The FairPay Zone: April 2011

"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