Tuesday, August 28, 2018

BuzzFeed, Google, Testing Recurring 'Pay What You Want' Membership -- Steps in the Right Direction

Digiday reports that BuzzFeed is working with Google to pilot a recurring "pay what you want" membership program. Here is a quick recap and outline of how FairPay points the way to future improvements.

The story so far

Digiday's Lucia Moses explains (emphasis added):
BuzzFeed News is adding messaging to pages that solicits small donations of $5-$100 as seen [to the right]. The initial benefits will be updates on big investigations and new video programming. (There’s no member-only content for now; if the program is successful, BuzzFeed News hopes to add perks that will come on top of its news content, that will remain free.)
BuzzFeed News, like The Guardian, has staunchly adhered to the idea of being part of the free and open web. But... it’s eager to capitalize on people’s growing willingness to pay for quality news.... 
BuzzFeed News said it’s working on its membership program as part of the Google News Initiative...Google helped BuzzFeed with tech and market research; it’s unclear if Google is planning to expand its subscription program to accommodate publishers that have reader donation or membership programs. A Google rep confirmed the company is working with Buzzfeed to help it explore different business approaches and understand how its readers would react to this kind of model
Moses refers to her previous report on "a textbook turnaround" with a similar program in the Guardian US (1/26/18) (emphasis added):
Guardian US was primarily ad-driven; philosophically, the Guardian has eschewed the more common paywall model because it believes its journalism should be as widely accessible as possible...
The challenge with one-off contributions is replenishing them. Most of the 300,000 US supporters (230,000) are one-off contributions; the rest are recurring subscribers. The reader support is mostly one-offs because the ability to make recurring contributions was just added a few months ago. The plan is to move people toward recurring contributions, which creates a more predictable revenue stream.
To that end, Guardian US has two people dedicated to reader revenue, which it plans to double to four in the next fiscal year starting in April. They’re identifying topics U.S. readers care about and are more inclined to support with their wallets, and they’re testing everything about the way it solicits contributions, from the color to placement to language of the message, which is typically British in its politeness, from a U.S. audience.
We could be a little bit more assertive in the way we canvass,” [Guardian US CEO] Webster, a U.K. native , acknowledged.
 Some key points as I read this:
  • Little or no news is locked behind a paywall.
  • Payments are entirely voluntary. Emphasis is on being a patron or benefactor, not a quid pro quo.
  • The contribution amount is not pre-set by the publisher, but varies from reader to reader based on what they think fair and affordable.
  • Payments may in future bring perks, but still a vague degree of quid pro quo (which encourages contributions under communal norms of fairness, altruism, and generosity, rather that exchange norms of bargaining).
  • "Prices" are set by the customer, at whatever level they think fair.
  • The publisher can nudge the customer to pay generously -- just how to do that nudging most effectively is something to be tested and refined.
  • The recurring payment model not only adds predictable revenue, but builds a relationship that increases loyalty and fosters communal norms.
  • These voluntary payments in a relationship context provide a rich field for learning, for each reader, what "readers care about and are more inclined to support with their wallets" and "testing everything about the way [the publisher] solicits contributions." 
FairPay points to sensible next steps

The FairPay strategy and architecture that I have been developing with colleagues shows how to extend this early success with more win-win models. 

The key is to leverage the relationship and the information it generates to understand: 
  • the value each reader obtains (and perceives), and how that varies over time 
  • how to maximize that value over time, 
  • how to get the reader to recognize that value, and 
  • how to nudge the reader to pay increasingly generously, at a level that fairly maps to that value.
The objective is to tailor the offers -- and the services offered -- to each user to best solicit a fair share of their wallet relative to the the value each reader enjoys -- and to nurture and grow that.

Further steps are to find perks and premiums that further demonstrate value, to remind readers of the specific levels of value they received (based on usage and other data), and to encourage more share of wallet -- to the level that offers the most value to both the business and each customer. 
  • So far in the above, all payments are entirely voluntary -- but with some level of nudging. That could be the permanent strategy. 
  • But, as a possible further step to increase revenue, some level of services could be offered with a clear expectation of fairness in the voluntary payments from the reader. After some cycles of nudging as to what value is offered and what pricing is considered fair for that reader, future offers of that kind may be withdrawn (for some period) if the publisher concludes the reader just will not be fair about their payments. This is still much more participatory than conventional pricing, in that the reader still decides (on each payment cycle) what is a fair price for them and the value they received. The publisher gets to enforce reader generosity for selected services -- at whatever customized level of gentleness or firmness seems best.
Details of these strategies are in the sources listed below. Especially relevant places to start are these posts:
Your mileage may vary!

In evaluating and testing such strategies, keep in mind that the results will be highly dependent on the "framing" -- specific design of the offers, the skill in communicating them effectively, and the selection of which services and which reader segments to apply them to.  Disappointing results may not accurately reflect the potential of such methods in general, but could just mean the test was not done in the best way possible (or that your business has far to go in getting your customers to feel you deserve their support).

There is a great deal of marketing communications, pricing theory, value proposition design, and behavioral economics to getting this right. The details may seem complex, but the basic principle is simple -- build a win-win relationship of dialog, trust, and transparency, jointly seeking to create and share value with the each customer, in ways suited to that customer.

------------------------
More about FairPay

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

My article in the Journal of Revenue and Pricing Management, "A Novel Architecture to Monetize Digital Offerings" also provides an overview of FairPay (summarized more briefly in the ESADE Knowledge article "Three building blocks to monetize a digital business," and previously in Harvard Business Review, "When Selling Digital Content, Let the Customer Set the Price.").

Even better, read my highly praised book: FairPay: Adaptively Win-Win Customer Relationships.

(FairPay is an open architecture, in the public domain. My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)

Friday, August 17, 2018

Challenge your ideas at my 9/21 Workshop at NYCML18: "A New Economics for Digital Services"

Come break through your old biz-model blinders -- I am leading a workshop on re-thinking basic principles at NYCML18 (the annual summit of NYC Media Lab) on Friday, 9/21:

21st Century Customer Relationships, Value Propositions, and Pricing
A New Economics for Digital Services.

This workshop is an exploratory “think tank” discussion on future directions in Customer Relationships, Value Propositions, and Pricing
  • Participants will learn to see through presumptions now obsoleted by the new economics of digital content and services -- and make that concrete with the example of one promising architecture for a new logic.  
  • From there we will explore in open discussion how to chart a strategic path that (1) rethinks conventional approaches and (2) points to incremental steps toward a deepening transformation. 
  • This workshop relates to AI/ML and ethics in business models, and the “relationship economy” in which recurring revenue, subscription, and membership models are becoming mainstream, all driven by the “post-scarcity” economics of digital.

This interactive session will be a forum for rethinking how we do business, earn profits, and create value in our new digital world. We will consider a wide range of current and emerging models in terms of a "Ladder of Value" -- including subscriptions (unlimited, and usage-based), paywalls, freemium, membership, crowdfunding, patronship, pay what you want, micropayments, dynamic pricing, blockchain, and paying consumers for their data and attention -- with a perspective that spans commercial services, journalism, the arts, and non-profits.

A preview of this perspective is in my post, The Relationship Economy -- It's All About Valuing Customer Experiences -- plus the "Ladder of Value" section at the end of Finding Value in The Subscription Economy

NYCML'18 is a snapshot of the best thinking, projects and talent from across the City's industry and university ecosystem. Through thought-provoking discussions, hands-on workshops, and 100 innovative demos, attendees will consider pressing issues related to digital media innovation.

This workshop will be 10:30am-12pm, at NYU Kimmel Center.  Registration for NYCML18 is required (and includes all workshops). (Sign-up for specific workshops will be in September, but the overall conference usually sells out, so register for that early.)

------------------------
More about FairPay

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

My article in the Journal of Revenue and Pricing Management, "A Novel Architecture to Monetize Digital Offerings" also provides an overview of FairPay (summarized more briefly in the ESADE Knowledge article "Three building blocks to monetize a digital business," and previously in Harvard Business Review, "When Selling Digital Content, Let the Customer Set the Price.").

Even better, read my highly praised book: FairPay: Adaptively Win-Win Customer Relationships.

(FairPay is an open architecture, in the public domain. My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)

Wednesday, August 15, 2018

Deeper Lessons From MoviePass -- From Tickets to Subscriptions to Relationships

Many have commented sagely on the folly of MoviePass, but, at a deeper level, it is something of a caricature of how we are just at the baby-steps stage of The Subscription Economy. It is easy to laugh at what seems to be a Wyle E. Coyote model: "we lose money on each customer, but we will make it up in volume."  Of course it is not quite that simple, the intent being to monetize consumer data to compensate, but still the value proposition seems to defy gravity. There are important lessons here, as recently noted in the Washington Post, Price Intelligently, and Harvard Business Review.

These commentaries point to many dots that we have yet to fully connect into the larger image. There are many excellent insights about what Tien Tzuo of Zuora calls "The Subscription Economy" in his recent book Subscribed, and in these recent articles. The bigger picture I see here is what I call "The Relationship Economy." Subscriptions are an important way to structure profitable customer relationships, but what matters is how a business co-creates value in its relationship with each customer. If you focus on creating and sharing value with each customer, the rest will follow. That is explored in some depth in my recent post, The Relationship Economy -- It's All About Valuing Customer Experiences.

The core lesson of co-creating value is the shift from the Goods-Dominant Logic of tickets, through the more Service-Dominant Logic of subscriptions, to a fuller understanding of that logic in the value of service relationships. As the head of Stanley Tools was reported to say long ago, "our customers don't want drills, they want holes."

Eddie Yoon's article in HBR lists five lessons that serve as nice examples of some of the dots I refer to -- which I would connect into this larger picture of value-centered relationships. My perspective on his five points:
  1. Price elasticity is powerful -- and highly variable -- "playing with it requires great skill and precision." The issues are so dynamic that an adaptive, mass-customized approach to pricing is needed to profitably serve more than narrow niches. We need to go much farther down that road.
  2. "MoviePass serves as a cautionary tale of treating consumers with a transactional mindset" and "seeking to monetize them through advertising." I believe the age of services that are predominantly advertising-supported is giving way to models that are predominantly customer-supported (even if they retain some advertising value exchange in a way that is more customer-value focused, such as with a "reverse meter").
  3. All you can eat models are economically inefficient for both customers and businesses. Highly engaged "superconsumers" should be a prime asset to a business, not a gaping liability. Pricing and value propositions must adapt to different consumer needs.
  4. The movie ticket is only one aspect of the consumer experience. The customer wants holes (a good experience), not drills (tickets). A service relationship, value co-creation perspective points to ways to get more "share of wallet" from each customer.
  5. Yes, "bullying is a bad business plan." Long term success models are win-win, not zero-sum -- for consumers and business partners/suppliers.
Changing an industry like movies with essential entrenched players (theaters and studios) wedded to rigidly antiquated models will be challenging, but even so, the ultimate direction of relationship=value-focus seems clear.

My work on FairPay points to how such a new logic can work, but there may be other paths. The future of The Relationship Economy will be more mass-customized, and more win-win, drawing on deeper customer "dialogs about value." The power of businesses and customers will be more evenly balanced, and cooperation in co-creating value over the ongoing relationship will be the key to success.

------------------------
More about FairPay

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

My article in the Journal of Revenue and Pricing Management, "A Novel Architecture to Monetize Digital Offerings" also provides an overview of FairPay (summarized more briefly in the ESADE Knowledge article "Three building blocks to monetize a digital business," and previously in Harvard Business Review, "When Selling Digital Content, Let the Customer Set the Price.").

Even better, read my highly praised book: FairPay: Adaptively Win-Win Customer Relationships.

(FairPay is an open architecture, in the public domain. My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)