Wednesday, March 30, 2011

FairPay Process Dynamics -- a Big Picture Diagram

[Further Diagrams and Process Explanation are in a previous post.]

In the continuing quest to explain the radical ideas of the FairPay pricing process, here is a simpler and higher level view, one that gets to the heart of the process dialectic:
  • FP offers are gated by the seller, and restricted in value and duration, to limit seller risk
  • The buyer accepts an offer, buys, and uses a product/service
  • The buyer is then entirely free to set a "fair" price ("Fair Pay What You Want")
  • The seller tracks the price set by the buyer
  • The seller decides if the price is acceptably "fair"
  • -- If so, the seller makes further FP offers
  • -- If not, the FP process ends, and the buyer is only offered conventional fixed-price sales.
Unlike the asymmetric buyer-side power of conventional Pay What You Want offers, and the unfairness that generally results, the seller has a complementary power to balance that.  The buyer knows up-front that FairPay offers are a privilege, and if he does not set the price reasonably, that privilege will end.

The core balance of forces is seen in the dialectic of the two arrows:
  • Price it Backward reflects the buyer's power and privilege of setting the price after he knows what the product was actually worth to him (unlike the conventional case where he risks buyer's remorse)
  • Extend it Forward reflects the seller's power to gate the FP offers, and to limit them as a privilege granted only to those who set prices fairly.

This process is participative in that the buyer has real say in the pricing, but the seller still gets to limit his risk.  This participative process ensures that both parties continue only if they agree that the prices are fair.  The longer this continues, the closer the prices get to an ideal win-win value exchange.

Thus FairPay realizes the economic ideal of individually differentiated prices that correspond to the utility and price sensitivity of each buyer in a way that avoids the feeling of unfair "discrimination." Price discrimination is a problem of roles and perception -- there is nothing inherently wrong about price discrimination (it is beneficial to the general welfare) -- if the buyer sets the price, the "discrimination" is inherently acceptable.

This participative nature is what gives FairPay real power to enable a company to build a deep relationship with its customers, to achieve high loyalty and sustainable competitive advantage.

With this basic perspective, please see more details of how the process works, and how it integrates with conventional pricing, in my recent blog post with additional diagrams, such as this one:

  

  More Diagrams and Process Explanation...

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