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21st Century Customer Relationships,
Value Propositions, and Pricing
A New Economics for Digital Services
Copyright 2018, ...
21st Century Customer Relationships
Two Interrelated Sea Changes
1. Computer-mediated relationships deepen
– 1-shot games ...
21st Century Customer Relationships
Two Interrelated Sea Changes
1. Computer-mediated relationships deepen
– 1-shot games ...
Consumer business models for digital
Where we are now…
• Items (ownership): Downloads
– Flat per-unit prices / volume disc...
”The greatest danger in times of turbulence
is not the turbulence,
it is to act with yesterday's logic.“ --Peter Drucker
•...
• Extensive conceptual development
– online, book, patent filing in public domain
• Extensive discussions with businesses
...
Agenda
New Context for All Biz-Model Alternatives
B2C, Digital …in light of B2B, Physical
• A thought experiment
• The Lad...
A Thought Experiment
Imagine an all-knowing Economic “Demon”*
• Read buyers’ & sellers’ minds
to learn value-in-use, value...
Climbing the ladder of value
Customer-value-first
(Trust, loyalty, recurring revenue)
Customer-value-hostile
(Distrust, re...
The Relationship Economy
10
The Relationship Economy
The Journey Experience is as Important as the Product
11
“The Subscription Economy”
12
“The Age of the Customer”
…Based on Digital Transformation
Mind-shift:
• Linear to cyclical
• Customer-centric
empowerment...
From products, to services
From transactions, to relationships
14
• Goods-Dominant Logic  Service-Dominant Logic
– “Custo...
The Game Theory of Commerce
One-shot vs. Repeated Games
• Transactions = one-shot game  zero-sum contest
• Relationships ...
“Pricing and packaging
…for subscription businesses it is one of the most
powerful growth levers you can have...”
... you'...
• Operations
– UX/CRM/SM/chatbots…
– Dialog
• Essence
– Value exchange
– Value propositions
• Dialogs about value
– Talk a...
Aligning Price with Value
• Exchange of value as basis
• Price as the monetary balance
• Prices usually set by business
– ...
19
Set Prices Are So Last Century!
(Watch video on YouTube)
Set Prices Are So Last Century!
Now taken for granted, but unnatural!
• Historically: Prices personalized (village market)...
Value-Based Pricing
(for Consumer Markets?)
• Prices based on actual performance/outcomes
• Proven effective in B2B market...
Usage-based Pricing
More value-based
• "at its heart, usage-based billing is a way of quantifying
value...how they actuall...
Through the digital looking glass
23
24
25
Monetizing:
Digital Offerings in Networked Markets
• Dilemma: Pricing for digital information
– “Information wants to be f...
The Long Tail of Customer Demand
Customers are not the same!
Customer experience is not the same!
27
• Green revenue: capp...
A digital “product”?
• Valued as an “experience good” – a service
– Not discrete, scarce “product”
– Access, entitlements,...
A key part of the answer…
Separate the Sale from the Price!
Post-Pricing
29
–Thanks to John Blossom, Shore Communications ...
A key part of the answer…
Separate the Sale from the Price!
Post-Pricing
Why not price the experience after it is known?*
...
Relationship Business Models
Two Fundamental Questions
• Who decides the price?
Seller (usual)? Buyer (PWYW)? Jointly?
– M...
Climbing The Ladder of Value
Relationships, Risk, Timing, and Participation
• Relationship Perspective: Transactional Rel...
FairPay
A Strategy and an Architecture
33
The Relationship Economy
How can we center on value? (in B2C)
34
(See my journal article and/or this summary article)
The Game Theory of Commerce
One-shot vs. Repeated Games
• Transactions = one-shot game  zero-sum contest
• Relationships ...
Accept/buy/use
(before pricing)
(Buyer)
Set “fair” price
(after buy and use)
(Buyer)
Track price
(Seller)
Fair to seller??...
FairPay Value Discovery Engine
Continuous journey of adaptation – Frame/nudge/track
Seller-
gated
Premium
FairPay
Offer
Se...
Seller Control and Predictability?
Frame/nudge/track
• Managed dialog – “choice architecture” – fully personalized
– Selle...
Aligning Price with Value
Pricing for the Co-Creation of Value
Intuitive blend of diverse factors, emerging over the relat...
Lifetime Value in Relationships
Seeing through the Customer’s Eyes
• Customer Lifetime Value (CLV) – to Vendor
– Not curre...
FairPay Usage Scenario
Newspaper Subscription – “The Bugle”
Just one simplified example
[Slides moved to end (78)]
41
A new twist of the Invisible Hand
…Creating Shared Value over relationship – a repeated game
42(see Invisible Hand, Invisi...
Key Evidence and Enablers
• Behavioral Economics and Game Theory
– People are not heartless profit maximizers (eg: traditi...
Phasing in…
1. How much pricing power to yield to customers?
• Can limit FairPay to a contained niche offering
• Can build...
Phasing in…a big half-step
2. Post-pricing only – maintains full seller price control
• Sellers may be reluctant to yield ...
FairPay can be tested, phased in
“Toe-in-the-water” examples for News Subscriptions
Acquisition =“Fuzzy Freemium”
Paywall ...
Changing Consumer Behavior
Initial Sweet Spots
Back to the Future
– rebuild win-win social/communal norms and values
• Par...
Usage/Value Pricing - Buyer-friendly
• Deadweight loss of “all you can eat”
unlimited subscriptions
• Soften the “ticking ...
“Price Discrimination” - Buyer-accepted
Economic optimum: price tracks to value
• Buyer “self-discrimination”  Legitimacy...
Platform and Database Opportunities
• Single vendor – internal process solutions
• Cross-vendor – added leverage, info
– S...
A New Cloud of Value
• Implicit signals of value
– Traditional + new IoT data (“E-Books are Reading You” example)
• New: E...
A Flexible, Extensible Architecture
Subsumes major alternatives
• Coexist with conventional pricing (segment by fairness)
...
Business Contexts
• Ongoing relationships
– Subscriptions (ongoing services)
– Item Aggregation (iTunes, Amazon, App store...
Product / Service Category Examples
• Anything with low marginal cost
– Long-tail / low-demand products (expand market / g...
Change the Game with FairPay
From invisible hand to invisible handshake
55
• From: set prices
 shop for “bargains”  comm...
Climbing the ladder of value
Customer-value-first
(Trust, loyalty, recurring revenue)
Customer-value-hostile
(Distrust, re...
Alternative Paths
Theory X or Y?* / make the shift
X. Zero-sum – one shot games
exploitation, alienation
Y. Win-win – rep...
Some Rungs on the Ladder
The FairPay Demon Challenge
(Why can’t our model be more like FairPay?)
• FairPay
• Soft values a...
Unit sales of items
(A la carte, Pay Per View/Article, Downloads)
• Base case
(“own” articles, music, videos, e-books, …)
...
Ad Models and Reverse Meters
“Original sin of the Internet” – Facebook, Google, …
• Attention/Data/Value (vs “Engagement”)...
Fixing Facebook
An 80% Solution that is Market-based
• User revenue vs. ad revenue?
Value (=customer) vs. engagement (=pro...
Subscription access
All you can eat (AYCE)
• Time-limited access – to many items
(“rent” articles, music, video, e-books, ...
Subscription access
Freemium (All you can eat)
• Time-limited access – to many items
(“rent” articles, music, video, e-boo...
Subscription access
Membership
• Like subscription (and/or crowdfunding)
• More cooperative, participative
– In value prop...
Subscription access
Metered Usage
• Almost as simple, easy
• Value (usage-base)
– No volume discount
– Ticking usage meter...
Subscription access
Tiered Usage
• Almost as simple, easy
– Packaging tiers (Bronze, Silver, Gold,…)
– Usage tiers
• Value...
[Pre-] Bundled Subscriptions
(Basic+premium TV channels, News categories)
• Moderate complexity
– Need to choose bundle or...
Post-Bundled Subscriptions (new)
Run of house access, post-priced
• Moderate complexity
– No need to choose bundle
– Depen...
Performance / Outcomes Pricing
(=Experiences)
• Improved value tracking – quality, results
• Common in B2B
– Average predi...
+Soft values as pricing factors
• Broader values
– Creative input, investigative journalism, design, …
– Triple bottom lin...
Participative alternatives
Pay What You Want (PWYW)
Crowdfunding / Patronship / Tipjars
• Spectrum of how voluntary
• PWYW...
FairPay
Coexist with and/or mimic others
• Remove customer pricing risk
• Adaptive management of business pricing risk
• D...
Blockchain and Cryptocurrency
Transformative or not?
• Micropayments
• Smart Contracts
• Distributed Ledgers
• Fundamental...
Other Interesting New Models…
• Crowdfunding: Patreon, Kickstarter-Drip, IndieGogo-InDemand
• HumbleBundle
• BitTorrent Bu...
“What Lies Beyond Paywalls” (Theory X)
vs. “Patron-izing Journalism” (Theory Y)
• Opaque, one-sided dynamic pricing (curre...
Thank You
Call to Action
• Questions?
• Strategic cooperation? Trials?
• Spread the word…
(leads to vendors, platforms)
• ...
FairPay Usage Scenario
Newspaper Subscription – “The Bugle”
Just one simplified example
77
FairPay Usage Scenario
Newspaper Subscription – “The Bugle”
• Now, standard: Set-Price paywall (metered >10 articles) = $1...
See How FairPay Pricing Adapts
in Some Sample Customer Situations…
• Adapting for different users:
– User attributes
– Usa...
FairPay Value Discovery Engine
Continuous journey of adaptation – Frame/nudge/track
Seller-
gated
Premium
FairPay
Offer
Se...
Preview: How the Pricing Adapts
in different customer situations…
1. Joe Average [Low-Fair] $12 Premium (probation)
2. Wil...
Patron 1 - Pricing Request
sent to Joe Average after use
• You read 300 articles this month (vs avg. 300)
• 40 were premiu...
Patron 1 - Pricing Response
from Joe Average
• You read 300 articles this month (vs avg. 300)
• 40 were premium features (...
Patron 1 – Seller Response
to Joe Average
• Fairness rating
(subject to framing strategies on how this is communicated)
– ...
Patron 2- Pricing Response
from Willy Wonky [High-Fair]
• You read 600 articles this month (vs avg. 300) = Heavy use
• 80 ...
Patron 2 - Seller Response
to Willy Wonky [High-Fair]
• Fairness rating
(subject to framing strategies on how this is comm...
Patron 3 - Pricing Response
from Sam Student [Low-Fair]
• You read 100 articles this month (vs avg. 300)
• 20 were premium...
Patron 3 - Seller Response
to Sam Student [Low-Fair]
(Just like Joe Average, but at student rate)
• Fairness rating
(subje...
Patron 4- Pricing Response
from Ron Retiree [High-Fair]
• You read 100 articles this month (vs avg. 300)
• 20 were premium...
Patron 4 - Seller Response
to Ron Retiree [High-Fair]
• Fairness rating
(subject to framing strategies on how this is comm...
Patron 5 - Pricing Response
from Mr. Big
• You read 100 articles this month (vs avg. 300)
• 40 were premium features (vs. ...
Patron 5 - Seller Response
to Mr. Big
• Fairness rating
(subject to framing strategies on how this is communicated)
– High...
Patron 6 - Pricing Response
from Lou Lowball
• You read 300 articles this month (vs avg. 300)
• (0 were premium features –...
Patron 6 - Seller Response
to Lou Lowball
• Fairness rating
(subject to framing strategies on how this is communicated)
– ...
Recap: How the Pricing Adapts
in different customer situations…
1. Joe Average [Low-Fair] $12 Premium (probation)
2. Willy...
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NYCML18 Reisman Workshop - "21st Century Relationships, Value Propositions, and Pricing - A New Economics for Digital Services" (A FairPay Perspective)

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As presented at NYC Media Lab 2018 Summit:
This workshop is an exploratory “think tank” discussion on future directions in Customer Relationships, Value Propositions, and Pricing. Participants will learn to see through presumptions now obsoleted by the new economics of digital content and services -- and make that concrete with the example of one promising architecture for a new logic. From there we will explore in open discussion how to chart a strategic path that (1) rethinks conventional approaches and (2) points to incremental steps toward a deepening transformation. This workshop relates to AI/ML and ethics in business models, and the “relationship economy” in which recurring revenue, subscription, and membership models are becoming mainstream, all driven by the “post-scarcity” economics of digital.

Published in: Business

NYCML18 Reisman Workshop - "21st Century Relationships, Value Propositions, and Pricing - A New Economics for Digital Services" (A FairPay Perspective)

  1. 1. 21st Century Customer Relationships, Value Propositions, and Pricing A New Economics for Digital Services Copyright 2018, Teleshuttle Corp, all rights reserved Richard Reisman fairpay [at] teleshuttle [dot] com @RReisman, #FairPayZone 1 (SlideShare Version, Rev 9/21/18) Harvard Business Review 11/18/13 Journal of Revenue and Pricing Management 2/26/18 FairPay book 9/16 NYCML18 Workshop (9/21/18)
  2. 2. 21st Century Customer Relationships Two Interrelated Sea Changes 1. Computer-mediated relationships deepen – 1-shot games (transactions)  repeated games 2. The Invisible Hand flails – Scarcity of supply  digital: no scarcity to ration A new social contract to sustain creation – An Invisible Handshake Win-win relationships – Empowered, loyal customers Central focus: actual value to each customer 2
  3. 3. 21st Century Customer Relationships Two Interrelated Sea Changes 1. Computer-mediated relationships deepen – 1-shot games (transactions)  repeated games 2. The Invisible Hand flails – Scarcity of supply  digital: no scarcity to ration Win-win relationships – Empowered, loyal customers A new social contract to sustain creation – An Invisible Handshake, balanced powers Central focus: actual value to each customer 3
  4. 4. Consumer business models for digital Where we are now… • Items (ownership): Downloads – Flat per-unit prices / volume discounts / bundles – Micropayments • Access (time-limited): Subscriptions / Memberships – Advertising – Paywalls hard/soft (all you can eat, AYCE) – Freemium (all you can eat, AYCE) – Tiered (multiple levels) – Usage priced / micropayments – Bundles (eg: cable TV channels) • Participative alternatives (for access or items) – Pay What You Want (PWYW) – Crowdfunding / Patronship / Tipjars 4
  5. 5. ”The greatest danger in times of turbulence is not the turbulence, it is to act with yesterday's logic.“ --Peter Drucker • FairPay – a logic for tomorrow (…not a product) • Reisman – The FairPay Story – Pioneering digital services for people since 1960’s • Diverse businesses and roles – B2B and B2C, content and services • >50 patents, licensed to >200 companies, for billions of users – Steeped in disruption – business model crisis in content industries – A new way forward – simple new logic – deep implications – Shift the focus of customer relationships from price to value • FairPay can change the world – Save industries + Create new value (journalism, music, video, …+nonprofits) – Human-Centered Markets – win-win values, convergent across profit spectrum – Work pro-bono with business + academia on research, trials, applications …seeking collaborators, evangelists…and offer free consultation (More information at FairPayZone.com) 5
  6. 6. • Extensive conceptual development – online, book, patent filing in public domain • Extensive discussions with businesses – Vendors (NYTimes, News Corp, Disney, Spotify, Rhapsody, IBM, American Express, Verizon) – Platform providers (Zuora, Salesforce) – Research firms (Forrester and MECLABS/MarketingSherpa) • Key elements already proven in wide use • New combinations supported by behavioral economics and emerging marketing theory • Find the sweet spots with partial steps, trials • Eminent scholar collaborators to assist in trials Toward FairPay… An open architecture, not a product 6
  7. 7. Agenda New Context for All Biz-Model Alternatives B2C, Digital …in light of B2B, Physical • A thought experiment • The Ladder of Value • The Relationship Economy • Through the digital looking glass • FairPay: a strategy and an architecture (straw man?) • Climbing the ladder of value • Conventional and alternative paths 7
  8. 8. A Thought Experiment Imagine an all-knowing Economic “Demon”* • Read buyers’ & sellers’ minds to learn value-in-use, value-in-context • Know how used, liked, value obtained, willingness/ability to pay • Know cost, economic “value surplus” (including cost to sustain) • Arbitrate fair sharing of surplus Set personalized and fair prices --- • Practice: Better strategies • Theory: Better insights (*Like Maxwell’s Demon and Laplace’s Demon in physics) 8
  9. 9. Climbing the ladder of value Customer-value-first (Trust, loyalty, recurring revenue) Customer-value-hostile (Distrust, resentment, churn) 9
  10. 10. The Relationship Economy 10
  11. 11. The Relationship Economy The Journey Experience is as Important as the Product 11
  12. 12. “The Subscription Economy” 12
  13. 13. “The Age of the Customer” …Based on Digital Transformation Mind-shift: • Linear to cyclical • Customer-centric empowerment • Top-down and bottom-up • Big-Data insights • Transformed cross-functional operations: innovation, marketing, sales, finance, IT,… • Transformed Customer Experience (CX) 13
  14. 14. From products, to services From transactions, to relationships 14 • Goods-Dominant Logic  Service-Dominant Logic – “Customers want holes, not drills” – “Power by the hour,” “Tires by the mile” – Book of the Month…Dollar Shave…iPhones…Cars – Anything as a Service (AaaS) • From transactions to relationships • Service Level Agreements, CX, Customer Success • New Success Factors (KPIs) – Customer Lifetime Value (CLV) – Customer Acquisition Cost (CAC) – Churn/Retention
  15. 15. The Game Theory of Commerce One-shot vs. Repeated Games • Transactions = one-shot game  zero-sum contest • Relationships = repeated games  win-win cooperation 15 (Buyer) 1. Set the rules 2. Consume Accept/buy/use (Buyer) Continue or churn? (Buyer) Pre-set offer (& price) (Seller) 3. Repeat the game?
  16. 16. “Pricing and packaging …for subscription businesses it is one of the most powerful growth levers you can have...” ... you're not pricing an object, you're pricing an outcome... customers may assign different value to the same outcome. ...But what happens when you get it right? …customer acquisition gets much easier …churn gets reduced. …value is translated into revenue...a virtuous cycle...You can create intuitive customer journeys... when your pricing model locks into that subscriber journey, …your business model locks into subscriber relationships, …a valuable company is born. [emphasis added] 16 (Zuora - SaaS for 900+ Subscription Businesses)
  17. 17. • Operations – UX/CRM/SM/chatbots… – Dialog • Essence – Value exchange – Value propositions • Dialogs about value – Talk at customer? – Hear from customer? – Transparency, trust Connecting the Value Exchange 17 dialog dialog dialog dialog dialog dialog business
  18. 18. Aligning Price with Value • Exchange of value as basis • Price as the monetary balance • Prices usually set by business – Take it or leave it – Uptake, churn, retention deals (squeaky wheel) • What basis for price??? – Cost-based? – Competition-based? – Value-based (average or customized)? 18
  19. 19. 19 Set Prices Are So Last Century! (Watch video on YouTube)
  20. 20. Set Prices Are So Last Century! Now taken for granted, but unnatural! • Historically: Prices personalized (village market) – Personal negotiation – human buyer and seller – Personal contexts – needs, bargaining powers, relationships – Communal norms (win-win): caring, fairness, even generosity • Mid-1800s: Price tags / institutions (department stores) – Institutional sellers – mass market of “consumers” – Scalable – simple, operationally efficient – Exchange norms (zero-sum): take it or leave it, bargain hunting, exploitation • E-commerce: Mass-personalization? 1:1 marketing? – Why not price? – End race to the bottom, commoditization – personalize a fair price for value – How to do it effectively, efficiently at scale??? 20
  21. 21. Value-Based Pricing (for Consumer Markets?) • Prices based on actual performance/outcomes • Proven effective in B2B markets* – Win-win: Buyer and seller agree to share in the actual “value surplus” – as co-created – High economic efficiency, reduced pricing risk, transformative competitive advantage, customer- first – But: high cost/effort for custom analysis *See Value-Based Pricing Is Transforming B2B -- Now for B2C... and Finding Value in The Subscription Economy 21
  22. 22. Usage-based Pricing More value-based • "at its heart, usage-based billing is a way of quantifying value...how they actually use your service...a 'value metric.' Simply put, a value metric should do three things: – align to customer needs, – grow with customers, – and be predictable (both for customers and the organization).“ • Based on Zuora customer data (900+ companies): – “…only about 27 percent...use some sort of usage-based pricing today." – those who do grow significantly faster. – In B2C, unlimited usage plans are most common. – But, referring to cable companies, Tien says "smarter usage-based billing...will make their video content services more responsive and valuable.“ • Conventional wisdom: consumers dislike usage-based pricing • Is there a smarter way? 22
  23. 23. Through the digital looking glass 23
  24. 24. 24
  25. 25. 25
  26. 26. Monetizing: Digital Offerings in Networked Markets • Dilemma: Pricing for digital information – “Information wants to be free” (infinite replication) – “Information also wants to be expensive” (creation) • Answer: Re-think our value exchange process – Not allocating scarce resources (no invisible hand) – Still need to sustain creation (pay for future services) Balance value, ability to pay, cost, profit …How?... 26
  27. 27. The Long Tail of Customer Demand Customers are not the same! Customer experience is not the same! 27 • Green revenue: capped at set price • Red head: lost surplus • Amber tail: lost sales …Dynamic and context-dependent (see Long Tail blog post)
  28. 28. A digital “product”? • Valued as an “experience good” – a service – Not discrete, scarce “product” – Access, entitlements, usage – Personalized variations (items, time, intensity, volume, …) – …all measurable – rich instrumentation in use – Cloud of Value New data on value for each consumer • Near-zero replication cost ( “Free”) • “Free” as a selling tool (eliminate price risk to customer ) – freemium, pay what you want, tipjars, free trials …  Better: Embrace dynamic variability, control pricing risk 28
  29. 29. A key part of the answer… Separate the Sale from the Price! Post-Pricing 29 –Thanks to John Blossom, Shore Communications (ContentBlogger) “Pay as You Exit: FairPay Explores New Content Pricing Discovery Regimes” Watch video on YouTube (Relevant portion is 1:30-2:15, but all is amusing. If video is removed from YouTube, search by title for an equivalent version. Also may be available on DVD.)
  30. 30. A key part of the answer… Separate the Sale from the Price! Post-Pricing Why not price the experience after it is known?* • Unlike typical up-front offers (Pay What You Want, etc.) • Remove the consumer’s risk discount (or rejection) • Signal supplier’s value and trust (Timing aspects: packaging/bundling, usage levels, unit price schedules) _________ *= post-pricing = ex-post pricing = price in arrears = price as you exit = price it backwards 30 –Thanks to John Blossom, Shore Communications (ContentBlogger) “Pay as You Exit: FairPay Explores New Content Pricing Discovery Regimes” – Watch the episode
  31. 31. Relationship Business Models Two Fundamental Questions • Who decides the price? Seller (usual)? Buyer (PWYW)? Jointly? – Manage value and risk to each party – Apply best information • When do they decide it? Before selection/experience? At…? After…? – Knowledge of selection/experience – Effect on decisions and risk 31
  32. 32. Climbing The Ladder of Value Relationships, Risk, Timing, and Participation • Relationship Perspective: Transactional Relational • Pricing risk: Will I get my money’s worth? – Sellers can reduce customers’ risk (if low marginal cost) • Value: Value-in-use is best assessed… – after use (timing = pre-pricing/post-pricing) – with recipient input (participation = seller/joint/buyer) • Price/Value: aspects: – Packaging: who defines packages, before or after use? – Usage levels: does pricing depend on actual usage? (with fair volume discounts?) – Price schedules: set by seller?– buyer? – joint? – Ability to pay: fair to each buyer (and the seller)? FairPay points the way up the ladder* *Post-bundling as an intermediate example: post-packaging / discounted usage / seller-set price schedule. 32
  33. 33. FairPay A Strategy and an Architecture 33
  34. 34. The Relationship Economy How can we center on value? (in B2C) 34 (See my journal article and/or this summary article)
  35. 35. The Game Theory of Commerce One-shot vs. Repeated Games • Transactions = one-shot game  zero-sum contest • Relationships = repeated games  win-win cooperation 35 (Buyer) 1. Set the rules 2. Consume Accept/buy/use (Buyer) Continue or churn? (Buyer) Pre-set offer (& price) (Seller) 3. Repeat the game? Loyalty?
  36. 36. Accept/buy/use (before pricing) (Buyer) Set “fair” price (after buy and use) (Buyer) Track price (Seller) Fair to seller??? (Seller) Gated FP Offer (selective privilege) (From Seller) Price it BackwardExtend it Forward? (after trial)(limit FairPay credit) FairPay Dialog Cycle Continuous journey of adaptation – a new balance of powers – a “repeated game” 1. Set the rules 2. Set the price 3. Repeat the game? * * Can relax criteria in Voluntary Payment Mode ** Can restrict buyer pricing power for more conventional control ** Fairness?
  37. 37. FairPay Value Discovery Engine Continuous journey of adaptation – Frame/nudge/track Seller- gated Premium FairPay Offer Seller- gated Basic FairPay Offer Buyer Accepts FairPay Offer ? Buyer Tries Product /Service Buyer Sets FairPay Price Seller Tracks Fairness of Price High -Fair Low- Fair Un- Fair Buyer Seller Sets Price (take or leave it) Buyer Accepts Set-Price Offer ? Buyer Uses Product /Service FairPay Zone (revocable privilege) Conventional Set-Price Zone (Paywall) 37 Value/FairnessOffers * * Can relax criteria in Voluntary Payment Mode – no paywall (positive nudges only) ** Can restrict buyer pricing power for more conventional control (Also a repeated game, but less cooperative and win-win) **
  38. 38. Seller Control and Predictability? Frame/nudge/track • Managed dialog – “choice architecture” – fully personalized – Seller: 1. Set the rules • defines the offer / reports usage • provides a suggested price personalized to that buyer’s usage • frames the pricing rationale, and nudges with incentives (+, -) – Buyer: 2. Set the price** • sets FairPay prices (as a differential from suggested price) • states reasons for their differential (multiple choice) – Seller: 3. Repeat the game?* • evaluates fairness of reasons – reciprocal value proposition • frames new offers – manages FairPay credit and incentives • Nudge buyers toward suggested prices – as fair exchange • Test/review value propositions, offers, framing, incentives • Start with those who will be delighted and fair… 38*Can relax criteria in Voluntary Payment Mode – no paywall (positive nudges only) ** Can restrict buyer pricing power for more conventional control
  39. 39. Aligning Price with Value Pricing for the Co-Creation of Value Intuitive blend of diverse factors, emerging over the relationship  From provider to consumer (soft/fuzzy meter) – Value-in-use / experience / outcomes – Other “soft” value • Service / support • Participation / listening / responsiveness (comments, access to reporters, curators) • Social values / “triple bottom line” (investigative journalism, community)  From consumer to provider (“reverse meter”) – Monetary payments – Other currency -- “Consumer” as provider of value to “provider” • Attention to ads (customized levels) / Personal data to exploit (customized levels) • User-Generated Content / Co-creation (eg: participatory journalism) • Promotion / virality / leads • Volume/loyalty discounts Can extend through the ecosystem value chain – Even with ads, the user becomes the customer  value propositions matter – Designations of value share to creators/suppliers (vs. intermediaries) – Bonus contributions (split to creator/supplier) 39
  40. 40. Lifetime Value in Relationships Seeing through the Customer’s Eyes • Customer Lifetime Value (CLV) – to Vendor – Not current sale, but lifetime value – Balance CAC (Customer Acquisition Cost) with CLV • Vendor Lifetime Value (VLV) – to Customer – Convenience, trust, real loyalty, communal norms – Dialogs about value -- “Value nurturing” – Procedural utility: “Not only what, but how matters” 40
  41. 41. FairPay Usage Scenario Newspaper Subscription – “The Bugle” Just one simplified example [Slides moved to end (78)] 41
  42. 42. A new twist of the Invisible Hand …Creating Shared Value over relationship – a repeated game 42(see Invisible Hand, Invisible Handshake, and Customer Journeys posts)
  43. 43. Key Evidence and Enablers • Behavioral Economics and Game Theory – People are not heartless profit maximizers (eg: traditional, PWYW generosity) – Traits: Fairness, reciprocity, altruism, self-image, acceptance, … – Situations: Social/communal norms vs. economic/exchange norms – Repeated game: Invest in fairness reputation to gain continuing privilege – Treat me as a patron, make me want to be a patron • Computer-mediated dialog (AI) – Customer journeys – Facilitate automated dialog about what I value, on what basis …and act on it – Engage me as a patron, show you hear/understand me • Big Data + IoT + Predictive analytics (AI) – Cloud of Value – Use data to validate customer dialogs about value, incentivize honesty – Customize offerings and how they are framed – Show that you recognize and respect my desires as a patron  Adaptive, cooperative, “customer-first” relationships – “dialogs about value” 1. Segment based on fairness traits (social values) and value propositions 2. Foster social/communal norms (participation and dialog) 3. Nudge buyers toward fairness, perception of value, sharing value surplus 4. Motivate a repeated game that is win-win 43
  44. 44. Phasing in… 1. How much pricing power to yield to customers? • Can limit FairPay to a contained niche offering • Can build and apply in incremental stages Level 1: Voluntary Payment Mode (much like tipping) • Simple Pay What You Want / Pay What You Think Fair + Post-Pricing • Pricing unrestricted by fairness – no fairness gating – but soft nudging • Post-pricing (“as you exit”) based on value – makes PWYW more meaningful and fair • Good transitional step for services that are currently free (or included as extras) Level 2: Balanced FairPay • “Gated” by seller (minimum fairness threshold) – most of the cost, complexity • Manage thresholds adaptively -- loose or strict control by seller • A “repeated game” – to keep playing, invest in reputation for being fair 44
  45. 45. Phasing in…a big half-step 2. Post-pricing only – maintains full seller price control • Sellers may be reluctant to yield price control • “Post-bundling” achieves post-pricing benefits, retains full seller price control (TV example): – Price as a bundle at period end (after use) – Buyer gets run-of-house access (by category) – Bundle price reflects volume discounts aligned with unlimited usage plans (with price caps) (unlike un-discounted micropayments) – Seller retains full control of price rate schedules – Can offer “risk-free” subscriptions 45
  46. 46. FairPay can be tested, phased in “Toe-in-the-water” examples for News Subscriptions Acquisition =“Fuzzy Freemium” Paywall balkers? – special limited usage “trial” versions, tie-ins, gamification, membership ”club” Retention (Saves) low usage, low price Premium “club”/“patron” segments curated, early access/new releases, quality, downloads/offline use, added features Usage /style segments Limited usage? low/high usage, low/high cost, song frequency, … Content segments: Long-tail / genre indies, back-list, genres Device segments phones, embedded systems Family Plans “seats,” concurrent use “Deserving” sellers compensation to artist/creator Trials, sampling, coupons, specials limited offers Special branding distinct from conventional Retention (Saves) (Revenue recapture) low usage, low price Acquisition =“Fuzzy Freemium” (Revenue from day one) versions, tie-ins, gamification, membership ”club” Premium “club”/“patron” segments (Eg: NY Times “Premier”/”Insider”) curation, early access, journalist access, archives, downloads/offline, extra features Usage /style segments low/high usage, low/high cost, alerts acted on… Content segments: Long-tail / genre investigative journalism, analysis, financial insight, sports insight, crosswords Device segments phones, embedded systems Family Plans “seats,” concurrent use “Deserving” sellers compensation to journalists, field reporting Trials, sampling, coupons, specials limited offers Distinct branding separate from conventional offering 46
  47. 47. Changing Consumer Behavior Initial Sweet Spots Back to the Future – rebuild win-win social/communal norms and values • Partial steps up the ladder (post-bundling, reverse ad meter) • FairPay: small segments / value-focused tiers – low cost/risk • High generosity users – Superfans – loyal, perceive value – Deserving providers – High service / value-add – justify appreciation • High cooperation users – Thrilled to share price responsibility – Willing to bear burdens to do it right …The thin end of the wedge of behavior change 47
  48. 48. Usage/Value Pricing - Buyer-friendly • Deadweight loss of “all you can eat” unlimited subscriptions • Soften the “ticking meter” / no shocking usage bill • Price considering usage, but… – Buyer decides, factors in: • Usage history • Volume discounts (…with seller guidance) – Soften the extremes – average out Price tracks to value (with affordability) (Reduce risk of not getting your money’s worth) Warm and fuzzy, good feelings 48 Advanced Economics:
  49. 49. “Price Discrimination” - Buyer-accepted Economic optimum: price tracks to value • Buyer “self-discrimination”  Legitimacy (not imposed or hidden) • Engages buyers – a rewarding process, centered on personalized value propositions • Infinite segmentation, in all dimensions – Context, ability-to-pay, usage, time, devices, users, … …Price discrimination can be good! when it is “value discrimination” 49 Advanced Economics:
  50. 50. Platform and Database Opportunities • Single vendor – internal process solutions • Cross-vendor – added leverage, info – Shared infrastructure and processes = “Pricing as a Service” (PaaS) – New: FairPay Fairness Reputation Database • Across vendors and contexts (fairness ratings + details) • Use like credit rating database (“FairPay credit line”) • Detailed data on value perceptions and willingness to pay Database asset / “Data moat” -- first mover advantage • Interest by established platform vendors (Zuora) – Plug-ins / SaaS • Entrepreneurial startups??? 50
  51. 51. A New Cloud of Value • Implicit signals of value – Traditional + new IoT data (“E-Books are Reading You” example) • New: Explicit expressions of value – New, generate from FairPay “dialogs about value” – Validate consistency with implicit signals Adaptively win-win customer journeys • Focused, flexible value propositions – Match to customer perceptions, contexts, times – Sell value: a positive experience (not focus on price) – Build a relationship (not just customers, but patrons) 51
  52. 52. A Flexible, Extensible Architecture Subsumes major alternatives • Coexist with conventional pricing (segment by fairness) • Tunable parameters (choice architectures) – Gating, nudging, warning, dispute-resolution – Up-selling, down-grading – Liberal or tight control very tight = conventional /… / very liberal = PWYW • Analogs of conventional methods, plus new ones, in any combination – Advertising (reverse meter) – Freemium, Paywalls (metered/soft) – Tiers, segments, dynamic/usage pricing – Customized mix of customer revenue and advertising – … 52
  53. 53. Business Contexts • Ongoing relationships – Subscriptions (ongoing services) – Item Aggregation (iTunes, Amazon, App stores, …) • Experience goods • Low marginal cost, perishable, promotions (Also, costly goods, using a minimum price floor) • “Deserving” sellers/producers (For profit … and non-profit) 53
  54. 54. Product / Service Category Examples • Anything with low marginal cost – Long-tail / low-demand products (expand market / gain revenue) – Short-head / high-demand products (expand market / gain revenue) • Digital content / products /services (by item or by subscription) – Social media /communications – News / information / magazines – Music / audio / podcasts – Video – Games – E-Books – Apps / Software – Other Digital Services • Real products /services (especially experience goods) – Low marginal cost (primary product or extras/support) – Sampling / trials /coupons (eg: Groupon) – Perishable excess (eg: hotels, transport, museums, events) – Costly goods with a minimum price floor + FairPay bonus 54
  55. 55. Change the Game with FairPay From invisible hand to invisible handshake 55 • From: set prices  shop for “bargains”  commoditization • To: FairPay participative value exchange  shop for value, relationship  engagement, loyalty • Analogous to tipping – Easy, intuitive, with rich multi-dimensional nuance – Happily pay more than you “need,” often generously • Delight your customers – give pricing freedom, focus on value, gain loyalty • Start with those who will be delighted and fair  Emergent strategy  Pricing “legitimacy”  Higher profits + deeper market penetration (+ad $) (See Handshake post)
  56. 56. Climbing the ladder of value Customer-value-first (Trust, loyalty, recurring revenue) Customer-value-hostile (Distrust, resentment, churn) 56
  57. 57. Alternative Paths Theory X or Y?* / make the shift X. Zero-sum – one shot games exploitation, alienation Y. Win-win – repeated games  cooperation – Empowerment, Dialog, Reputation – Trust, Transparency, Loyalty – More customers + more profit – Single, real bottom line that is value-based (*Analogous to Theory X and Y management) 57
  58. 58. Some Rungs on the Ladder The FairPay Demon Challenge (Why can’t our model be more like FairPay?) • FairPay • Soft values as pricing factors • Subscription access – Value / Performance / Outcomes Pricing – Bundled (pre-bundled, post-bundled) – Usage-related (metered, tiered) – Freemium – All you can eat (AYCE) / Membership – Advertising • Unit sales of items 58
  59. 59. Unit sales of items (A la carte, Pay Per View/Article, Downloads) • Base case (“own” articles, music, videos, e-books, …) • Simple, easy • Value (one price fits few) – Of owned item – for predicted, average user – “Your mileage may vary” – Favors heavy use – prohibitive for light use – High consumer pricing risk (how much will I use/want/like?) – More risk if time-limited (Pay Per View/Article) 59
  60. 60. Ad Models and Reverse Meters “Original sin of the Internet” – Facebook, Google, … • Attention/Data/Value (vs “Engagement”) • Ad-blocking/Hostility, Disinformation “If you’re not the customer you’re the product” • Reverse meter, quantify value • Consumer ”the customer” Incentives for ads to be valuable, non-intrusive • Self-reinforcing …for both advertiser and platform/publisher 60
  61. 61. Fixing Facebook An 80% Solution that is Market-based • User revenue vs. ad revenue? Value (=customer) vs. engagement (=product)? • Affordability?  FairPay (or similar innovation) • Voluntary? • Regulatory? – Auto emissions model: set target, let firms determine how – 5% of Facebook revenue from users (or taxed) – Then 10%, 25%, 50%, … 61
  62. 62. Subscription access All you can eat (AYCE) • Time-limited access – to many items (“rent” articles, music, video, e-books, …) • Simple, easy • Value (one price fits few) – Of access – for predicted, average user – “Your mileage may vary” – Favors heavy use – prohibitive for light use – High consumer pricing risk (how much will I use/want/like?) 62
  63. 63. Subscription access Freemium (All you can eat) • Time-limited access – to many items (“rent” articles, music, video, e-books, …) • Really two tiers at fixed price: free + premium • Value (two prices fit few) – What cutover – to single non-zero price? – Still significant consumer pricing risk How much will I use/want/like? – for paid level Disappointment/frustration? – for free level 63
  64. 64. Subscription access Membership • Like subscription (and/or crowdfunding) • More cooperative, participative – In value prop, including reverse value – Sometimes in price • Value (one price fits few?) – Set price favors heavy use, prohibitive for light use – May be voluntary payment, sometimes customer-set – May add perks, merch (gimmicky distraction) – High consumer pricing risk if set price (how much will I use, want, like?) 64
  65. 65. Subscription access Metered Usage • Almost as simple, easy • Value (usage-base) – No volume discount – Ticking usage meter – High consumer pricing risk (usage shock?) 65
  66. 66. Subscription access Tiered Usage • Almost as simple, easy – Packaging tiers (Bronze, Silver, Gold,…) – Usage tiers • Value – a few prices fit better – Gain from volume discounts – Bumpy jumps, disappointments/frustrations – Still a ticking usage meter? – Moderate consumer pricing risk (will tier fit, will I bump to next tier?) 66
  67. 67. [Pre-] Bundled Subscriptions (Basic+premium TV channels, News categories) • Moderate complexity – Need to choose bundle or categories – Depends on usage amount, categories • Value – Gain from volume discounts (vs. PPV/a la carte) – High consumer pricing risk • Pre-selection risk • High-usage risk 67
  68. 68. Post-Bundled Subscriptions (new) Run of house access, post-priced • Moderate complexity – No need to choose bundle – Depends on usage amount, categories • Value – Gain from volume discounts (vs. PPV/a la carte) – Low consumer pricing risk – No pre-selection risk – Reduced usage risk (especially if price-capped) – Can offer instant item refund 68
  69. 69. Performance / Outcomes Pricing (=Experiences) • Improved value tracking – quality, results • Common in B2B – Average predicted outcomes (drugs: efficacy studies) – Individual outcomes (ad-sales: pay per click, lead) • Limited in B2C – Instant refund – why not??? (eg: Blendle news articles) 69
  70. 70. +Soft values as pricing factors • Broader values – Creative input, investigative journalism, design, … – Triple bottom line – People, Planet, Profit • Now indirectly in conventional methods (some premium factored into price) 70
  71. 71. Participative alternatives Pay What You Want (PWYW) Crowdfunding / Patronship / Tipjars • Spectrum of how voluntary • PWYW as one-shot game • Pre-pricing vs. post-pricing • Tiers and soft nudging • Value-based • 100’s of research papers on behavioral factors • But usually not: – Post-priced – Adaptive nudging – Disincentives for unfairness (carrot + stick) High pricing risk to seller 71
  72. 72. FairPay Coexist with and/or mimic others • Remove customer pricing risk • Adaptive management of business pricing risk • Dialogs on value explicitly include key value factors – Usage – with volume discounts – Outcomes / experiences – Soft values – Variations over time – Ability to pay – History / reputation •  Value discrimination 72
  73. 73. Blockchain and Cryptocurrency Transformative or not? • Micropayments • Smart Contracts • Distributed Ledgers • Fundamental change to relationships? – Trust/reputation/stake? – Data/privacy? – Operational efficiencies? • Micropayments • Ledgers 73
  74. 74. Other Interesting New Models… • Crowdfunding: Patreon, Kickstarter-Drip, IndieGogo-InDemand • HumbleBundle • BitTorrent Bundles • Flatter (Soundcloud), Kachingle • Gumroad • PressPatron • PledgeMusic • PayTime • Blendle • LaterPay • Scroll • Medium • … 74
  75. 75. “What Lies Beyond Paywalls” (Theory X) vs. “Patron-izing Journalism” (Theory Y) • Opaque, one-sided dynamic pricing (current direction) – Transaction focus – Psych out “propensity to buy” – Secretly seek to hog value surplus for seller – Breed distrust, zero-sum  risk CLV and VLV • Transparent dynamic pricing (FairPay) – Relationship focus – Dialogs about value – Transparently share value surplus – Breed trust, win-win  nurture value: VLV and CLV 75
  76. 76. Thank You Call to Action • Questions? • Strategic cooperation? Trials? • Spread the word… (leads to vendors, platforms) • FairPayZone.com -- Overview, Details • Book, Journal paper • E-mail Reisman: fairpay [at] teleshuttle [dot] com ---------------------- Additional Commentary Follows… 76
  77. 77. FairPay Usage Scenario Newspaper Subscription – “The Bugle” Just one simplified example 77
  78. 78. FairPay Usage Scenario Newspaper Subscription – “The Bugle” • Now, standard: Set-Price paywall (metered >10 articles) = $10* +premium Gold +$10* +premium Platinum (FairPay perk) • Add: selective FairPay subscription offers – “patrons” (=“members”) 1. Patron uses service each month 2. Bugle reports actual usage, with suggested price for that …depending on number, type of articles read, other factors 3. Patron sets price as he wants, gives reasons for higher/lower as “fair” 4. Bugle rates fairness of price (specific to that patron) 5. Bugle selectively continues offers to that patron based on fairness • Basic access if low-fair • Premium access if high-fair (Gold or Platinum) • No FairPay privilege (paywall-only), if unfair 6. Patron seeks desired level of offers, as “nudged” by Bugle *Just one example: Set-Price Paywall retained as option, with price raised from $8 after introduction of FairPay, FairPair suggested price “discounted” as $8 for typical user, matching old price (as anchor). 78
  79. 79. See How FairPay Pricing Adapts in Some Sample Customer Situations… • Adapting for different users: – User attributes – Usage levels and contexts – Value propositions/perceptions – Criteria for “fair” pricing • As determined by the seller, …in dialog with the user 79
  80. 80. FairPay Value Discovery Engine Continuous journey of adaptation – Frame/nudge/track Seller- gated Premium FairPay Offer Seller- gated Basic FairPay Offer Buyer Accepts FairPay Offer ? Buyer Tries Product /Service Buyer Sets FairPay Price Seller Tracks Fairness of Price High -Fair Low- Fair Un- Fair Buyer Seller Sets Price (take or leave it) Buyer Accepts Set-Price Offer ? Buyer Uses Product /Service FairPay Zone (revocable privilege) Conventional Set-Price Zone (Paywall) 80 Value/FairnessOffers * * Can relax criteria in Voluntary Payment Mode – no paywall (positive nudges only) ** Can restrict buyer pricing power for more conventional control (Also a repeated game, but less cooperative and win-win) **
  81. 81. Preview: How the Pricing Adapts in different customer situations… 1. Joe Average [Low-Fair] $12 Premium (probation) 2. Willy Wonky [High Fair] $24 Premium 3. Sam Student [Low-Fair] $3 Premium (probation) 4. Ron Retiree [High-Fair] $5 Premium 5. Mr. Big [High-Fair] $30 Super-Premium 6. Lou Lowball[Un-Fair] $6.40 Basic (probation) not shown in detail: 7. Bob Basic [Fair] $8 Basic 8. Izzy Difficult [Un-Fair] Flat $10 Set-price paywall (Basic) 9. Speedy Flyby [n/a] $0* No sub, <10 articles/mo. ______________ *all plus ad revenue 81
  82. 82. Patron 1 - Pricing Request sent to Joe Average after use • You read 300 articles this month (vs avg. 300) • 40 were premium features (vs. avg. 40) • Your demographics are much like our typical patrons • Recap recent pricing history… • Suggested price for you = $16 (vs. paywall $10+10)* ---------- • Set your price as: __% above(↑)/below(↓) $16 (= $ ). • Your reasons for pricing above (↑)/below (↓) suggested price: ↑ ↓ Coverage ↑ ↓ Quality ↑ ↓ Technical features/problems ↑ ↓ Investigative journalism ↑ ↓ Premium features/privileges __________________ *Loyalty discount to FairPay patrons 82
  83. 83. Patron 1 - Pricing Response from Joe Average • You read 300 articles this month (vs avg. 300) • 40 were premium features (vs. avg. 40) • Your demographics are much like our typical patrons • Recap recent pricing history… • Suggested price for you = $16 (vs. paywall $10+10)* ---------- • Set your price as: 25% above(↑)/below(↓)$16 (= $12). • Your reasons for pricing above (↑)/below (↓) suggested price: ↑ ↓ Coverage ↑ ↓ Quality ↑ ↓ Technical features/problems – 10-15 times ↑ ↓ Investigative journalism ↑ ↓ Premium features/privileges __________________ *Loyalty discount to FairPay patrons 83
  84. 84. Patron 1 – Seller Response to Joe Average • Fairness rating (subject to framing strategies on how this is communicated) – Low fair this cycle – Low fair prior cycles • Bugle Action – Continue basic and premium offers, but – Warn premium access trial may be subject to probation; must increase future payments or risk losing premium? (Depending on overall patterns and context, may accept $12 rate as still profitable for premium, or not.) 84
  85. 85. Patron 2- Pricing Response from Willy Wonky [High-Fair] • You read 600 articles this month (vs avg. 300) = Heavy use • 80 were premium features (vs. avg. 40) = Heavy use • Your demographics are much like our typical patrons • Recap recent pricing history… • Suggested price for you = $20 (vs. paywall $10+10)* ---------- • Set your price as: 20% above(↑)/below(↓) $20 (= $24). • Your reasons for pricing above (↑)/below (↓) suggested price: ↑ ↓ Coverage ↑ ↓ Quality ↑ ↓ Technical features/problems ↑ ↓ Investigative journalism ↑ ↓ Premium features/privileges __________________ *Loyalty discount to FairPay patrons 85
  86. 86. Patron 2 - Seller Response to Willy Wonky [High-Fair] • Fairness rating (subject to framing strategies on how this is communicated) – High fair this cycle – High fair prior cycles • Bugle Action – Continue premium offers – Provide recognition/perks as Gold Patron 86
  87. 87. Patron 3 - Pricing Response from Sam Student [Low-Fair] • You read 100 articles this month (vs avg. 300) • 20 were premium features (vs. avg. 40) • You are a college student at Podunk State • Recap recent pricing history… • Suggested price for you = $4 (vs. paywall $10+10)* (includes student-rate discount) ---------- • Set your price as: 25% above(↑)/below(↓)$4 (= $3). • Your reasons for pricing above (↑)/below (↓) suggested price: ↑ ↓ Coverage ↑ ↓ Quality ↑ ↓ Technical features/problems – 10-15 times ↑ ↓ Investigative journalism ↑ ↓ Premium features/privileges __________________ *Loyalty discount to FairPay patrons 87
  88. 88. Patron 3 - Seller Response to Sam Student [Low-Fair] (Just like Joe Average, but at student rate) • Fairness rating (subject to framing strategies on how this is communicated) – Low fair this cycle – Low fair prior cycles • Bugle Action – Continue basic and premium offers, but – Warn premium access trial may be subject to probation; must increase future payments or risk losing premium? (Depending on overall patterns and context, may accept $3 rate as still profitable for premium to light usage student, or not.) 88
  89. 89. Patron 4- Pricing Response from Ron Retiree [High-Fair] • You read 100 articles this month (vs avg. 300) • 20 were premium features (vs. avg. 40) • You are a retired, otherwise much like our typical patrons • Recap recent pricing history… • Suggested price for you = $4 (vs. paywall $10+10)* (includes student-rate discount) ---------- • Set your price as: 25% above(↑)/below(↓) $4 (= $5). • Your reasons for pricing above (↑)/below (↓) suggested price: ↑ ↓ Coverage ↑ ↓ Quality ↑ ↓ Technical features/problems ↑ ↓ Investigative journalism ↑ ↓ Premium features/privileges __________________ *Loyalty discount to FairPay patrons 89
  90. 90. Patron 4 - Seller Response to Ron Retiree [High-Fair] • Fairness rating (subject to framing strategies on how this is communicated) – High fair this cycle – High fair prior cycles • Bugle Action – Continue premium offers – Provide recognition (/perks?) as Gold Patron 90
  91. 91. Patron 5 - Pricing Response from Mr. Big • You read 100 articles this month (vs avg. 300) • 40 were premium features (vs. avg. 40) • You got 3 Platinum Patron Circle features (vs avg. 5) • You are a VP Finance at BigCorp – news/analysis is very valuable to you. • Recap recent pricing history… • Suggested price for you = $25 (vs. paywall $10+10+n/a)* ---------- • Set your price as: 20% above(↑)/below(↓) $25 (= $30). • Your reasons for pricing above (↑)/below (↓) suggested price: ↑ ↓ Coverage ↑ ↓ Quality ↑ ↓ Technical features/problems ↑ ↓ Investigative journalism ↑ ↓ Premium features/privileges __________________ *Loyalty discount to FairPay patrons 91
  92. 92. Patron 5 - Seller Response to Mr. Big • Fairness rating (subject to framing strategies on how this is communicated) – High fair this cycle – High fair prior cycles • Bugle Action – Continue premium offers – Continue super-premium access level – Provide recognition/perks as “Platinum Patron” 92
  93. 93. Patron 6 - Pricing Response from Lou Lowball • You read 300 articles this month (vs avg. 300) • (0 were premium features – basic level service only) • Your demographics are much like our typical patrons • Recap recent pricing history… = “un-fair” • You are now on final warning for pricing we consider not fair enough. To continue FairPair patron offers you must set a price closer to our suggestion or give better reasons to justify low pricing. (If you think we are not being fair, please contact customer service.) • Suggested price for you = $8 (vs. paywall $10+10)* ---------- • Set your price as: 20% above(↑)/below(↓) $8 (= $6.40). • Your reasons for pricing above (↑)/below (↓) suggested price: ↑ ↓ Coverage ↑ ↓ Quality ↑ ↓ Technical features/problems – 10-15 times ↑ ↓ Investigative journalism ↑ ↓ Premium features/privileges __________________ *Loyalty discount to FairPay patrons 93
  94. 94. Patron 6 - Seller Response to Lou Lowball • Fairness rating (subject to framing strategies on how this is communicated) – Low fair this cycle (slight improvement) – Un-fair prior cycles • Bugle Action – Extend probation (for basic offers only), but – Warn that basic access remains on probation, must maintain higher fairness or lose FairPay privilege (revert to <10 articles, or fixed-price paywall). 94
  95. 95. Recap: How the Pricing Adapts in different customer situations… 1. Joe Average [Low-Fair] $12 Premium (probation) 2. Willy Wonky [High Fair] $24 Premium 3. Larry Student [Low-Fair] $3 Premium (probation) 4. Ron Retiree [High-Fair] $5 Premium 5. Mr. Big [High-Fair] $30 Super-Premium 6. Lou Lowball [Un-Fair] $6.40 Basic (probation) not shown in detail: 7. Bob Basic [Fair] $8 Basic 8. Izzy Difficult [Un-Fair] Flat $10 Set-price paywall (Basic) 9. Speedy Flyby [n/a] $0* No sub, <10 articles/mo.  Average rate may drop a bit, but number of customers should be much higher  More profit, more total value ______________ *all plus ad revenue 95

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