Monday, August 8, 2016

How Pokemon Nudges Users to Spend

This Wall Street Journal article explores how PokémonGo and other mobile gaming apps "have mastered techniques for coaxing mobile-game players to make in-app purchases." This provides some crucial lessons about the future of marketing in general -- and the case for the new FairPay strategy in particular.

Here are some very interesting points about ways to get consumers to happily spend money -- points that can be generalized in computer mediated marketing of all kinds:

  • Once considered an unrefined nag, the in-app pitch has been honed so well it coaxes tens of billions of dollars a year from people who have gravitated to free mobile games.
  • They “engage people in a longer financial discourse than you would have in an upfront sale.”
  • Algorithms are playing an increasing part in nudging players to spend. Based on dozens of data points—how often gamers play, what model mobile device they use, location and gender—developers might raise a game’s difficulty level, making no two players’ experiences exactly alike.
  • Data on players’ behavior also are used to strategically tweak prices for virtual goods in real time. “You get people to spend more money if you understand their behavior,” said Niklas Herriger, founder and chief executive of Gondola, a New York analytics firm that develops algorithms for game developers. “You can trace their finger every step of the way.” 

In talking to companies about the potential of the new FairPay pricing strategy described in this blog, the two concerns that are most often raised relate to consumer behavior. Will customers be willing to become engaged in the game of spending money? And can I design the game to nudge users to be fair enough to provide a fair profit? 

The article suggests that both can now be done successfully. With the right choice architecture, a form of game design, customers can be nudged efficiently and effectively. If it can be done in marketing for a game, why not in other forms of marketing as well? 

That suggests the same is true for FairPay. It is a new logic, but a natural one -- the kind of economic cooperation that people have excelled at for millennia.  It is only in the past century that we have been conditioned to think differently. This anomaly has held force for all of our lives and is therefore all we know, but now it is time to jump into to the future. We have the technology -- and both businesses and consumers will love it.

For a full introduction to FairPay see the Overview and the sidebar on How FairPay Works (just to the right, if reading this at There is also a guide to More Details (including links to a video).

Monday, August 1, 2016

Price Discrimination for the Good!

"Higher prices in an affluent area help bring healthier meals to a poor neighborhood" reads the teaser for an interesting NYTimes article, which goes on to report on a 2:1 difference in prices between two Everytable restaurants only two miles apart in LA:
The big price difference represents an unusual experiment to address the persistent issue of limited food choices in poorer neighborhoods around the country. The higher prices at the downtown store are effectively meant to offset smaller profits at the other location, making the lower-priced restaurant more economically viable.
The article includes comments from advisory firm partner Michael Kaufman:
To make it work, he said people would need to understand why prices are higher in one neighborhood than in another. ...“I think the key to it will be how they tell their story” 
FairPay applies similar logic -- in a more dynamically adaptive, emergent process -- to set prices based on an individual "invisible handshake" that applies a balance of powers to learn what value customers receive, and factor in their ability to pay to determine the fair share they should contribute the the profits that sustain a business. This was explained in my earlier post Price Discrimination Can Be Good!, which was triggered by the equally interesting, if less noble, example of Uber surge pricing.

One key point is that price discrimination is not inherently evil, as it is often viewed. It depends on how and why it is done:

  • When price discrimination is done unilaterally by sellers, to extract maximum profit with no buy-in from customers it can be bad -- especially if done secretly in a way that is exploitative.
  • When it is done with transparency and customer buy-in, based equitably on differentials in ability to pay and value received, it can be laudable, and customers can feel good about it.  
What matters is the openness and fairness of the process. As Kaufman said, "the key to it will be how they tell their story.”

This relates to the broader issue of the growing call for a more socially conscious capitalism, a "fairness economy." We want the efficiency of free markets, but with an awareness of social values and bottom lines that factor in people and planet. Many are seeking ways to to achieve that. FairPay points to a new and more powerful solution.

FairPay's invisible handshake is not just a feel-good image, but an operational process based on a specific balance of powers that shapes the "story" -- a process of dialog that gives pricing power to customers, but only as long as they use it in a way the seller agrees is fair. FairPay can be applied in a wide range of contexts, from those that today lack much social context (like TV), through those that have stronger social context (like journalism and indie music), to those with dominating social context (like non-profits and charities).

Engaging customers, telling the story, and building long-term relationships based on this invisible handshake promises to increase Lifetime Customer Value, to offer more profit, greater market share -- and more total value to society.

For a full introduction to FairPay see the Overview and the sidebar on How FairPay Works (just to the right, if reading this at There is also a guide to More Details (including links to a video).