Monday, August 29, 2011

Re-inventing Value Exchange For Digital Offerings -- A Radically New Approach to Business Relationships

Imagine a market Nirvana for digital offerings. Think beyond the traditional value exchange processes and protocols and re-envision how buyers and sellers might interact in a world with a networked marketplace.

I suggest FairPay offers the path to that market Nirvana, and that it is now very practical. Here is an overview (based on the recent rework of the FairPay home page).

First let us look at what the consumer wants, and FairPay delivers:

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

Of course free is even more ideal (for the buyer alone), but we know there is no free lunch -- someone pays. The question is how to make the market work for the consumer, and still motivate sellers to sell and creators to create. "Fair Pay What You Want" (as just described in the box) clearly comes rather close to a practical ideal for a large mass of consumers.

The bigger challenge is how to make our new "ideal" market system work for businesses? -- to ensure that they get a fair price, to enable them to stay in business and continue to deliver value. Here is how FairPay does that, as well:

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 on the value they get from your products or services
  • Make a trial offer to every potential customer who sees potential value and is fair-minded
  • 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 for each buyer, and limiting future offers if you judge that buyer to not pay fairly
  • Continue to make every offer a trial... long as each buyer continues paying fairly--in your judgment

Ordinary "Pay What You Want" pricing  has been shown to work well for special offers.  ...With FairPay (short for "Fair Pay What You Want"), every offer is a special offer.  
  • FairPay changes the game from single transactions to an ongoing relationship of continuing transactions. 
  • That enables a whole new balancing dynamic that drives to a better market equilibrium, over a wide range of relationships and value perceptions.

FairPay works through a very simple balancing dynamic:

1. Selectively offer to let the buyer set any price the buyer considers fair -- after the sale (Fair Pay What You Want, post-sale).

2. Track that price and determine whether the seller agrees that is fair, and use that information to let the seller decide whether to make further offers of that kind to that buyer in the future.

I suggest this gets us as close as possible to market Nirvana. The buyer always pays a price he considers fair, and seller gets to sell to every buyer who set prices fairly (in the seller's judgment).  The seller is also able to limit his risk, in way that trades a managed level of small loses for a large expansion of his market to the entire population who value his offering. Some will pay better than others, but for all who pay fairly, the seller gains revenue. And for those who the seller judges to not pay fairly, FairPay offers are restricted, and conventional set-price selling remains the fallback.

Thus FairPay exploits the power of the networked marketplace to offer as a participative pricing process that combines the user freedom of pay-what-you-want pricing, with a new level of feedback, accountability, and seller control of future offers to make it fair to both buyers and sellers.

For more on how that works, see the FairPay site (How Does FairPay Work?), and many of the posts on this blog.