Almost everyone who hears about FairPay sees its appeal -- but they also see that, because this relationship-centered strategy seems unconventional, it may not be not suitable for all customers (at least not yet). So the question arises: "where does it work best?" Naturally, in experimenting with a new technique, the smart strategy is to begin with the low hanging fruit and low-risk learning. Here is a focused approach to finding those early sweet spots.
FairPay as a change in behavior
People almost universally understand the new balance of power represented by FairPay's invisible handshake as being compelling:
We will give you (our customer) real power to participate in pricing -- as long as you demonstrate that you are fair about it. We will reward your generosity -- but will withdraw this special privilege if you are unfair.This makes relationship marketing a two-party repeated game that rewards cooperation on both sides, and is clearly in the interest of consumers who are willing to play. (As explained in FairPay Changes the "Game" of Commerce.)
Rational consumers should want to play the FairPay game with any business they want to have a maximally beneficial long-term relationship with. They will get the best value for their money (including value from the relationship that they could not otherwise buy at all). But behavioral economics has shown us that consumers are not homo economicus, not all that rational. So the questions are how will real customers react? There are two related questions:
- How hard is it to get customers to use their pricing power fairly, given the current mind-set of many modern consumers to look for bargains -- to take a very short-term view of commerce as a brutally zero-sum game of deals, not relationships?
- Is the cognitive load of participating in the FairPay pricing process too burdensome for most customers -- compared to "one-click" seamlessness of "take it or leave it" set-pricing? (Of course this is a bit of a false comparison, given that bargain hunting leads many consumers to take on huge cognitive loads -- such as for credit card bonuses and airline rewards, some extremists spending days researching and making "mileage runs" to get miles with most of the costs and none of the benefits of going anywhere.)
- What is the nature of those low-hanging fruit customer segments?
- Where can we find and engage them? -- in what businesses sectors?
- How can we target them with niche initiatives to prove the concept and refine it at low cost and risk?
- How can we leverage our early learning to quickly make FairPay more simple and habitual?
- How can we then build on that learning with select customers to broaden the market?
Think of these early sweet spots as the thin end of the wedge of behavior change. As customers begin to see how it improves their customer experience -- their value experience -- they will want to use it more, and others will want to join in that.
Natural customers for FairPay
FairPay is not a new behavior, but a reversion to behavioral norms that are natural, and were the way people conducted business with one another for millennia. But that is a change from current consumer mind-sets (bargain-hunting), and some customer segments will adapt to that more readily than others.
- Some will be slow to shift from short-term, zero-sum thinking -- viewing businesses as an enemy to exploit or be exploited by -- while others will jump at the opportunity to build a productive and cooperative relationship.
- The trick will be to find lines of business and customer segments who are most disposed to welcome this new logic, those for whom it is most natural.
- Social Value Orientation (SVO), essentially pro-social versus pro-self, as individual traits.
- Economic/Exchange Relationship Norms versus Communal Relationship Norms, as situational variables in a relationship.
1. Start with those disposed to generosity -- “superfans” who are loyal and perceive high value (especially appreciative customers of providers who demonstrably deserve generosity for delivering high quality, service, and social value). They are the ones who will respond best to the pricing privilege that the seller grants to the buyer in FairPay, to price in a way that considers fairness to the seller, and who will be least inclined to abuse that privilege. Managing FairPay offers for these buyers will be mostly carrot, and not much stick. They are the ones who will be most willing to pay you generously for your product or service -- as long as you establish and maintain your position as deserving, delivering on your promises, and asking in the right way for fair compensation.
not just a desire to be fair, but willingness to make the effort to do so. For that, the key is to target customers who are dedicated to the product or service and/or the provider. Again, loyal/"superfan" customers are most likely to have this dedication. (Benji Rogers of PledgeMusic observed to me that "superfans will happily crawl on broken glass" to support their favorite artists.)
These are the customers who will be worth your while to start with. The FairPay process enables you to test for these attributes with low risk, nudge those who are amenable toward cooperative and profitable behaviors, and cull out those who are not (at least until there is reason to think they might be more ready to cooperate). Many posts on this blog explore various aspects of how to do that, in various business use cases.
Of course it is still essential to make the process as simple and seamless as possible. More of the theory behind that is outlined in
Thinking Fast and Slow about FairPay: A New Psychology for Commerce in a Networked Age.
(As to the related question of how can we leverage our early learning to quickly make FairPay more simple and habitual, I will address that in a companion post.)
Natural businesses for FairPay
Some businesses will naturally motivate willingness and dedication of their customers to be fair -- and some naturally attract more than their share of customers who are already predisposed to such behavior. Other posts have examined the application of FairPay to some such businesses in detail, for example:
- Journalism: Patron-izing Journalism -- Beyond Paywalls, Meters, and Membership
- Music: The Future of the Music Business -- The Artist is King with FairPay
- Non-profits: A Better Revenue Strategy for Non-Profits in the Digital Era.
Whatever the field of business, a critical success factor will be the ongoing demonstration of customer-first behaviors that continually lead customers to see the business as responsively listening, and deserving of their trust and generosity.
Grabbing the low-hanging fruit
The next question is just which phase of the customer journey to start with -- to further maximize likely success and minimize risk. Three areas are especially promising as starting points for testing:
- Retention -- win-back offers to subscribers who are asking to cancel (but had previously seen value, and could be profitable at the right price). This is covered in Winning Back Lost Customers -- Before They Get Lost.
- Acquisition -- offers to potential new customers in selected segments that might see value, but might be put off by paywalls or other set-price offers. FairPay can work as a kind of "fuzzy" freemium to attract these customers.
- Premium “member"/"patron” tiers -- offers to enhance relationships with existing customers known to recognize the value. One example is Times Premier? [/Insider?] -- What is it really worth? ...FairPay can tell.
- Usage or style segments
- Content segments (such as long-tail items, or by genre)
- Device segments
- Family plans
- Segments that can highlight “deserving” sellers
- Trials, specials, coupons
- Distinct branding or white label offers.
FairPay is well suited to a step-wise introduction that allows for testing and learning at low cost and risk. The idea is to let both the business and the customers ease into the new logic of FairPay and learn how to apply it effectively. This is addressed in the post FairPay “Free Trial”/“Survey” Mode – Easing into the FP Waters -- And Understanding Your Customers. The Trial/Survey mode it describes can generate significant learning with only simple software -- that can help shape a full FairPay implementation, as well as generate customer value perception data that is valuable in its own right -- even if the project goes no further.
The thin end of the wedge
All of these strategies can lead to effective trials that will serve as the thin end of the wedge of behavior change. The initial strategy should be to find these sweet spots and do low-risk controlled tests there. Businesses and customers will begin to see good results and learn how to apply this kind of win-win strategy. That will generate a virtuous cycle, to increase the loyalty and CLV of the initial customers, then to attract more customers to the game, and then to lead a growing range of firms to create FairPay zones, which will then bring more customers who are ready and willing to cooperate in this more win-win mode of commerce.
Even better, read my highly praised new book: FairPay: Adaptively Win-Win Customer Relationships.