Community Pricing: Reinventing Marketing and Production

The common approach to starting a business or launching a new product is the "build it and they will come" model. What's wrong with this approach is you never know market demand and you can end up with a garage full of products waiting for the market to respond. Logos Bible Software has flipped this convention on its head by community pricing or a "let them come and then build it" approach. Logos describes their pricing model as:

"We calculate how much it will cost to produce a title; when Logos users together place bids to total that amount, we produce the title. What makes this program unique is that as more users bid, the price moves lower. Community Pricing is about finding the lowest price that covers the production costs."

This model works great at gauging customer interest for a product and covering production costs. What do you think of community pricing? Can you apply this approach to your business?