The FairPay Zone

FairPay: Adaptively Win-Win Customer Relationships -- Richard Reisman's blog (now a book) on win-win ways to reinvent business, resolve the revenue crisis for digital, and create more customer/vendor lifetime value for all. Seeking value-based, customer-first relationships. A one to one "invisible handshake" that brings commerce back to human values. A simple "risk-free subscription" that is far more win-win and efficient than flat-rate, all you can eat, for far more subscribers.

FairPay Application/Market Sectors

(Working Paper in progress)

The following is a work-in-progress that seeks to catalog an overview of major market sectors in which FairPay is readily applicable, with some notes as to the various forms it might take. Initial emphasis is on digital media content and services.

See More Details on FairPay for a guide to relevant posts with more detail.

Digital Powers

Some large companies have a broad digital media presence that spans multiple market segments. Such firms might build a FairPay platform for their own use, and for use by others, having rich and varied features. Some of these business are now free, some are paid.
(See blog posts listed by segment below.)

Examples:
Amazon -- Store, Prime, Affiliates, Payments
Google -- YouTube, Checkout, App Store
Apple -- iTunes Store
News Corp -- MySpace, Wall Street Journal, Hulu, Fox, ...

Newpapers, Magazines, other editorial

These are text-centered publishers, with ancillary images and video. Most are currently free (typically ad-supported), but many have moved to paid freemium models ("soft paywalls"). Some avoid posting content online for fear of losing print revenue.

Examples:
The New York Times (basic, plus premium Insider service)
The Wall Street Journal (paid subscription)
Piano platform (free+paid infrastructure for newspapers)
CondeNast Digital (family of magazines, some content free, some not online)

Video

These range from major Internet video sites like YouTube and Hulu, to specialty sites, to other providers like cable TV services (with both cable and Internet distribution). Many are currently free (typically ad-supported), but many are moving to paid models. Some charge now.

Examples:
YouTube (Google) (free)
Hulu (free plus paid)
Netflix (paid)
Time Warner
CBS
Disney
HBO
Cable, Telco, and Satellite TV distributors

Music

Music was perhaps the first content business face the creative destruction of digital media on large scale, and the industry continues to seek better business models and pricing models (and contain rampant piracy). Artists like Radiohead and Amanda Palmer have gone on their own with PWYW pricing experiments, with modest success. FairPay could transform how music is sold by labels, and other aggregators, and by artists, possibly through shared indie distribution services.

Examples:
Distributors/Aggregators (iTunes, Amazon, Spotify, Rhapsody, Pandora, ...)
Studios/Labels
Artists

Games

Much like music, digital games are also struggling with pricing and piracy, and have experimented with PWYW. FairPay could transform how games are sold by distributors, and other aggregators, and by developers, possibly through shared indie distribution services.
Examples:
Game downloads
Game subscriptions
In-app purchases.

E-books

E-book pricing and business models have been a subject of continuing contention between distributors, publishers and authors. FairPay could transform this industry, by making pricing more flexible, and changing competition from price-based to service/feature based.

Examples:
Distributors/Aggregators (Amazon, B&N, iTunes, Sony, Google, ...)
Publishers
Authors

Software and Apps

Software and "Apps" have long struggled with free, paid, and piracy, and have used a cousin of PWYW, Pay-If-You-Want (shareware, which has a pre-set but voluntary price) with modest success. The emergence of App Stores has added a new level of aggregator/distributor and made free an even stronger force. FairPay supports reasonable revenue generation, while offering the low purchase barriers of free and shareware, and FairPay reputations can be collected and applied across an App Store to benefit all merchants using the store.

Examples:
Apps/Widgets (Apple, Google, Verizon, Yahoo, ...)
PC software packages
Shareware/Open source
Software as a Service (SaaS)

Other services, including Non-profits / Charities

Many Web (and non-Web) services are free, and supported by ads or are non-profits supported by donations, and many use freemium models. FairPay is especially well-suited to non-profits, as a way to link "donations" and "memberships" to value received by users (combined with ability/willingness to pay). FairPay might potentially enable new hybrids/intermediates of profit, non-profit, and socially-responsible organizations/enterprises. This may also include non-Web services promoted/paid via the Web.

Examples:
Wikipedia
Combination offers including a charitable component
Memberships to museums, etc.

B2B

Business-to-business services also have significant issues with pricing for digital products/services, and market segmentation. These generally involve higher price points for which FairPay models might involve higher value-at risk, but there are many opportunities to broaden markets with limited use of FairPay. For example, academic/scientific publishers that charge very high single copy rates for articles might use FairPay to expand their market for light-use segments, including consumers and small businesses. Also for digital services to SMB segments.

Examples:
Academic/scientific publishers (Elsevier, McGraw-Hill, IEEE, HBS press, ...)
Any service sold direct to business users or SMBs

Payments and Infrastructure

Payment service providers are well positioned to add FairPay offer/sale/pricing/reputation services to their payment services offered to merchants. Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) software/infrastructure providers are also positioned to extend their offerings to support FairPay. Cross-vendor FairPay reputation services could significantly increase the power of FairPay reputations.

Examples:
Credit card services (AmericanExpress, Visa, Mastercard, ...)
Alternative payment services (PayPal, Google Payments, Apple Pay...)
Specialized monetization service providers (TrialPay, JulySystems)
Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) Software/infrastructure providers (Zuora, IBM, SAP, Oracle, ...)

Physical products

While the near-zero marginal cost of digital products and services is especially suited to FairPay models, physical products might also benefit. That could apply to products with low marginal cost, or minimum prices could be set to enable use of FairPay for more costly items. This might also include products and services that are adjuncts to higher cost products/services, such as warranty service.

Examples:
DVD distribution (Netflix. Redbox, ...)
Appliance warranty services (Apple, HP, Sony, Samsung, ...)
Artisanal products (Etsy, ...)

Other physical products for which win-win relationship is a priority (Everlane, ...)

Note: Many of the above businesses have significant instances of free, freemium, PWYW or similar models that make free an option. Those businesses might be especially good candidates for experimenting with FairPay models, since they already incur the risks of no/low payment.

(Working Draft 7/19/10, partial rev 12/29/15)

Subscribe to: Posts (Atom)

"Anyone responsible for monetizing digital content in consumer markets should understand this radically new perspective on pricing and how to maximize lifetime customer value."

- Shelly Palmer, Business Advisor, Author, Commentator

"...an innovative and visionary methodology …what disruption could look like..."

- Lucila Pagnoni, News Corp Australia

"...groundbreaking..."

- Professor Pennie Frow, University of Sydney Business School

"...compelling ...promises to transform business..."

- Professor Adrian Payne, University of New South Wales Business School

"Highly recommended for digital business entrepreneurs, as well as established firms..."

- Jim Spohrer, IBM and ISSIP.org

Foreword by Adrian Payne

How FairPay Works
...over a relationship, as a repeated game
...through a deceptively simple balancing dynamic:

1. Set the rules (Seller). As usual, the seller sets the ground-rules of the game, but in this repeated game, the rules favor fairness, transparency, and cooperation on both sides. The seller decides to whom to make a FairPay offer, on what terms and conditions. FairPay offers are a privilege that can be granted or withheld.

2. Set the price (Buyer). Reversing traditional practice, the buyer is granted the power to set the price to whatever value-based price the buyer considers fair -- after the sale, when the real value is experienced and known.

3. Repeat the game? (Seller). This seller power is what makes FairPay work, balancing the power of the buyer to set the price. The seller tracks the price, and determines, in the context of the overall history, whether it seems fair enough to the seller to continue the FairPay game for another round.

The buyer knows this is a repeated game, and must consider the consequences when exercising his price-setting power. That motivates the buyer to price reasonably fairly. This builds a relationship based on fair value exchange, that adapts and evolves over time. The seller manages "dialogs about value" that frame the value that was delivered, and a suggested price for that -- and nudge the buyer to be generous by offering more value for more generosity.

This repeated game structure gives buyers a strong incentive to price fairly – and enables sellers to limit their future exposure to those who do not.

More broadly, it shifts the entire focus of customer relationships from short-term transaction price to long-term relationship value.

...See Overview for more

Consumers -- Pay only what seems fair to you:

Pay what you think fair for products or services – after you try them
Make every purchase on a trial basis – so you can always be sure to get your personal fair value for your money
Agree to set your price fairly – in your judgment – and explain why you think it is fair
Keep that privilege as long as you can convince the seller that you are being fair

Businesses -- Get the most revenue from the most customers by continuously learning what each one values:

Engage in real dialog with each of your customers and listen to their perceptions of the value they get from your products/services
Make a trial offer to every potential customer who sees potential value
Suggest a price after use that you think is fair for that particular customer, considering all relevant factors
Offer incentives, such as premium tiers and perks, to entice fairness, even generosity
Let your customers self-select into segments (based on usage, value perception, willingness and ability to pay, ...)
Limit your risk from those trial offers by tracking the results (fairness) for each buyer, and limiting future offers if you judge that buyer to not pay fairly
Retain set-price plans for those who refuse to play the game fairly
Learn how much freedom (FairPay credit) to extend (or what restrictions to enforce) to get satisfactory results from each customer segment
Continue to make every offer a trial...
...as long as each buyer continues paying fairly--in your judgment

Delight your customers: give them what they really want, at a price they really think fair.
Shift the conversation from price to value, and from transactions to relationships.
Empower them to engage with you and tell you what they value.
Make commerce a repeated game that drives value creation to build a profitable relationship with high Customer Lifetime Value (CLV).

Sample FairPay Offer

...This sample offer letter to consumers shows how a newspaper might frame FairPay as a privileged benefit to regular patrons – to enable them to participate in a win-win pricing process and personalize their value propositions – as an alternative to a standard freemium "soft paywall."

FairPay Application/Market Sectors
...Overview of major market sectors in which the FairPay revenue model is readily applicable

Why would anyone pay if they do not have to? ...and other FAQs
...The answer is simple: Buyers who do not pay will not get further offers.

Resource Guide to Pricing
...Annotated links and references on Pricing, Pay What You Want, and other related background