study of Pay What You Want Strategy

    Uploaded by

    Tuan Anh
    489 views1 page
    Panera Bread experimented with a pay-what-you-want model by opening "Panera Cares" cafes from 2010 to 2019. However, the cafes struggled financially, with revenue only covering 60-70% of costs. This was because Panera violated recommendations for successful pay-what-you-want models by offering it long-term for all products without limitations, targeting all customers rather than a subset. To improve the model's sustainability, Panera should have limited pay-what-you-want to certain days/products and made "normal" customers feel generous rather than uncomfortable.

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    Pay what you want

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    Panera Bread experimented with a pay-what-you-want model by opening "Panera Cares" cafes from 2010 to 2019. However, the cafes struggled financially, with revenue only covering 60-70% of costs. This was because Panera violated recommendations for successful pay-what-you-want models by offering it long-term for all products without limitations, targeting all customers rather than a subset. To improve the model's sustainability, Panera should have limited pay-what-you-want to certain days/products and made "normal" customers feel generous rather than uncomfortable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    489 views1 page

    Panera - A Fail Case Study of Pay What You Want Strategy

    Uploaded by

    Tuan Anh
    Panera Bread experimented with a pay-what-you-want model by opening "Panera Cares" cafes from 2010 to 2019. However, the cafes struggled financially, with revenue only covering 60-70% of costs. This was because Panera violated recommendations for successful pay-what-you-want models by offering it long-term for all products without limitations, targeting all customers rather than a subset. To improve the model's sustainability, Panera should have limited pay-what-you-want to certain days/products and made "normal" customers feel generous rather than uncomfortable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Panera – a fail case study of pay what you want strategy

    Pay-what-you-want (PWYW) is a merging price strategy that attracts lots of attention from marketing
    community. There are both supporter and un-supporters of this strategy. How can firms make money
    from PWYW still a major concern before applying it. There are some success stories from RadioHead,
    Humble Bundle..., however, there are also unsuccess stories, for example from Panera Bread. I would like
    to analyze Panera Bread case in detail to see why Panera’s experiment with PWYW dining failed.
    Panera is a chain of bakery-cafe casual restaurants in US with over 2,000 locations. In 2010, Panera opened
    the first PWYW cafe named Panera Cares in St. Louis, Missouri. The restaurant looked similar to other
    company’s restaurants, but offer food at a suggested donation price. Ron Shaich, the founder of Panera,
    opened this restaurant with nonprofit purpose, he wanted to support people who were struggling for
    food. He expected that this restaurant could sustain itself.
    After the first cafe, other ones were opened in 5 locations, Dearborn, Michigan; Portland, Oregon; Boston,
    and Chicago. Customers come to this Panera Cares chain can pay what they wanted or even not pay at all.
    However, the Panera Cares chain quickly struggling with financial issues. Some Panera Cares cafe reported
    that the revenue was just enough to cover about 60~70% cost. Some restaurants were closed in 2016,
    2018, and the final one in Boston was closed on February 15th 2019. The question is that why Panera Cares
    fails?
    In the PWYW lecture, it can be seen that PWYW model is more likely to succeed if:
    • It's offered for a limited duration
    • Available to a small subset of firm's product offerings
    • Limited to a certain set of buyers
    Panera Cares violated all of these three recommendations.
    • Panera Cares restaurants opened for long-term without any limited duration. In fact, they were
    opened until were closed due to financial problem.
    • Panera Cares restaurants, consumers could take any meals and just pay what they want.
    • Panera planned to target middle-class consumers who were willing to pay a little extra for their
    food. In fact, many homeless patrons visited the restaurant frequently for meal. In some location,
    Panera Cares even had to find a way to limit these patrons. And because of this, the “normal”
    customers didn’t feel comfortable with the atmosphere of the restaurant. They didn’t want to be
    considered as homeless people, and they also felt pressure about how much they needed to pay
    as a donation.
    In order to operate the PWYW chain sustainably, I suggest that Panera should change the way they run
    the chain. For example:
    • Instead of offering PWYW all time, they can limit it to one or two days per week.
    • Instead of offering PWYW for all kind of foods, they should limit items that applied PWYW
    • The restaurant should have some actions to tribute the “normal” customers (who are willing to
    pay higher price), make them feel they are generous, instead of making them feel shamed when
    coming.

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