Rafi Mohammed

Founder

Culture of Profit LLC

www.pricingforprofit.com

Rafi Mohammed has been working on pricing issues for the last 21 years. He is the founder of Culture of Profit LLC, a Cambridge, Massachusetts-based company that consults with businesses to help develop and improve their pricing strategy. He also holds the title of Batten Fellow at the University of Virginia's Darden Graduate School of Business (in residence, Spring 2001). A frequent commentator on pricing issues to the print media, Rafi has also made prime time appearances on CNBC, MSNBC, Fox Business News, and the Canadian Broadcast Corporation as an expert pricing commentator. He is a regular contributor on pricing issues to the Harvard Business Review and thestreet.com web sites.

This month’s spotlight award goes to Panera Bread Company for being the first for-profit restaurant chain to bring a name your own price model to brick and mortar sales. Panera has created a viable community service out of this strategy, known as market operating price, which was previously only attempted online. Name your own price honor systems have evolved over the past century and are common in other parts of the world. In rural parts of India, Doctors are still paid according to what people can afford. Even here in the Western world, pay what you can contributions are still made during church services. This may be a first for a national chain, but it is not the first time the concept has been tested; a handful of individually operated cafés guided by Denise Cerreta, founder of One World Everybody Eats, have succeeded in Salt Lake City, Denver and New Jersey. Historically, Panera Bread Co. had been involved in charitable giving by donating leftover food to the needy and homeless, but Panera’s former CEO and founder of Panera’s non-profit, Ronald Shaich, wanted to be more directly involved. He launched Panera’s first non-profit community café in St. Louis in May 2011. This experimental, non-profit community café is still going strong after more than a year and has even started to turn a profit of a couple of thousand dollars a month. Schaich has also transferred two more cafes to the non-profit model under the name Panera Cares.  A study conducted in Germany in 2009 by Kim, Natter and Spann, determined “The most common reason given in favor of paying, as opposed to free riding, is social-norms…The other factors that may dissuade free riding are: avoiding the appearance of looking cheap; fairness, reciprocity; and altruism.” Another key to Panera’s success is the carefully chosen location of the cafés. Schaich intended, “For the haves and have-nots to come together around a desire to help each other and those less fortunate.” Even though successful, Schaich intends to take one step at a time in the expansion of his community cafés. The lessons from this month’s spotlight award are these. Panera made name your own price work. Name your own price can work for brick and mortar. Name your own price works best with a charity component. Name your own price, however, must match your brand. Lastly, name your own price is best suited to established brands.