tag:blogger.com,1999:blog-75578422408010394192024-03-19T04:47:56.596-04:00The FairPay ZoneFairPay: Adaptively Win-Win Customer Relationships -- Richard Reisman's blog (now a book) on win-win ways to reinvent business, resolve the revenue crisis for digital, and create more customer/vendor lifetime value for all. Seeking value-based, customer-first relationships. A one to one "invisible handshake" that brings commerce back to human values. A simple "risk-free subscription" that is far more win-win and efficient than flat-rate, all you can eat, for far more subscribers.Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.comBlogger151125tag:blogger.com,1999:blog-7557842240801039419.post-90772609953600691872022-03-19T14:02:00.007-04:002022-03-19T15:45:05.520-04:00Oversubscribed? Peak Subscription? -- No, Peak Unlimited, Flat-Rate!<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhUxImYWvSIdERfOgfOsmpBEiFZ0uDCRuW0ui0-S2-rN-C_afC_TZVTEr2FZof8xnIiMkcE3s6O-6JQdSJYMBZCi7ZndRBBihBq13krD42GEndoxL4PJkOZdpEoqkXP4dgt8iyVRxqo2_DfLxmoo7tRt9CyCT-Zm2H3M7olZNOtlhor0syjK5gYvc6vqA=s976" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="548" data-original-width="976" height="113" src="https://blogger.googleusercontent.com/img/a/AVvXsEhUxImYWvSIdERfOgfOsmpBEiFZ0uDCRuW0ui0-S2-rN-C_afC_TZVTEr2FZof8xnIiMkcE3s6O-6JQdSJYMBZCi7ZndRBBihBq13krD42GEndoxL4PJkOZdpEoqkXP4dgt8iyVRxqo2_DfLxmoo7tRt9CyCT-Zm2H3M7olZNOtlhor0syjK5gYvc6vqA=w200-h113" width="200" /></a></div>Amanda Mull wrote "<a href="https://www.theatlantic.com/health/archive/2022/03/why-subscriptions-are-hard-to-cancel/623885/" target="_blank">This Is Peak Subscription: Forking over another $5 a month is getting pretty old</a>" in <i>The Atlantic</i> (3/3/22), identifying the pricing problem: "trying to divine what constitutes an acceptable return on, say for or 10 bucks a month." Buying a new smart TV and loading all her streaming apps, she asked, <p></p><blockquote><p>Why am I paying for these things? How much of this stuff do I even enjoy? ...the kind of light-bulb moment that has stuck with me as I peruse my credit-card statements or shuffle through apps looking for something to watch on TV, trying to divine what constitutes an acceptable return on, say, five or 10 bucks a month. ...No one is sure how many subscriptions the average household will bear before it snaps and starts canceling things, but we might be about to find out. </p></blockquote><p>To which Tien Tzo (CEO of subscription management company Zuora) said: "Nonsense. Hogwash. Poppycock. Balderdash." in his well-reasoned rebuttal, "<a href="https://www.linkedin.com/pulse/world-oversubscribed-tien-tzuo/" target="_blank">Is The World Oversubscribed?</a>" (3/19/22).</p><p>As those familiar with FairPay strategies can see, <b>both are right.</b> <b>This is peak <i>unlimited, flat-rate</i> subscription!</b> That is because for most services the acceptable return actually realized will vary from month to month, depending on many variables not known until the month has ended. That means the acceptable price must vary with that month's need.</p><p>I expect a shakeout that will gradually kill many subscription businesses, but two kinds will thrive and grow.</p><p></p><ol style="text-align: left;"><li>The biggest players, with the richest value propositions have the market power to survive even their bad pricing models.</li><li>The others will find ways to make their pricing more flexible, able to track to varying levels of value, but still simple. (as Zuora's Subscribed Institute <a href="https://www.zuora.com/resource/direct-to-consumer-in-subscription-economy/" target="_blank">suggests</a>).</li></ol><p></p><p><b>Few yet understand how they can do that -- here is how...</b></p><p>My previous post, <a href="https://www.fairpayzone.com/2022/02/the-streaming-war-to-end-all-you-can.html" target="_blank">The Great (Streaming) War of Stupid Value Propositions -- Continued!</a>, explains how more flexible strategies might operate as "risk free subscriptions" in which the consumer <i>does not risk</i> <i>paying for a subscription they get little or no value from in a given month:</i></p><blockquote><p>The essence of the risk-free subscription is to be flexible, in order to be value-based -- cheap or free at low or zero usage, and rising at a reasonable rate as usage and other aspects of value received increase in that month, up to a set monthly cap. <i>Think of it as a pay-ramp instead of a pay-wall</i>. This kind of flexibly affordable model that is <i>based on the value that each individual viewer actually receives</i> (and that ramps up less prohibitively than pay-per-view) will get more viewers to buy more subscriptions. That will generate more profit from more viewers for every provider who has content that viewers want.<br /><br />Such a pricing model also offers sensible economics across a mix of providers and aggregators. Disney could leave most of its content on Netflix for those who are only occasional viewers, while attracting its more regular fans to direct relationships on Disney+ with added features (such as its newest and hottest shows, and extra perks).<br /><br />Instead of the all-or-nothing battle for AYCE subscriptions, providers can build relationships with all or most of their potential viewers. Think of this as <i>agile pricing</i> for a good <i>customer value experience</i> (CVX) -- and for a fair revenue share to platforms, content providers, and creators.<br /></p></blockquote><i>More on this theme:</i><br /><ul><li><a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">"Risk-Free" Subscriptions to The Celestial Jukebox? (A Working Draft)</a></li><li><a href="http://www.fairpayzone.com/2015/08/post-bundling-packaging-better-tvvideo.html" target="_blank">Post-Bundling -- Packaging Better TV/Video Value Propositions with 20-20 Hindsight</a></li><li><a href=""The Case Against Micropayments" versus "Subscription Hell" -- Finding Flexibility" target="_blank">"The Case Against Micropayments" versus "Subscription Hell" -- Finding Flexibility</a></li></ul><p> ------------------------</p><div><div><b><i><span style="font-size: x-small;">More about FairPay</span></i></b><br /><b><i><span style="font-size: x-small;"><br /></span></i></b></div><div style="margin: 0px;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-size: x-small;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></span></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white; font-size: x-small;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span><b><span style="font-family: inherit;"><i>A brief introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br /><ul><li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span><b><span style="font-family: inherit; font-size: x-small;"><i>More in the </i><a href="http://www.fairpayzone.com/p/overview.html" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). </i></span></b></span></span></i></b></span></span></li><li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span><b><span style="font-family: inherit; font-size: x-small;"><i>There is also </i><a href="http://www.fairpayzone.com/p/more.html" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span></i></b></span></span></li><li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white; font-size: x-small;"><b><i><b style="background-color: transparent;"><span>And these journal articles, </span><a href="http://rdcu.be/HTfJ" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b></span></span></li><li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white; font-size: x-small;"><b><i><b style="font-family: inherit;"><i>Or, my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></i></b></span></span></li></ul></div><div><div style="margin: 0px;"><span style="font-size: x-small;"><i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></span></div></div></div><p> </p>Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com37tag:blogger.com,1999:blog-7557842240801039419.post-34284834880365268452022-02-01T12:28:00.011-05:002022-02-01T15:02:09.526-05:00The Great (Streaming) War of Stupid Value Propositions -- Continued! <p><span style="color: #cc0000; font-size: medium;"><b><i>The Streaming War to End All-You-Can-Eat Streaming Wars</i></b></span></p><p><i><span style="color: #cc0000;">I first posted </span><a href="https://www.fairpayzone.com/2019/11/the-streaming-war-to-end-all-you-can.html">The Streaming War to End All-You-Can-Eat Streaming Wars</a> <span style="color: #cc0000;">(below) in 2019. Now, well over $100 billion of content spending later (for just the top four streamers), the costly no-man's land of all-you-can-eat (AYCE) subscription models continues to suck up huge deadweight losses -- as nicely reported in today's Wall Street Journal: </span><a href="https://www.wsj.com/articles/streaming-data-netflix-hbo-disney-hulu-11643560207" target="_blank">Disney+, HBO Max and Other Streamers Get Waves of Subscribers From Must-See Content. Keeping Them Is Hard</a>. <span style="color: #cc0000;">(Updates are shown here in red, the original text is in black.) </span></i></p><p><i><span style="color: #cc0000;">My message is reinforced -- the value proposition for flat-rate all-you-can-eat streaming sucks -- it costs the streamers a fortune, as they fight over a no-man's land of costly subscriber acquisition and poor retention. They continue making an offer that is quickly refused or cancelled, to a finite number of streamers </span><span style="color: #cc0000;">who want a full range of viewing,</span><span style="color: #cc0000;"> but </span><span style="color: #cc0000;">with limited wallet to share among competing offerings -- thus satisfying few. </span></i></p><p><i><span style="color: #cc0000;">This is not a problem of user behavior, or of competition, but of collective industry blindness to a failed pricing model. Few want all they can eat! We can't eat that much! We want only what we want, and don't want to pay for more. </span></i></p><p><span style="color: #cc0000;"><i>Instead, all streamers and consumers could share a much larger pie, with much higher shared value all around. </i></span><i><span style="color: #cc0000;">Experiment with more win-win value propositions -- set a fair, bundled (volume discounted) price -- for however much or little we want each month. Offer a fair value proposition so we can subscribe, stay, and watch as we like -- not pay a flat rate every month even when we get no value at all.</span></i></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj956vB-at1lm0fvd7G_P8vhuZvdj5_k5Jn4duBDG9lGg-xS2ZxnDKFvuo9_FH72oaa-B8_Cn5bq4YNRpyLvXIj69cm9wxgemoAwiU-9OqW5fgiit4M_RHVBrFUeNBfbxGnXNR9MIwG1DPB/s1600/Stream+War+WSJ.PNG" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="947" data-original-width="952" height="316" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj956vB-at1lm0fvd7G_P8vhuZvdj5_k5Jn4duBDG9lGg-xS2ZxnDKFvuo9_FH72oaa-B8_Cn5bq4YNRpyLvXIj69cm9wxgemoAwiU-9OqW5fgiit4M_RHVBrFUeNBfbxGnXNR9MIwG1DPB/s320/Stream+War+WSJ.PNG" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: xx-small;">(Image: Wall Street Journal)</span></td></tr></tbody></table><div style="text-align: center;"><span style="color: #cc0000;">------------</span></div><div style="text-align: center;"><br /></div><div>Do you hear the giant sucking sound of tens of billions of dollars of content production cost and corporate debt going down the drain? ...of tens of millions of consumers missing out on content they want to watch? <br /><br />Much like World War I, great powers are massing armies and entrenching content libraries for a Great War that may have no real winners. And once again those great powers (and other contenders) are relying on inflexible strategies that will drain resources, and get mired in a long and costly war of attrition. This time the inflexible trenches that will suck up armies of content dollars are not in the ground, but in the deadweight loss of all-you-can-eat (AYCE) subscription models.<br /><br />News of this streaming war is everywhere. The Wall Street Journal provided a good summary of the <a href="https://www.wsj.com/articles/the-great-streaming-battle-is-here-no-one-is-safe-11573272000" target="_blank">order of battle</a>, and of the <a href="https://www.wsj.com/articles/disney-apple-tv-and-more-how-to-watch-tv-in-this-confusing-age-11573272000" target="_blank">collateral damage</a> that consumers will face. <a href="https://www.axios.com/media-streamers-debt-netflix-att-disney-8cbe1706-757b-4c64-bb53-76df5812d186.html" target="_blank">Axios</a> notes the huge debt being incurred to create these arsenals of content.</div><div><br /></div><div><span style="color: #cc0000;"><i>As reported in the new WSJ article, </i></span><i style="color: #cc0000;">just the top four streamers spent </i><i style="color: #cc0000;">well over $100B in content costs since this article was first published. Many consumers subscribe then cancel within months, and many others forego viewing that they would gladly pay a fair price for.</i></div><div><br />The nimbleness of the German Blitzkrieg ("lightning warfare") demonstrated how WWI strategies of trench warfare could be overcome quickly, and with far less carnage. The players in this streaming war should be looking for a similar Blitzkrieg business model. But I predict it will be the smaller players, less able to throw money at this, who will be driven to experiment with less familiar, but more agile, strategies.<br /><br />We wanted a "Celestial Jukebox" -- instead we got "subscription hell" and "subscription fatigue." This is the era of "peak content," but only a fraction of it is within any one person's reach -- its costs and its price are unsustainable. Can't we find an ecosystem business model that can sustain a celestial jukebox for the video industry?</div><div><br />Earlier this year I suggested how more agile strategies might operate, in <a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">"Risk-Free" Subscriptions to The Celestial Jukebox</a>. The essence of the risk-free subscription is to be flexible, in order to be value-based -- cheap or free at low or zero usage, and rising at a reasonable rate as usage and other aspects of value received increase in that month, up to a set monthly cap. <i>Think of it as a pay-ramp instead of a pay-wall</i>. This kind of flexibly affordable model that is <i>based on the value that each individual viewer actually receives</i> (and that ramps up less prohibitively than pay-per-view) will get more viewers to buy more subscriptions. That will generate more profit from more viewers for every provider who has content that viewers want.<br /><br />Such a pricing model also offers sensible economics across a mix of providers and aggregators. Disney could leave most of its content on Netflix for those who are only occasional viewers, while attracting its more regular fans to direct relationships on Disney+ with added features (such as its newest and hottest shows, and extra perks).<br /><br />Instead of the all-or-nothing battle for AYCE subscriptions, providers can build relationships with all or most of their potential viewers. Think of this as <i>agile pricing</i> for a good <i>customer value experience</i> (CVX) -- and for a fair revenue share to platforms, content providers, and creators.<br /><br />Disney is apparently ignoring such options, presumably thinking its Magic Kingdom will enthrall enough users to take the risk that they will not view (and enjoy) $7 worth every month. All of the great powers may similarly be too <i>entrenched </i>in their thinking to want to experiment.<br /><br />But less dominant providers -- and entrepreneurial upstart aggregators of many providers -- may come to embrace agility and Blitzkrieg asymmetry, seeing that the <i>biggest risk for them is not to take the risk that a risk-free model </i>will empower them to <i>fight a win-win battle</i> -- one based on desirability of their content, not just overwhelming scale.<br /><br />More on this theme:<br /><ul><li><a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">"Risk-Free" Subscriptions to The Celestial Jukebox? (A Working Draft)</a></li><li><a href="http://www.fairpayzone.com/2015/08/post-bundling-packaging-better-tvvideo.html" target="_blank">Post-Bundling -- Packaging Better TV/Video Value Propositions with 20-20 Hindsight</a></li><li><a href=""The Case Against Micropayments" versus "Subscription Hell" -- Finding Flexibility" target="_blank">"The Case Against Micropayments" versus "Subscription Hell" -- Finding Flexibility</a> (added 11/13/19)</li></ul><div style="text-align: center;"><i><span style="color: #cc0000;">----------</span></i></div><div><i><span style="color: #cc0000;"><br /></span></i></div><div><i><span style="color: #cc0000;">I commented further in 2017 in an <a href="https://www.fairpayzone.com/2017/09/open-letter-to-robert-iger-on-designing.html" target="_blank">Open Letter to Robert Iger on "Designing" the ESPN Fan's Experience</a> about what I saw as a hopeful sign, when Iger had said "You'll be able to pick and choose over time what it is you want, it won't necessarily be a one-size fits all." What I did not say then is that I had presented my suggestions for better pricing models in 2016 to senior executives at Disney (who have since moved on). </span><span style="color: #cc0000;">I was given t</span><span style="color: #cc0000;">he feedback that, after kicking it around across business units, people were "intrigued," but they did not currently have the bandwidth to pursue any real world testing of my "thoughtful" approach.</span></i></div><div><span style="color: #cc0000;"><i><br /></i></span></div><div><span style="color: #cc0000;"><i>When will a current player or new entrant try this kind of innovative and nimble strategy? </i></span></div><div><br /></div><div></div>------------------------<br /><div><div><b><i><span style="font-size: x-small;">More about FairPay</span></i></b><br /><b><i><span style="font-size: x-small;"><br /></span></i></b></div><div style="margin: 0px;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-size: x-small;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></span></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white; font-size: x-small;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span><b><span style="font-family: inherit;"><i>A brief introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br /><ul><li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span><b><span style="font-family: inherit; font-size: x-small;"><i>More in the </i><a href="http://www.fairpayzone.com/p/overview.html" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). </i></span></b></span></span></i></b></span></span></li><li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span><b><span style="font-family: inherit; font-size: x-small;"><i>There is also </i><a href="http://www.fairpayzone.com/p/more.html" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span></i></b></span></span></li><li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white; font-size: x-small;"><b><i><b style="background-color: transparent;"><span>And these journal articles, </span><a href="http://rdcu.be/HTfJ" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b></span></span></li><li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white; font-size: x-small;"><b><i><b style="font-family: inherit;"><i>Or, my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></i></b></span></span></li></ul></div><div><div style="margin: 0px;"><span style="font-size: x-small;"><i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></span></div></div></div><div><span style="font-size: x-small;"><em><br /></em></span></div></div>Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com10tag:blogger.com,1999:blog-7557842240801039419.post-39618858419673267122021-04-14T14:33:00.013-04:002021-05-01T11:45:00.846-04:00Web Monetization and Payments, Meet The Relationship Economy and FairPay<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfnyqiI0gQkwPqlixj73NyPIywmyZxWuPFD0UTErnnPcHRDgrDRt7Yj6MzbVdLvWv6iMh0bv2agQcs_u6lBTY_CR-65y0sKNlaxJW9EBcIL0RoeJ5lcycTOUwOZtqn0rr2hT4lX7OI_JUB/s366/handshake.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"></a><div style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfnyqiI0gQkwPqlixj73NyPIywmyZxWuPFD0UTErnnPcHRDgrDRt7Yj6MzbVdLvWv6iMh0bv2agQcs_u6lBTY_CR-65y0sKNlaxJW9EBcIL0RoeJ5lcycTOUwOZtqn0rr2hT4lX7OI_JUB/s366/handshake.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="242" data-original-width="366" height="133" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfnyqiI0gQkwPqlixj73NyPIywmyZxWuPFD0UTErnnPcHRDgrDRt7Yj6MzbVdLvWv6iMh0bv2agQcs_u6lBTY_CR-65y0sKNlaxJW9EBcIL0RoeJ5lcycTOUwOZtqn0rr2hT4lX7OI_JUB/w200-h133/handshake.jpg" width="200" /></a></div>This post is to introduce the FairPay framework and its larger context in The Relationship Economy to those involved with <a href="http://webmonetization.org/" target="_blank">Web Monetization</a>, <a href="https://www.w3.org/blog/wpwg/" target="_blank">Web Payments</a>, <a href="https://interledger.org/" target="_blank">Interledger</a>, <a href="https://coil.com/" target="_blank">Coil</a>, <a href="https://www.grantfortheweb.org/" target="_blank">Grant for the Web</a>, and related efforts to bring monetization directly into open Web standards. It positions FairPay as an architectural framework for important higher-level functions that can leverage the lower-level foundation of these standards and infrastructure that do not track user identity or even sessions.</div><div style="text-align: left;"><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; font-size: medium; mso-color-alt: windowtext;">PART 1 of this post provides an introduction to FairPay that is relevant to anyone interested in business and revenue models for the</span><span lang="EN"><span style="font-size: medium;"> <span style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">digital era.</span></span><span style="background: rgb(243, 243, 243);"><o:p></o:p></span></span></i></p><div>The FairPay framework provides a perspective on why and how provision for a higher-level of relationship-based features will be important to achieving the full potential of Web Monetization and payments. That perspective suggests that the ability to layer on a persistent identity (even if only an opaque identity) is needed to enable Web Monetization use cases to extend beyond a narrow niche.</div></div></div><div><div><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">FairPay creates a new, holistic framework for economic relationships in the digital world that bridges many worlds, including for-profit, non-profit, and the Creator/Passion Economy, and many perspectives, including transactions, micropayments, subscriptions, memberships, and tipping/donation models. FairPay was first conceived as a specific and radically new strategy for monetizing digital services in a way that is not only <i style="mso-bidi-font-style: normal;">effective and efficient, but also fair and win-win</i>. It has grown into a multi-dimensional framework that bridges most forms of human economic relationships through a holistic understanding of value.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">That led me to being introduced to the Web Monetization, Interledger, Grant for the Web and Coil community -- and seeing the time may be ripe for a fruitful bridging of silos. This became apparent after a series of conversations with two Mozilla Fellows looking at the broader context of those new initiatives (Matt Mankins and Amber Case), and with an advisor to Coil and the Grant for the Web (Desigan Chinniah)<i style="mso-bidi-font-style: normal;">.</i> (Some good background is in the<a href="https://www.w3.org/blog/2019/09/w3c-interview-coil-on-interledger-protocol-and-web-monetization/"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.w3.org/blog/2019/09/w3c-interview-coil-on-interledger-protocol-and-web-monetization/"><span style="color: #1155cc;">W3C interview</span></a> of Stefan Thomas by Ian Jacobs.) Much of the messaging of these initiatives refers (implicitly or explicitly) to "micropayments," a fundamental but fraught concept. Here are my suggestions for building on and broadening that vision to realize the potential of this important development more fully.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><i style="mso-bidi-font-style: normal;"><span lang="EN"><b>This is a discussion draft, intended to open dialog on these broader considerations and how to address them.<o:p></o:p></b></span></i></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><i style="mso-bidi-font-style: normal;"><span lang="EN"><b style="background-color: #f3f3f3;">The introductory sections of this post are cross-posted to the <a href="https://community.webmonetization.org/rreisman/web-monetization-and-payments-meet-the-relationship-economy-and-fairpay-2cjk" target="_blank">Web Monetization Community</a>. It is suggested that any comments/questions be posted there, to maximize collaborative focus within that active community.</b></span></i></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">When an earlier draft was nearly complete, Stephanie Rieger posted a very complementary analysis, <a href="https://yiibu.github.io/web-monetization/"><span style="color: #1155cc;">Three futures, Exploring the future of web monetization</span></a>. She provides an excellent tutorial on Web Monetization, three future scenarios on how it might be extended to support a variety of specific monetization models that have likely appeal to potential Web Monetization users, and specific thoughts and recommendations. We both seem to be very aligned in suggesting that while absolute privacy might be ideal in some respects and some use cases, “What’s not yet clear, is whether this binary approach to privacy will serve their users as well as they believe” (as she put it).<span style="mso-spacerun: yes;"> </span>She provides a section suggesting a structure for “layered privacy” that provides for controlled reductions in privacy in order to gain functional benefits.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Stephanie’s section on “three glimpses of the future” outlines possible futures that translate various business models and examples of current businesses into a Web Monetization context, leading to her recommendations. My presentation here of the FairPay framework steps back to undertake a more fundamental rethinking of our logic for value exchange -- how effective value exchange depends on relationships and the nuanced nature of value and outcomes, and how a new logic for those relationships can enable far more win-win exchanges.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">The FairPay framework suggests that a selective and controlled relaxing privacy constraints -- in business contexts in which a necessary level of trust and cooperation can be established -- can not only enable added function, but can enable a far more win-win level of value co-creation, to the benefit of all involved parties. Some brief updates tying to Stephanie’s article have been added below. (A deeper synthesis is left as future work.)<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">The logics for value exchange<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in;"><i style="mso-bidi-font-style: normal;"><span lang="EN">The greatest danger in times of turbulence is not the turbulence,<o:p></o:p></span></i></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in;"><i style="mso-bidi-font-style: normal;"><span lang="EN">it is to act with yesterday’s logic.<span style="mso-spacerun: yes;"> </span><span style="mso-tab-count: 1;"> </span>(--Peter Drucker)<o:p></o:p></span></i></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Web Monetization seeks a new logic that allows any Web service to be monetized directly from its users, without significant friction or dependence on intermediaries who may extract unfair costs (in both money and privacy). It does that by enabling direct streams of "small payments" within the browsing process (or simple direct payments or voluntary "tipping" payments), without revealing the identity of the paying user. My concern is not with this as a low-level service to build on, but that the protocols should be designed to allow for higher-level services that provide richer functionality.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">FairPay offers a new logic for monetizing services particularly suited to the world of digital content and other digital services. It also illuminates new perspectives on the familiar older logics that we commonly fail to see. As I understand it, Web Monetization currently assumes that monetization can be divorced from relationships, and limits awareness of relationships to maintain high levels of privacy. But the FairPay perspective suggests that there is only a limited class of use cases in which monetization can be effective, efficient, and fair without consideration of relationship -- and that often requires some relaxation of privacy constraints, at least among some actors.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">You may already know most of the facts I will cover here, but FairPay assembles those facts to provide a new perspective. The first time we ever try to drive a car, we learn that we cannot steer effectively by looking just a few feet ahead. To steer in a way that will get us where we want to go, we must look down the road. To drive well, we must be glancing in many directions. We need to understand and make predictions about many aspects of our environment. <i style="mso-bidi-font-style: normal;">Monetization is based on predictions of value</i> that occur in a similarly rich and highly context-dependent environment. FairPay offers a framework for understanding value in its full richness and context dependency. Even if you do not buy in to all the ideas I present, the hope is you will find new insights and a deeper understanding.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .25in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.25in;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">Key ideas for the Web Monetization community</span><span lang="EN" style="background: rgb(243, 243, 243);"><o:p></o:p></span></i></b></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">Some form of persistent identity is essential to many of the most fair and efficient models for value exchange, including not only subscriptions and memberships (whether flat-rate or value/usage-based), but advanced forms of voluntary or incentivized donation/tipping/patronship/PWYW (pay what you want) models.</span></i><span lang="EN"><o:p></o:p></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">A simple protocol for building on top of Web Monetization might provide that a publisher could ask as part of its initiation of an access request a “Do I know you?" Replies could be (1) "Yes, here is the reference to our relationship agreement." (2) "No, I wish to remain anonymous.” or (3) "No, but let’s negotiate a relationship agreement."</span></i><span lang="EN"><o:p></o:p></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">Those who opt in could negotiate what data is tracked, for how long, and with what constraints on use by that publisher, and on any allowable sharing with others. They could also negotiate what level of personal identification is enabled </span><span lang="EN">(in a layered structure such as Rieger suggests and with possible opaqueness of identity)<span style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">. Such agreements could be with individual publishers, or with an aggregator/</span>bundler<span style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;"> (with terms that could vary for defined publishers).</span></span></i><span lang="EN"><o:p></o:p></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">This could empower users and publishers to maximize privacy and independence from one another, and from any third parties, while affording the option to relax those constraints to negotiated levels that may offer better pricing as well as other more win-win relationship features and perks.</span></i><span lang="EN"><o:p></o:p></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">Such protocols could also allow for an “infomediary” with a fiduciary duty to serve the user as their agent, and to reveal only summary or limited data to publishers under defined conditions. Such infomediaries might also be delegated authority to conduct negotiations on behalf of the user, thus reducing the cognitive load that such nuance might otherwise place on the user.</span></i><span lang="EN"><o:p></o:p></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">Consider adding support in the low-level Web Monetization protocol for features such as instant refunds (full and/or partial) that can enable greater user control to improve pricing fairness, even without any identification.</span></i><span lang="EN"><o:p></o:p></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">Consider how Web Monetization and services built upon it relate to parallel issues of identity and relationship in Web advertising, such as in the Requirements for a Healthy Ecosystem in Advertising (RHEA) proposal.</span></i><span lang="EN"><o:p></o:p></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">Consider to what extent</span></i><span lang="EN"><a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html"><i style="mso-bidi-font-style: normal;"><span style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext; text-decoration-line: none; text-underline: none;"> The Elements of FairPay</span></i></a><i style="mso-bidi-font-style: normal;"><span style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;"> can be supported, individually and in key combinations, at the protocol level, independent of any software platform.</span></i><o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">Consider whether many of the above capabilities can be enabled by an “enhanced” WM provider (EWMP) offering separate “relationship” monetization services that depart from the strict WM requirement to not track site identity, and to act in part as an infomediary user agent in doing so.</span></i><span lang="EN"><o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .25in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.25in;"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(243, 243, 243); color: black; mso-color-alt: windowtext;">These are addressed in PART 2, after laying the foundations of this new logic in PART 1.</span><span lang="EN" style="background: rgb(243, 243, 243);"><o:p></o:p></span></i></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><u><span lang="EN"><span style="font-size: large;">PART 1 – FairPay concepts -- economic exchange in the digital era</span><o:p></o:p></span></u></i></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">A thought experiment about value -- Reisman's Demon<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Imagine a supernatural demon that might power a system of commerce. <a href="https://www.blogger.com/blog/post/edit/7557842240801039419/447090575813857316"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"><span style="mso-spacerun: yes;"> </span></span></a><a href="https://www.blogger.com/blog/post/edit/7557842240801039419/447090575813857316"><span style="color: #1155cc;">This demon</span></a> has a "god's-eye" view, a perfect ability to observe activity and read the minds of buyers and sellers to determine individualized "<i style="mso-bidi-font-style: normal;">value-in-use</i>:"<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l9 level1 lfo4; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">The demon knows how each buyer uses a product or service, how much they like it, what value it provides them, and how that relates to their larger objectives and willingness/ability to pay. It understands that the value of a given item or unit of service depends on when and how it is experienced. It is also aware of broader/external/social value impacts.<o:p></o:p></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l9 level1 lfo4; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">This demon can determine <i style="mso-bidi-font-style: normal;">the economic value surplus</i> of the offering -- how much value it generates beyond the cost to produce and deliver it.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in; mso-list: l9 level1 lfo4; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">The demon can go even farther, to arbitrate <i style="mso-bidi-font-style: normal;">how the economic value surplus can be shared fairly</i> between the producer and the customer. How much of the surplus should go to the customer, as a value gain over the price paid, and how much should go the producer, as a profit over the cost of production and delivery, to sustain their ability to continue those activities.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Even if we lack such a demon, we can internalize it as an ideal, and design relationships and pricing methods that seek to approximate what it knows. This demon would apply all of the elements described below.<span style="mso-spacerun: yes;"> </span>Advanced forms of FairPay apply all or most of them. Keep this demon and its sense of value and fairness in mind as you think about which elements of FairPay you might apply now, and which you might add in over time.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">What? Yield my privacy?<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Obviously, the demon’s “god’s eye” view sees through any cloak of privacy. Thus the challenge in applying the insights of the demon will depend on which actors can see through which privacy constraints to what extent. As noted below, this can depend on which actors are trusted for what purpose, and one approach to facilitating that with maximum privacy is to interpose trusted intermediaries that are legally obliged to act as fiduciaries on the user’s behalf to safeguard their data. Otherwise, if users demand absolute privacy, that has a cost. If you are a privacy absolutist, this may seem a major turnoff, but if you think through the economics outlined here, you may see why there might be a case to seek a more balanced solution -- to get both a level of privacy and the benefits of the Relationship Economy.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Note also that in many contexts we have not just a single buyer (WM “user”) and seller (WM “publisher”), but intermediaries in a <i style="mso-bidi-font-style: normal;">value chain</i>, including potentially aggregators/bundlers (including the special role of WM “providers”). My demon would be able to arbitrate a sharing of the value surplus all the way down the chain (to the extent that privacy constraints do not preclude that).<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Digital changes everything<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">The digital era brings two interacting sea-changes to value exchange. They have been increasingly understood separately, but how they combine has been largely ignored. The failure to consider that is why we have been frantically automating our old logic, making it <i style="mso-bidi-font-style: normal;">more efficient at faulty economics</i>, and wondering why things are getting worse. My demon sheds light on how they fit together, and how we can do much better.<o:p></o:p></span></p><ol start="1" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="margin-top: 12pt; mso-list: l2 level1 lfo8;"><i style="mso-bidi-font-style: normal;"><span lang="EN">The Invisible Hand fails for digital services.</span></i><span lang="EN"> We are steeped in the pricing model of classical economics: <i style="mso-bidi-font-style: normal;">the market uses prices to ration scarce supply against demand</i>. But <i style="mso-bidi-font-style: normal;">the invisible hand flails at digital services because there is no scarcity of supply.</i> Suppliers have turned to "artificial scarcity" to maintain prices (using paywalls and Digital Rights Management) but users rebel at that as an obvious artifice that seems hostile. "Information wants to be free." FairPay shows how the solution to this new problem is tied to the other change.<o:p></o:p></span></li></ol><ol start="1" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="margin-bottom: 12pt; mso-list: l11 level1 lfo10;"><i style="mso-bidi-font-style: normal;"><span lang="EN">Commerce has been moving from one-shot games of transactions to repeated games of loyalty and cooperation</span></i><span lang="EN">, to put it in game-theory terms, Traditional mass-marketing has centered on one-time transactions targeted to an endless universe of consumers -- lose one, find another. But we are increasingly turning to the superior economics of repeat business and "loyalty loops," especially with the emergence of "The Subscription Economy," "The Membership Economy," and the “Creator” or “Passion” Economy.<span style="mso-spacerun: yes;"> </span>I call this "The Relationship Economy" because even in the age of "1:1 marketing" and "mass-customization" we have barely begun to realize how improvements in computer-mediated relationships will empower mass-customized, 1-1 value propositions.<o:p></o:p></span></li></ol><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">These two come together in FairPay, because we need a new social contract to sustain creation of value. The only way to justify a fair price to creators of digital value is to understand that we are <i style="mso-bidi-font-style: normal;">not paying for current value, but to sustain the continuing creation of future value</i>.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l7 level1 lfo6; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">The only way to sustain a one-shot game for valuing an item of digital service is artificial. That makes it a zero-sum game in which the price will be based on pricing power, not win-win cooperation on co-creating value.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in; mso-list: l7 level1 lfo6; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">By shifting to a repeating game of relationship, we can create an "Invisible Handshake," a win-win process for seeking to find a fair price for each customer that can sustain and incent ongoing creation of the services they want to have available in the future.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">FairPay provides methods for adaptively seeking actual fair values in a win-win way -- for each consumer at each stage of this repeated game. That suggests ways to blend the best features of micropayments, subscriptions, memberships, and tipping/donation models to suit each business-customer context. Lack of support for ongoing relationships, at least at higher levels, would limit the use of Web Monetization and payments protocols as a base for such options.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext;">FairPay is a user-centered strategy framework and architecture, not a product</span><span lang="EN" style="background: rgb(238, 238, 238);"><o:p></o:p></span></i></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext;">FairPay is not a product, platform, or protocol. It is a framework and architecture that can be embodied in products, SaaS services/platforms, and/or protocols. My blog has extensive background (tabs list</span></i><span lang="EN"><a href="https://www.fairpayzone.com/p/more.html"><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext; text-decoration-line: none; text-underline: none;"> </span></i></a><a href="https://www.fairpayzone.com/p/more.html"><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: #1155cc;">key items</span></i></a><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext;"> from the blog and other publications (including a book, Harvard Business Review and two scholarly journals, Inc., and Techonomy) and</span></i><a href="https://www.fairpayzone.com/p/blog-page_14.html"><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext; text-decoration-line: none; text-underline: none;"> </span></i></a><a href="https://www.fairpayzone.com/p/blog-page_14.html"><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: #1155cc;">conferences</span></i></a><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext;">. The concepts of FairPay have been evolving since 2010 in discussions with hundreds of businesses (and non-profits) of all sizes, in a range of digital content and service businesses to much praise but are still not widely understood. FairPay combines a set of well-proven elements, drawing on recent development in marketing theory, behavioral economics, and game theory. The most advanced combinations still need testing to prove and refine, but the foundational</span></i><a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html"><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext; text-decoration-line: none; text-underline: none;"> </span></i></a><a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html"><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: #1155cc;">elements</span></i></a><i style="mso-bidi-font-style: normal;"><u><span style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext;"> </span></u><span style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext;">that have already been proven offer clear lessons applicable to most conventional commerce.</span><span style="background: rgb(238, 238, 238);"><o:p></o:p></span></i></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext;">Many view economic exchange through a political lens. Many businesspeople have hard-headed zero-sum attitudes, but many are more enlightened about win-win consumer and social value. Many consumers, creators, and technologists have an anti-business perspective. FairPay seeks to find a balance that is fair and win-win for all (as my demon would see it). My prime motivation in developing FairPay has been to</span></i><span lang="EN"><a href="https://www.fairpayzone.com/2019/08/the-reformation-of-market-capitalism-in.html"><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext; text-decoration-line: none; text-underline: none;"> </span></i></a><a href="https://www.fairpayzone.com/2019/08/the-reformation-of-market-capitalism-in.html"><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: #1155cc;">transcend the apparent conflict</span></i></a><i style="mso-bidi-font-style: normal;"><span style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext;"> between market capitalism and social values. FairPay seeks a logic for economics in the digital era that harnesses the genius of markets in a way that moves beyond the invisible hand to the invisible handshake that can restore human values to economics. I hope you will see that shine through whatever perspective you start from. I think this change in perspective can change the world in a way that all parties can embrace.</span><span style="background: rgb(238, 238, 238);"><o:p></o:p></span></i></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: rgb(238, 238, 238); color: black; mso-color-alt: windowtext;">My mission is to evangelize the concepts, and to advise those who seek to implement and test advanced forms of FairPay as I can. (More background on how I came to this is in the endnote below.)</span><span lang="EN" style="background: rgb(238, 238, 238);"><o:p></o:p></span></i></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Micropayments, subscriptions, and pricing risk<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj145Rhxd9aeypOKhFxh06o10AJmi_5yzPaS9_37xM55jbw6_Ew5JbAOcmBOIVHylXLsAyDKIuyGqmTjuS3I0SnyYXrofHEiewShiVwKAJZ2V_XTW4ZPwHut-CKbWnWp2sdwQumMog1qhw/s495/Risk.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="320" data-original-width="495" height="129" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj145Rhxd9aeypOKhFxh06o10AJmi_5yzPaS9_37xM55jbw6_Ew5JbAOcmBOIVHylXLsAyDKIuyGqmTjuS3I0SnyYXrofHEiewShiVwKAJZ2V_XTW4ZPwHut-CKbWnWp2sdwQumMog1qhw/w200-h129/Risk.jpg" width="200" /></a></div><span lang="EN">When we consider what my value demon knows, it becomes apparent that a key aspect of value that tends to be forgotten is <i style="mso-bidi-font-style: normal;">pricing risk</i>. Current convention in most consumer services is that the seller sets the price in advance and the buyer decides whether to take it or leave it. The buyer takes the risk of being disappointed at not getting the value they hoped for. That leads to regret for buying, or demanding a "risk discount," or not buying at all, even when they might have been pleasantly surprised by the value. If marginal costs are low, the seller takes little risk except that not enough customers will buy -- regretting that they did not ask for more, or less.</span><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">The consumer risk is very different for micropayments versus subscriptions.<a href="https://medium.com/coil/coil-building-a-new-business-model-for-the-web-d33124358b6"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://medium.com/coil/coil-building-a-new-business-model-for-the-web-d33124358b6"><span style="color: #1155cc;">Stefan Thomas' 2018 article</span></a> notes the issue of both models being built as closed systems, and other Coil and Web Monetization documents refer to issues of<a href="https://webmonetization.org/docs/explainer"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://webmonetization.org/docs/explainer"><span style="color: #1155cc;">friction</span></a><u> </u>and<a href="https://coil.com/p/sharafian/Doubling-Down-on-Privacy/cD_ZiwT2J"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://coil.com/p/sharafian/Doubling-Down-on-Privacy/cD_ZiwT2J"><span style="color: #1155cc;">privacy</span></a>, but I suggest it is the issue of consumer pricing risk that is paramount to user acceptance of these models.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Starting with<a href="https://www.fairpayzone.com/2018/11/the-case-against-micropayments-from.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/2018/11/the-case-against-micropayments-from.html"><span style="color: #1155cc;">micropayment pricing risk</span></a>, many are familiar with Clay Shirky's 2000 classic "<a href="https://www.blogger.com/blog/post/edit/7557842240801039419/3789530131866449571"><span style="color: #1155cc;">The Case Against Micropayments</span></a>." (Not so many know<a href="https://www.blogger.com/blog/post/edit/7557842240801039419/3789530131866449571"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.blogger.com/blog/post/edit/7557842240801039419/3789530131866449571"><span style="color: #1155cc;">Andrew Odlyzko</span></a>'s more scholarly paper with the same title, based on his work on telecommunication economics, where micropayments have a century-old history, such as for minutes of long distance usage.) Key issues are:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l10 level1 lfo11; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">Most pressing is the problem of "the ticking clock," the constantly incrementing meter, which brings the risk of "bill shock" when <i style="mso-bidi-font-style: normal;">micro</i>payments add up to <i style="mso-bidi-font-style: normal;">macro</i>payments. That has long been known (as has the resulting consumer preference and higher willingness to pay for flat rate plans, even though they cost the typical consumer more). This problem can be somewhat reduced by providing for volume discounts and for price caps and other variabilities, but simple micropayment models rarely allow for that at all, or do it with just a few usage tiers (as for mobile phone minutes or data gigabytes). But volume discounts and caps require tracking usage over a billing period, and that requires a persistent identity.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in; mso-list: l10 level1 lfo11; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">There are also problems of paying for items that were not satisfactory -- and of scanning many items lightly but having to pay full price for all of them. Some services enable ways to adjust for that, but again, that may require an identity.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Those risks to the user can be countered by aggregators that offer consumers flat rate plans (like Netflix, Spotify, and Coil). These might be considered hybrids that charge consumers on a subscription basis but pay their suppliers on a micropayment basis. That shifts consumer pricing risk to the issues with subscriptions (next). It also shifts an unfair level of pricing risk to the suppliers. Instead of set unit rates per item, the suppliers get some share of the flat rate, so heavy users generate rapidly declining unit rates of payment that quickly diminish to zero. The whales who should be generating the most revenue instead get an unsustainably high discount. Aggregators struggle, and creators struggle even more.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">(Keep in mind that the “micro” part of micropayments can occur at the actual payment level, or just at a metering level. Most traditionally micropayment pricing models are not actually paid as individual micropayments, but metered and then totalled into the monthly bill. That reduces friction and transaction costs, but leaves the risks.)<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Subscriptions involve a rather different set of pricing risks to the user:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l3 level1 lfo7; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">Most B2C subscriptions are flat-rate, all-you-can-eat (AYCE) plans. That eliminates micropayment usage-based "bill shock," but brings the new risk of not using enough in any given period to justify the price. It also continues the risk of not being happy with what you used.<o:p></o:p></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l3 level1 lfo7; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">As subscription models proliferate, the new problem of "<a href="https://www.fairpayzone.com/2018/11/the-case-against-micropayments-from.html"><span style="color: #1155cc;">subscription hell</span></a>" has become a major issue. If every provider of video or news or magazine content demands $5 or $10/month (even if you may only want one item per month), you need to spend a fortune to have access to all the content you want. That leads to the wasteful pattern of subscribe-binge-cancel.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in; mso-list: l3 level1 lfo7; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">Bundling of services, as with cable TV channel bundles offered by aggregators, can provide a level of discounting across multiple suppliers, but then consumers face the problem of "bundle hell." How do I choose in advance among all these bundles? How do I know if I will want to watch HBO or Showtime or Cinemax or any bundle of premium channels in any given month?<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">No wonder so many consumers, publishers, and creators are frustrated and angry. That is why we need to step back, reexamine where we are, and look for a new logic.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Keep in mind these fundamental questions of pricing risk:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l4 level1 lfo9; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN">Who takes the pricing risk?</span></i><span lang="EN"> </span></b><span lang="EN">Buyer or seller or both? Remember that both value and risk are a function of the price, the experience or outcome of an exchange, and the time the price is set.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in; mso-list: l4 level1 lfo9; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">That breaks down into two questions: <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">who decides the price, and when do they decide it? </i></b>Only when the answers are right will the value exchange be efficient and fair.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">The Relationship Economy</span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"></span></p><div class="separator" style="clear: both; text-align: center;"><span lang="EN"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFUmmRaQoGyGYKaclwrV1_v_6OK2ExiZRv6a2WTy6I6QqxCBikS-FZm-W-LEP5tBqxEg5fKz6nczC5q6BMakTQqut0f1hqsThtlQqsEP1_6eABaCOQUcebGELUn1e98ge1G5HY-fJ5YGRl/s1401/Loyalty+loop+journey+R1511E_EDELMAN_STREAMLINING.png" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="851" data-original-width="1401" height="243" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFUmmRaQoGyGYKaclwrV1_v_6OK2ExiZRv6a2WTy6I6QqxCBikS-FZm-W-LEP5tBqxEg5fKz6nczC5q6BMakTQqut0f1hqsThtlQqsEP1_6eABaCOQUcebGELUn1e98ge1G5HY-fJ5YGRl/w400-h243/Loyalty+loop+journey+R1511E_EDELMAN_STREAMLINING.png" width="400" /></a></span></div><span lang="EN">Businesses of all kinds have come to understand that, in general, it is far more profitable to make repeat sales to existing customers than to acquire new ones. Marketers design customer journeys to build "loyalty loops." In basic forms this may not require awareness of customer identity, but knowing your customer enables creation of a much more powerful loyalty loop. Two-way dialog with your customer adds even more to that.<o:p></o:p></span><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Relationships are even more central to the subscription and membership models that are increasingly dominating commerce. Such businesses are very focused on Customer Lifetime Value, to offset the fact that customer acquisition costs are high and churn is costly.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Currently, much of this focus on relationships is one-way. They want to know how to target you and sell you on their formulation of a value proposition. But the most enlightened businesses want to not just talk at you but listen to you. Computer-mediated communications are making it increasingly easy and essential to build real customer relationships that seek to understand and center on value as perceived by each customer.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">(For much more on this theme, see<a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html"><span style="color: #1155cc;">The Relationship Economy -- It's All About Valuing Customer Experiences</span></a>.)<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">The history of the price tag<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">We tend to forget that the price tag was only invented in the mid-1800s. We just assume that sellers set a price and customers take it or leave it. It has mostly been that way through our entire lifetimes.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l5 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">But for most of human history, prices in village markets were customized. Prices (in money or barter) emerged from individual negotiations in personal contexts, depending on needs, bargaining powers, and relationships. They generally reflected win-win "communal norms" including caring, fairness, and even generosity.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in; mso-list: l5 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">The price tag was invented by John Wanamaker and others when they first built large department stores (see this<a href="https://www.youtube.com/watch?v=FcWgvRXbet8"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.youtube.com/watch?v=FcWgvRXbet8"><span style="color: #1155cc;">amusing video</span></a>). Sellers became institutional, targeting a mass market of "consumers." They had to be scalable and efficient, and thus to limit the discretion of sales clerks. That changed everything: the “take it or leave it” offer led many to leave it -- leading to bargain-hunting and feelings of exploitation and alienation that have become endemic and still worsening.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Now we are in an age of mass-customization and 1:1 marketing -- why not for price? The question is how to do it fairly, effectively, and efficiently at scale.</span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Value-based pricing<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"></span></p><div class="separator" style="clear: both; text-align: center;"><span lang="EN"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhglM6HsU9uXmJQjmymj0H8-MrZT6Ak6qg5eC-IDXoXckAlr3d90PqzYJ8XcYFTcBNA73IwdXGgmIwrPfwW_ePafsM1XKkGq-DUjTVN6FSEJwImkTKB21VMG6V1i5YRupQRGUrsTunSBrYy/s2048/value+price.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1365" data-original-width="2048" height="133" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhglM6HsU9uXmJQjmymj0H8-MrZT6Ak6qg5eC-IDXoXckAlr3d90PqzYJ8XcYFTcBNA73IwdXGgmIwrPfwW_ePafsM1XKkGq-DUjTVN6FSEJwImkTKB21VMG6V1i5YRupQRGUrsTunSBrYy/w200-h133/value+price.jpg" width="200" /></a></span></div><span lang="EN">Business students learn that there are three basic ways to set price: cost-based, competition-based, or value-based. It is now widely accepted that the best way is to be value-based. That is what my value demon seeks to do.<o:p></o:p></span><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">The challenge is that being value-based is complex. Being usage-based is a start. Units of usage may be items, minutes, miles, etc. and more units usually correlates to more value. But not always, and usually not in a linear way. Value is a function of many dimensions, each possibly involving different units of usage -- and still there is much more to value.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Beyond usage, outcomes or performance are increasingly recognized as a truer measure of value. Increasingly, businesses are realizing that they are not selling products or items, they are selling desired outcomes, often in the form of an experience. One of the best business books of 2020 is<a href="https://mitpress.mit.edu/books/ends-game"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://mitpress.mit.edu/books/ends-game"><i style="mso-bidi-font-style: normal;"><span style="color: #1155cc;">The Ends Game</span></i></a> (coauthored by Marco Bertini, the marketing scholar who was my coauthor on an<a href="http://bit.ly/1uAEyxD"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="http://bit.ly/1uAEyxD"><span style="color: #1155cc;">HBR article</span></a> and a<a href="http://link.springer.com/article/10.1057/s41272-018-0143-3"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="http://link.springer.com/article/10.1057/s41272-018-0143-3"><span style="color: #1155cc;">journal article</span></a> on FairPay).<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Truly value/outcomes-based pricing is still limited in consumer markets, but it is increasingly considered best practice in B2B markets. This is especially true for big-ticket items like industrial machinery, because determining value is complex and costly. It is still a challenge to do it well at scale for small transactions. But subscription services company Zuora has shown that even basic usage-based pricing can be powerful as an<span style="mso-spacerun: yes;"> </span>element of a total strategy. Their tracking of data on over 900 companies that they serve<a href="https://www.retailtouchpoints.com/features/executive-viewpoints/what-goldilocks-can-teach-us-about-fending-off-amazon"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.retailtouchpoints.com/features/executive-viewpoints/what-goldilocks-can-teach-us-about-fending-off-amazon"><span style="color: #1155cc;">found</span></a> that the fastest growth was with some non-zero level of usage based pricing, but less than 50% usage-based.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">But usage-based pricing takes us back to the per minute or per gigabyte micropayment models that "consumers hate" as Shirky said. FairPay suggests a smarter way that consumers may come to love. But, before we get to that, how does the new challenge of digital change things?<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Digital changes everything about pricing and customer relationships<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">We all know the classic dilemma of digital pricing:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l0 level1 lfo2; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">"<i style="mso-bidi-font-style: normal;">Information wants to be free</i>" because it can be infinitely replicated at essentially zero cost. It is a world of abundance. Consumers have become used to free, and freemium, and ask “why should we pay anything at all?” But...<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in; mso-list: l0 level1 lfo2; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">"<i style="mso-bidi-font-style: normal;">Information also wants to be expensive</i>" because it often has very high value and is usually costly to create. Creators need to earn a living and invest in creating more information.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">To resolve this dilemma, we must re-think the core assumptions of our value exchange process to find a new logic. We are no longer allocating scarce resources with the invisible hand, but we need to sustain creation of future services. How can we do that in a way that balances value, ability to pay, cost, and a fair profit that creators need to live on?<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Hint: <i style="mso-bidi-font-style: normal;">most consumers are willing to pay even when they don’t have to, if they feel you deserve it</i>. But before explaining how FairPay addresses that, a few more key ideas.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Experience goods and the long tail of customer demand</span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"></span></p><div class="separator" style="clear: both; text-align: center;"><span lang="EN"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAFY7TrX7ArKSoH_kcUTIzj-h0jDqLUq8XBeLuk9zPiH7NdY9UIzNlNSKYKKnFV4X0gyjNwpcqVo1oQtgK0iNNhKZZtza65XDuNyt-LBIuF4KxQBDn-cHLrc7OofPPCDgoCIjuDOS2W1e0/s477/Long-Tail-Prices.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="303" data-original-width="477" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAFY7TrX7ArKSoH_kcUTIzj-h0jDqLUq8XBeLuk9zPiH7NdY9UIzNlNSKYKKnFV4X0gyjNwpcqVo1oQtgK0iNNhKZZtza65XDuNyt-LBIuF4KxQBDn-cHLrc7OofPPCDgoCIjuDOS2W1e0/s320/Long-Tail-Prices.jpg" width="320" /></a></span></div><span lang="EN">In thinking about a fair price, it is natural to think in generalities and to analyze for the “typical” consumer. But willingness to pay varies widely from customer to customer, as shown in this demand curve.<a href="http://www.fairpayzone.com/2010/06/long-tail-of-prices-uncoil-it-with.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="http://www.fairpayzone.com/2010/06/long-tail-of-prices-uncoil-it-with.html"><span style="color: #1155cc;">The Long Tail of Prices</span></a> is a tail of potential buyers ordered by the price they are willing to pay.<o:p></o:p></span><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Conventional set prices lop off the long tail by refusing to make sales to those unwilling to pay the set price. This eliminates a potentially significant market, out of fear that selling to those buyers will cause the other buyers to demand lower prices. Conventional set prices also lop off the top of the fat head, since the seller gets only the set price, even from those who might be willing to pay more. So, revenue is only the green box, even though there is a red surplus at the top of the head, and a long amber tail to the right. This shows the huge opportunity that FairPay opens up. No matter what price you pick, it will be right only for a small fraction of your potential buyers. If my demon could set individualized prices, we could get revenue from all interested customers.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">This long tail problem is especially challenging because digital products and services are not discrete scarce “products,” but actually services that are “experience goods.” We are buying access, entitlements, and usage – and the broader outcomes they enable. The nature of that value is very personal and depends on how many units of service are consumed, over what time, with what intensity, and with what results.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">On the plus side, digital services are highly measurable. There is rich data on what was consumed and how. That has a cost to privacy, but the gain is that it can enable providers to understand at least key components of the value provided to each user. That data on individual consumption can be used to help customize prices, and that customization can be very good for the user when done fairly.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Free and freemium to reduce pricing risk<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">The marketing value of free trials has long been known, and digital has led to a plethora of variations on free, in the forms of freemium, pay what you want (PWYW), crowdfunding, tipjars, and free trials. Clearly smart use of free services can reduce pricing risk, but what is the right level for a given user? The problem with freemium and other free offers is that it is still a pre-set price – what is the line between free and paid? However you may set it, it will be wrong for many users, much of the time. And because we are dealing with experience goods, what is right for a given user at one time, will be wrong at another time. How can we embrace this dynamic variability and manage pricing risk?<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Post-pricing – separate the sale from the price<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">The realization that sparked my original conception of FairPay was that I would be happy to pay for a service that I valued <i style="mso-bidi-font-style: normal;">after I had experienced that value</i>. After seeing the long history of digital pricing challenges and watching trials of “freeware” software and PWYW offers (such as Radiohead’s widely noted PWYW album offer in 2007), I was reflecting on some services that surprised me at how much I valued them. It struck me that I never would have been willing to agree to pay up-front, but I would be happy to pay in hindsight.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">By pricing the experience after it is known, you remove the customer’s risk discount. Up-front pricing requires the customer to discount for possible disappointment, and that risk often leads them to not buy at all. And even with PWYW offers, how do we know what price we want to offer? Studies show that many buyers balk, rather than deal with that uncertainty. Strangely, very few PWYW offers let users set the price after the experience (but<a href="https://www.fairpayzone.com/p/pricing.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/p/pricing.html"><span style="color: #1155cc;">recent studies</span></a> now show that those are far more effective).<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Tipping models are the primary exception to setting prices up front. But even so, the challenge is to get the customer to actually pay after they have consumed the service.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Managing pricing risk<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN">Who takes the pricing risk?</span></i></b><span lang="EN"> This comes down to two key issues:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"></p><ul style="text-align: left;"><li><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN">Who decides the price?</span></i></b><span lang="EN"> We are conditioned to think it is the seller, but with PWYW and similar offers, it is the buyer. It can be joint, in the case of auctions, and was traditionally joint in village markets. Clearly joint determination has the potential to best manage risk to each party, and to apply the fullest information from both parties on the nature of the experience and its costs.</span></li><li><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN">When do they decide it?</span></i></b><span lang="EN"> Before the selection, at the time of selection, or after the experience? If I buy a cable TV bundle, do I know which premium channels I will want when I subscribe? At the start of each month? When I select each program? Do I know what price seems fair before the end of the month’s viewing?</span></li></ul><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">FairPay leads to multiple levels of answers. It suggests the best answers are when the decision is <i style="mso-bidi-font-style: normal;">joint</i>, and <i style="mso-bidi-font-style: normal;">after the experience</i>. That gets closest to what the demon knows. However, even if the seller unilaterally decides the price, they can do that better after the experience.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Remember, for digital services, the provider risks nothing …except the opportunity to take money in exchange for no value. That will be less and less tolerated.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">How FairPay changes the game<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">FairPay centers on value throughout the course of an economic relationship by creating a repeated game that seeks fairness and cooperation by <i style="mso-bidi-font-style: normal;">empowering </i>customers, engaging in <i style="mso-bidi-font-style: normal;">dialog </i>with them, and tracking their <i style="mso-bidi-font-style: normal;">reputation </i>for fairness.</span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVLPHGLq3CVisyx8NThfe2edsp4k92DiOb8nwIdpkx74xEBjWTVgh2PyvFN4pL6Z3w240BbaeoZhHRlIxXYnJrvgRiPH_VbPW0cs1wjQkYPqoX5BG3wHo5I4kp4D_KVV4DBIVJnEYPD9VP/s960/Game+change+diagram.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="720" data-original-width="960" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVLPHGLq3CVisyx8NThfe2edsp4k92DiOb8nwIdpkx74xEBjWTVgh2PyvFN4pL6Z3w240BbaeoZhHRlIxXYnJrvgRiPH_VbPW0cs1wjQkYPqoX5BG3wHo5I4kp4D_KVV4DBIVJnEYPD9VP/w400-h300/Game+change+diagram.jpg" width="400" /></a></div><span lang="EN">To see how FairPay changes the game with simple twist, consider a subscription, as contrasted in the diagram:</span></div><div><span lang="EN"><p class="MsoListParagraphCxSpFirst" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in; mso-add-space: auto; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN" style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><i><span lang="EN">The conventional repeated game</span></i><span lang="EN"> is a one-sided
game of <i>customer loyalty</i>: "Here
is our monthly price, <i>take it or leave it</i>.
We hope <i>you will take the risk</i>--and be
satisfied enough that <i>you will continue
this game</i>." <o:p></o:p></span></p>
<p class="MsoListParagraphCxSpLast" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in; mso-add-space: auto; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN" style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN"><a href="http://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html"><i><span style="color: #1155cc;">The FairPay
repeated game</span></i></a> is a cooperative game of <i>joint fairness</i>: "We will <i>remove
your pricing risk</i> by letting you <i>pay
what you think is fair for you</i> after each month's use--but <i>we will continue this game</i> (beyond a few
trial cycles) only if we agree that you are being reasonably fair."</span></p></span></div><div><div class="separator" style="clear: both; text-align: center;"><span lang="EN"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjeTAk5UpZLNyjD2EMG7L4oFYe3-4VZQ1aB7aPOIHD2xc_7WnMgWVp3h7kHBy3BNCWsOfMrf6_Z7ECGurpIrvnkXn2vGHnS-nnoiC3Ls5uAm-WOnRcLx5P7HgdBYQIPMCfsDV04_EnMaOv4/s960/FairPay+Repeated+Game.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="720" data-original-width="960" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjeTAk5UpZLNyjD2EMG7L4oFYe3-4VZQ1aB7aPOIHD2xc_7WnMgWVp3h7kHBy3BNCWsOfMrf6_Z7ECGurpIrvnkXn2vGHnS-nnoiC3Ls5uAm-WOnRcLx5P7HgdBYQIPMCfsDV04_EnMaOv4/w400-h300/FairPay+Repeated+Game.jpg" width="400" /></a></span></div><span lang="EN">A more detailed diagram breaks down the<a href="https://www.fairpayzone.com/2011/05/guiding-fairpay-pricing-for-control-and.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/2011/05/guiding-fairpay-pricing-for-control-and.html"><span style="color: #1155cc;">key steps</span></a>.<o:p></o:p></span><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .25in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.25in;"><span lang="EN">1.</span><span lang="EN" style="font-size: 7pt; line-height: 10.7333px;"> </span><span lang="EN">The seller sets the basic rules up front, explaining how this new model works, gives the buyer access, and then at the end of the period reminds the user what they used and suggests a price they think fair.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .25in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.25in;"><span lang="EN">2.</span><span lang="EN" style="font-size: 7pt; line-height: 10.7333px;"> </span><span lang="EN">The buyer has access for the period, reviews the results and suggested price, and is free to adjust that up or down as they think fair, and is invited to give reasons for any adjustment (using multiple choice selections).<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .25in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.25in;"><span lang="EN">3.</span><span lang="EN" style="font-size: 7pt; line-height: 10.7333px;"> </span><span lang="EN">The seller decides whether to repeat the game by tracking the price and any reasons given, assessing its fairness, and considering fairness over prior cycles.</span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">The seller can nudge the buyer toward being fairer and more generous. They would be especially lenient for an initial learning period, treating that much like a free trial.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"><a href="https://www.fairpayzone.com/2011/03/fairpay-pricing-some-process-diagrams.html"><span style="color: #1155cc;"></span></a></span></p><div class="separator" style="clear: both; text-align: center;"><span lang="EN"><span style="color: #1155cc;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6bypbPvN2h2BHQ-e9C9zJFgZ-sdldNh4q8YUfr48AJywa9JLXzVLHMqBbLpuSJ_kx2vSPmGUgpxV4TQHTip2NjPIWQFiPVdU4yl0FL_eE_c4bnUDf8EzN8fPUwuaNrzEswkL2WCp_fjXi/s728/FairPay+Value+Discovery+Engine.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="546" data-original-width="728" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6bypbPvN2h2BHQ-e9C9zJFgZ-sdldNh4q8YUfr48AJywa9JLXzVLHMqBbLpuSJ_kx2vSPmGUgpxV4TQHTip2NjPIWQFiPVdU4yl0FL_eE_c4bnUDf8EzN8fPUwuaNrzEswkL2WCp_fjXi/w400-h300/FairPay+Value+Discovery+Engine.jpg" width="400" /></a></span></span></div><span lang="EN"><span style="color: #1155cc;">The next diagram</span> shows how this can gain far more nuance and combine with a conventional paywall as a backstop. They may start with the paywall and offer FairPay to selected customers they expect to value their service and be fair. They can offer multiple tiers of service, starting new FairPay users on a basic tier, holding out premium offers as a “carrot” to motivate generous payments. The optional “stick” is that those who are repeatedly unfair can lose their FairPay privilege and be dropped back to the set-price paywall (or turned away).</span><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"></span></p><div class="separator" style="clear: both; text-align: center;"><span lang="EN"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhFQS9_4j0KtExszCS4cNIp47OLuvB29jln5zrj4lGe9lJeR0pPd1Kp6WQgvBceG_UqnL8yuBalaVV3oBwL72Ogwk5WtLmBFEVIJi5iqgw2EjzhzCq76rp6VUF6dA4N8LGmNpFdxS1AUjky/s800/ESADE+fairplay-esade.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="209" data-original-width="800" height="105" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhFQS9_4j0KtExszCS4cNIp47OLuvB29jln5zrj4lGe9lJeR0pPd1Kp6WQgvBceG_UqnL8yuBalaVV3oBwL72Ogwk5WtLmBFEVIJi5iqgw2EjzhzCq76rp6VUF6dA4N8LGmNpFdxS1AUjky/w400-h105/ESADE+fairplay-esade.jpg" width="400" /></a></span></div><span lang="EN">This serves as an adaptive and emergent price discovery engine that applies the repeated game structure to foster cooperation on both sides, based on empowerment, dialog, and reputation.<o:p></o:p></span><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in; text-align: left;"></p><ul style="text-align: left;"><li><span lang="EN">It learns to find the value sweet spot for each customer, and to dynamically segment customers based on what they value and their fairness reputation.<o:p></o:p></span></li><li><span lang="EN">Fairness can be enforced as strictly or leniently as the seller desires for any given customer or segment.<o:p></o:p></span></li><li><span lang="EN">Alternatively, there can be no enforcement (making payments purely voluntary), but still set after the experience, and still in a process that can individually nudge toward generosity.<o:p></o:p></span></li><li><span lang="EN">It can be combined with conventional models and offered as a privilege to the customers who will be most delighted and fair.<o:p></o:p></span></li><li><span lang="EN">Instead of using occasional sampling and focus groups to discover the right value proposition in an artificial setting, this can constantly test and review value propositions for each customer on each real transaction cycle.<o:p></o:p></span></li></ul><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Aligning price with value in the broadest sense – in both directions<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Because the FairPay process sets value in dialog with each user, it can factor in whatever aspects of value the two parties agree are relevant. That value can include aspects of value that are generally ignored in pricing, and aspect of value the go from customer to the “provider.”<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .25in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.25in;"></p><ul style="text-align: left;"><li><span lang="EN">From provider to consumer: not just value in use relating to specific experiences and outcomes, but other “soft” value, including service and support; participation, listening, and responsiveness, and social values to the community, environment, etc.<o:p></o:p></span></li><li><span lang="EN">From consumer to provider -- a “reverse meter:” Beyond monetary payments, the dialogs on value can incorporate other currencies, such as negotiated levels of attention to advertising or use of personal data; credit for user-generated content or other co-creations such as participatory journalism, and virality, leads, and volume/loyalty discounts.<o:p></o:p></span></li></ul><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Again, the value proposition can consider whatever factors both parties agree to be relevant. This can include <i style="mso-bidi-font-style: normal;">ability to pay</i> in far more nuanced ways than now common with student and senior discounts. This can include any aspects of <i style="mso-bidi-font-style: normal;">Corporate Social Responsibility (CSR), Triple Bottom Line, or Environment Social and General (ESG)</i> – and brings them in to the main financial bottom line. It can make explicit the now implicit price premium expected by businesses that gain customer approval as good corporate citizens.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">This framework can also extend through the ecosystem value chain. With the “reverse meter” negotiated attention to ads makes the user become the customer so that ads are more relevant and non-intrusive. With aggregators, customers can designate a value share to specific favorite creators, such as to the artists most listened to and appreciated on a music service like Spotify. Such contributions can be a voluntary layer on top of any standard pricing -- effectively a tipping layer on top of set pricing for the basic service).<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"></span></p><div class="separator" style="clear: both; text-align: center;"><span lang="EN"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEju2O7E2vzhuks5jKlmiwHnhS0W7AUqpMckiMk92IWwO5U16ohxm1U9hDy5X4l8J4hLtvC_9DpgDgehqPy4ECruiGT1OvUKBII9FQFlHiG7ibbQuU_50bsz0lkRAX9REgbxIXh9qK62xDhE/s886/Invisible+hand.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="684" data-original-width="886" height="309" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEju2O7E2vzhuks5jKlmiwHnhS0W7AUqpMckiMk92IWwO5U16ohxm1U9hDy5X4l8J4hLtvC_9DpgDgehqPy4ECruiGT1OvUKBII9FQFlHiG7ibbQuU_50bsz0lkRAX9REgbxIXh9qK62xDhE/w400-h309/Invisible+hand.jpg" width="400" /></a></span></div><span lang="EN">Think of this new social contract as an<a href="http://www.fairpayzone.com/2015/05/an-invisible-handshake-for-digital.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="http://www.fairpayzone.com/2015/05/an-invisible-handshake-for-digital.html"><i style="mso-bidi-font-style: normal;"><span style="color: #1155cc;">invisible handshake</span></i></a>--an agreement to cooperate to seek a fair level of financial support to sustain future creation of desired services. That is based on rich, ongoing conversations about value. What value do I want from you? What value can you offer to me? What does it cost to produce? What outcomes can I achieve with it? How do we share fairly in the surplus? Instead of the old invisible hand that works across a market at a point in time, it is an agreement that works over the course of our relationship. Unlike the invisible hand, which works for all customers across the market at a point in time, this invisible handshake works along each relationship over time.</span><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Dynamic value discrimination not price discrimination<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Many see that FairPay is a form of dynamic pricing and ask about that. Price discrimination rightfully concerns consumers because as currently practiced, it is usually done in stealth, as a way to extract as much of the consumer’s value surplus as possible. But with FairPay, this is transparent, and the customer opts in to the dynamic price, actually being the one to set it.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in; text-align: left;"></p><ul style="text-align: left;"><li><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">“Discrimination” can be a negative word, but with FairPay it become “self-discrimination.” That is why I refer to this as “value discrimination” rather than “price discrimination.” I argue that “<a href="https://www.fairpayzone.com/2012/01/price-discrimination-can-be-good.html"><span style="color: #1155cc;">price discrimination” can be good</span></a> when it is “value discrimination.”<o:p></o:p></span></li><li><span lang="EN">FairPay engages consumers in a rewarding process based on jointly customized value propositions that lead to fair segmentation in all dimensions of value: context, usage, time, number of users, devices, and ability to pay.<o:p></o:p></span></li></ul><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Value discrimination leads to optimal co-creation of value with optimal sharing of the value surplus.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Key evidence and enablers – not as crazy as it may seem<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">While full forms of FairPay have not yet been proven in practice, the elements behind it are well established.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Modern<a href="https://www.fairpayzone.com/2014/10/making-customers-want-to-pay-you.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/2014/10/making-customers-want-to-pay-you.html"><span style="color: #1155cc;">behavioral economics</span></a> sheds light on how this strategy leverages human nature. People are not <i style="mso-bidi-font-style: normal;">Homo economicus</i>, purely rational profit maximizers who will never pay any more than they must. Thousands of PWYW success stories and dozens of research studies prove that people are <i style="mso-bidi-font-style: normal;">Homo reciprocans</i>, driven to reciprocate fairness with fairness (and even altruism).<span style="mso-spacerun: yes;"> </span>This applies in two ways:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"></p><ul style="text-align: left;"><li><i style="mso-bidi-font-style: normal;"><span lang="EN">Traits</span></i><span lang="EN">: Individuals vary in how inclined they are to fairness, reciprocity, altruism and related traits that affect how generously they are willing to pay. This argues for segmenting users based on their fairness traits.<o:p></o:p></span></li><li><i style="mso-bidi-font-style: normal;"><span lang="EN">Situations</span></i><span lang="EN">: How these traits apply depends on the nature of the relationship. Economic/exchange norms are coldly business-like, favoring hard-nosed <i style="mso-bidi-font-style: normal;">quid pro quo </i>behavior, while social/communal norms are more friendly and human, favoring more flexibility and generosity. Even business relationships can enjoy more social/communal norms when both sides have positive feelings and trust toward the other. This argues for building the kind of relationship that shifts customers toward those favorable behavioral norms.<o:p></o:p></span></li></ul><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Game theory shows that when a repeated game is well designed, players will invest in a positive fairness reputation in order to gain a continuing privilege. If they see that FairPay is a privilege that benefits them, they will invest in fairness so they can continue to enjoy that privilege. (My<a href="https://www.fairpayzone.com/2014/10/making-customers-want-to-pay-you.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/2014/10/making-customers-want-to-pay-you.html"><span style="color: #1155cc;">resource guide</span></a> links to many studies, including some showing that, as well as some showing that post-pricing enhances the results of PWYW offers.)<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Computer-mediated dialog is rapidly improving to enable sophisticate dialogs about value to be handled at scale with only limited need for human intervention.<a href="http://www.fairpayzone.com/p/algorithm.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="http://www.fairpayzone.com/p/algorithm.html"><span style="color: #1155cc;">Simple decision rules</span></a> can track fairness to control nudging and offer decisions. As artificial intelligence, predictive analytics, machine learning, and natural language understanding are applied, the process can gain sophistication and nuance. A wealth of usage data will enable validation of whether customer’s reasons for paying less that suggested are honest.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">This background bears on the most common concerns about FairPay:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><i style="mso-bidi-font-style: normal;"><span lang="EN">The first is: Will people really pay if they do not have to?</span></i><span lang="EN"> The behavioral economics makes it clear that most people are happy to pay when they think it is only fair that they do so. Hopefully, the above discussion and the evidence in my<a href="https://www.fairpayzone.com/2014/10/making-customers-want-to-pay-you.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/2014/10/making-customers-want-to-pay-you.html"><span style="color: #1155cc;">resource guide</span></a> shows how FairPay achieves that, for most people, and allows the free riders who will not play fairly to be sorted out.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><i style="mso-bidi-font-style: normal;"><span lang="EN">The second is: Isn’t this much too complicated, putting too much cognitive load on the customer? </span></i><span lang="EN">That may be the greatest challenge, but there are ways to limit that. Most importantly, this is a learning experience, and most of the learning will happen in the first few cycles. Once each customer has gone through a few cycles, the business will learn what each customer values and why, and how fair and generous they are, and the customer will see that. The pricing process can gradually<a href="https://www.fairpayzone.com/2017/02/profiting-from-habit-seamless.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/2017/02/profiting-from-habit-seamless.html"><span style="color: #1155cc;">go on autopilot</span></a>, subject to correction whenever needed. The suggested prices can be charged, with the understanding that the customer can come back within a reasonable time to request an adjustment if they so desire. An even better solution might emerge in the form of user agent bots that can largely offload that cognitive load from users, as described in Part 2.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">And, especially in the Web Monetization community, there is a privacy concern.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Also, consider that there is a well-established model that works much like FairPay – tipping at a restaurant. We need not tip anything, but most people do, especially at a restaurant that one frequents (and especially in the US, where tipping is the norm). We may have a default model of 20% or whatever, but after each meal we do a complex multivariate assessment that considers many factors, such as courtesy, helpfulness, efficiency, and broader values. We can do that in a fuzzy way, with great nuance, usually in no more than a few seconds.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Of course tipping has a cognitive load, and different people and cultures have different levels of comfort and openness to the norms of fairness in tipping. As noted, cognitive load can be reduced by learning to predict what the user will consider fair so the user can opt-in to autopilot mode (with options for retroactive adjustments) when those predictions are converging well, and by nudging toward communal norms that motivate fairness. And unlike FairPay, tipping is done without any provision for transparent dialog on the perceived value received, the reasons for the amount of the tip given, and the server’s feedback on fairness. Uses of FairPay would seek to frame norms for such dialog.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><i style="mso-bidi-font-style: normal;"><span lang="EN">FairPay works because it does not have to be right all the time. It is enough that it is approximately right most of the time, the errors tend to average out, and it converges toward increasing accuracy as we continue to learn</span></i><span lang="EN">. And because we are dealing with low marginal cost services, the seller can err in favor of the customer whenever in doubt.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">FairPay shows how digital can enable a return to human values<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">It may now be apparent that FairPay seeks a return to traditional communal approaches to value exchange that have largely been lost and almost forgotten in our modern world – but seeks it in a new way.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"></p><ul style="text-align: left;"><li><span lang="EN">My value demon is not new -- it is just a simple formulation of the model we use when human peers exchange value -- as we have done for millennia in village markets.<o:p></o:p></span></li><li><span lang="EN">Negotiating customized prices with the joint participation of the buyer and seller is not new – FairPay just gives it a new twist to deal with digital abundance, where the scarcity is sustaining creator resources and share of customer wallet, not of current supply.<o:p></o:p></span></li><li><span lang="EN">Centering prices on rich, multidimensional considerations of value, and with respect to fairness, and communal norms is not new – that was how humans exchanged value through most of history.<o:p></o:p></span></li><li><span lang="EN">It is the alienated zero-sum game of mass marketing that is relatively new, an artifact of the need to scale with inadequate technology -- and that is a problem we can now transcend.<o:p></o:p></span></li><li><span lang="EN">Our ability to transcend that is still limited and unfamiliar, but as we learn, and improve human-centered technology, we can use automation, AI and ML to enable businesses to act more like humans that have a real relationship with each customer – and we can create agent services that protect customer fiduciary interests.<o:p></o:p></span></li></ul><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Getting to FairPay -- Deconstructing the Elements of FairPay<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">The full form of the FairPay repeated game described above is obviously a significant change in perspective for both businesses and consumers. Some people I talk to get the idea immediately and love it, some are stuck on how to get there and whether it can really work. Passion economy creators and service providers are among the biggest fans of FairPay concepts, but most lack the resources to implement the software. That creates an opportunity for entrepreneurs to facilitate that with SaaS offerings.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">FairPay will be most applicable in the near term to business that can create passion and loyalty in their customers (which seems the case for many candidates for Web Monetization) – but most businesses can do that at least for selected customer segments. Many posts<a href="https://www.fairpayzone.com/p/more.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/p/more.html"><span style="color: #1155cc;">on my blog</span></a> address strategies for determining which kinds of businesses, which services -- and which customer segments to tackle first. Moves toward FairPay can be stepwise, beginning with baby steps, many of which are in wide use and well-proven, as outlined in many of those posts.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">My post on<a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html"><span style="color: #1155cc;">The Elements of FairPay</span></a> deconstructs FairPay into a framework of synergistic <i style="mso-bidi-font-style: normal;">elements</i>, as shown in two tables. These elements can be applied in whatever combination fits any business context, to move it toward fairer, more effective, and more efficient relationships, whether in isolated baby steps that are largely conventional, or in fuller and more novel combinations. In that sense, FairPay is an innovation architecture for transitioning any business to become better centered on customer-relationship-value. That post provides a helpful framework for exploring what lessons FairPay offers regarding Web Monetization and payments. Here we outline the most relevant aspects.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"></span></p><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgP4ZJi5dLc7HPmlKhRNneUbINtimQkEhkrcval3UernMO-ihtctaPmuhtOH4VEbcTfj_C2_n4ExJM2C1RgTI1sGw2K6K-O4ORMgpBZGa1itTN50VsJYPoci-TM55ZNTqtHIiZx-vRFT8iB/s960/Elements+Ladder.jpg" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="720" data-original-width="960" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgP4ZJi5dLc7HPmlKhRNneUbINtimQkEhkrcval3UernMO-ihtctaPmuhtOH4VEbcTfj_C2_n4ExJM2C1RgTI1sGw2K6K-O4ORMgpBZGa1itTN50VsJYPoci-TM55ZNTqtHIiZx-vRFT8iB/w400-h300/Elements+Ladder.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"></td></tr></tbody></table><span lang="EN"><br />The first view of this chart (above) suggests a “ladder of value,” beginning with elements that become more value centered. The elements are listed in the rows, starting with the most foundational elements (the lowest rungs) and then elements that amplify the power. The columns are suggestive of which elements are most relevant to for-profit and non-profit use cases, with sub-cases for what is common now, and what is most applicable in low-trust versus high-trust environments. The second view (below) defines some important combinations of elements relevant to different stages and use cases.<o:p></o:p></span><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"></span></p><div class="separator" style="clear: both; text-align: center;"><span lang="EN"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZoOjTIbDh8TiripbE4S3HfL79n1kybXANbnRRKqnRa0BasPMht6jMkSXpbc4vtsBG7FrJ-HixiND55oXsZoHBBanrHQvY2YPSgpsa3JYsc4LLOCaGRdRN1nT76IYy7eFE1l6ookxJAQGm/s960/Elements+Variations.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="720" data-original-width="960" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZoOjTIbDh8TiripbE4S3HfL79n1kybXANbnRRKqnRa0BasPMht6jMkSXpbc4vtsBG7FrJ-HixiND55oXsZoHBBanrHQvY2YPSgpsa3JYsc4LLOCaGRdRN1nT76IYy7eFE1l6ookxJAQGm/w400-h300/Elements+Variations.jpg" width="400" /></a></span></div><span lang="EN"><br />Full “Gated” FairPay includes enforcement of fairness to continue playing the game, making FairPay a revocable privilege. Voluntary FairPay relaxes that to serve as an enhanced form of PWYW or tipping that still includes key features of post-pricing and reputation tracking to enable individualized nudging toward fairness. Risk-free and FairMicroPay are variations that may have special relevance to Web Monetization.<o:p></o:p></span><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Risk-free subscriptions<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">As I said above, for digital services, the provider risks nothing …except the opportunity to take money in exchange for no value. That will be less and less tolerated.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">While the best way to manage risk is to set prices with customer participation, in the full FairPay repeated game, I propose this “risk-free” model as a way to approximate that while maintaining full seller control of pricing. Many businesses are hesitant to yield control until FairPay is more proven, so this is a way for the seller to predict what the user would do, to set prices based on the seller’s best guess of what my demon would work out.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"><span style="text-indent: -24px;">Think of it as a cable TV bundle that lets the customer view whatever they want each month, then creates a bundle price as if they had picked a bundle that would give them just that. That price can factor in standard versus premium programs and how much was viewed. It can have a cap on price to avoid risk of “bill shock.” But I can also start at zero if nothing was viewed that month, and ramp up at a non-linear rate that can includes a volume discount. A full description is in my post</span><a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" style="text-indent: -24px;"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><span style="color: #1155cc; text-indent: -24px;"><a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" style="text-indent: -24px;">"Risk-Free" Subscriptions to The Celestial Jukebox?</a></span></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">FairMicroPay<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">This simplified form of FairPay was developed in discussion with businesses seeking to monetize content using cryptocurrencies in a way that seems to have parallels with Web Monetization and payments, to add a relationship value-based adjustment layer. The idea is to add a FairPay layer that adds this:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"></p><ul style="text-align: left;"><li><span lang="EN">·</span><span lang="EN">Let the user adjust the standard base price within limits, as permitted by a smart contract:<o:p></o:p></span></li><li><span lang="EN" style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";">o</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">Downward as a volume discount, or as a refund/discount for lack of desired value, or<o:p></o:p></span></li><li><span lang="EN" style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";">o</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">Upward as a value-based bonus or sustaining contribution.<o:p></o:p></span></li><li><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">Identify each user and track their fairness reputation, and nudge and alter price adjustment limits accordingly.<o:p></o:p></span></li></ul><p></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">That might achieve much of the functionality of FairPay in a lightweight way, and that is what I suggest be considered as minimum functionality that can be layered on top of Web Monetization and payments protocols. This is explored further in PART 2.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Aggregation and value-based pricing – no more “subscription hell” or “bundle hell”<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">FairPay can be applied by individual creators/service providers or by aggregators. It provides a new way to harmonize both direct and aggregated models because the value-based prices it seeks are similarly aligned in either case. <i style="mso-bidi-font-style: normal;">With full FairPay, or even the more limited “risk-free” model, what you pay relates to the value of what you use, regardless of whether the relationship is direct or with an aggregator</i>.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">If you want to access a broad array of services with no fuss, use an aggregator and <i style="mso-bidi-font-style: normal;">pay commensurate with the value received</i>.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">If you have an affinity for a specific service provider, subscribe and have a direct relationship, and again <i style="mso-bidi-font-style: normal;">pay commensurate with the value received</i>.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">The price with an aggregator may be a bit higher to reflect that service, or not --their share of the value surplus may be paid by the service provider, as a marketing cost. As suggested above the balance here may vary with the context.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><i style="mso-bidi-font-style: normal;"><span lang="EN">Either way you avoid “subscription hell”</span></i><span lang="EN"> because you are not paying $5 or $10/month for all you can eat for each service, you only pay for what you do eat. You can subscribe directly to as many low-volume publishers as you like, because <i style="mso-bidi-font-style: normal;">you do not pay for all you can eat, only for what you do eat</i>.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><i style="mso-bidi-font-style: normal;"><span lang="EN">Either way you avoid “bundle hell”</span></i><span lang="EN"> because you automatically get a fair bundle price, computed after the fact based on what you finally chose to use.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><i style="mso-bidi-font-style: normal;"><span lang="EN">Either way you can be allowed to make adjustments</span></i><span lang="EN"> if items were disappointing, or to pay bonuses to specific creators or to all that you used, to the extent you feel that was warranted.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">This can behave far better over a wide range of usage patterns than either conventional micropayments (pay per item) or subscriptions (all you can eat for a flat rate). Whether you use the full form of FairPay with balanced control by both parties, or just the simpler “risk-free” model where the seller unilaterally estimates what my demon would do, the result is similar. It all comes down to the shape of the volume discount curve – how the price changes with volume:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">At low volume, the unit price can start small. It can even start at zero for new users who are “sampling,” but established users may not start at that low a unit price, since they know more, and are at low volume.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">As volume increases, the price can increment at a moderate unit rate that gradually declines at higher volumes.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">As volumes get high, the unit rate can become very small. To eliminate risk of bill shock, there may be a price cap (after which additional units do not increment the price at all).<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">To match a “risk-free” subscription with a price to a conventional flat-rate subscription at $10/month, the cap might be higher (maybe $12-15/month), or not, as noted below. Many users will not be charged even $10, but the whales might be charged a bit more to produce that same average revenue per user.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Contrast this to a flat rate, all you can eat subscription:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">At low volume, the unit rate is very high – the full flat rate for one item, or even for no items at all.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">At higher volumes, the unit rate declines asymptotically to zero. That is fair up to a point, but very heavy users get a bargain – an infinite volume discount -- which drives the price up for more typical users.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">And, remember that we can expect many more users to subscribe to the risk free plan, since they have no risk of having wasted their money if they have low usage. That means the cap might not need to be higher than for flat rate AYCE and might even be lower.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">And compare it to pay-per-item micropayments:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">At low volume, the unit price is moderate, but high enough to deter many users from sampling. (For example, Blendle charges are typically $.25-.49 for a news article.)<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">At increasing volume, the unit price remains at that “moderate” level, but the meter keeps incrementing rapidly at the same unit rate, with no volume discount at all.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">At higher volumes the total price becomes far higher than a flat-rate subscription, sometimes by orders of magnitude – “bill shock.”<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Platform and Database opportunities<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">FairPay seeks to leverage relationships to make commerce more win-win. That makes customer relationship databases a vital tool, both to individual creators/service providers and to aggregators. FairPay’s reliance on adaptive relationships that center on learning about value and fairness in a scalable environment supported by automation entails a non-trivial software requirement to manage these value proposition decision processes in realtime.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">While simple steps up the ladder of value using some of the Elements may be easy, full forms with fairness enforced by selective warnings and revocation of FairPay privileges take code. I have described an example of simple rules-based <u>algorithms </u>for that. Estimates that have been supported by third parties suggest such an implementation might require about three person-months each of programmer time and of business analyst time. Eventually, advanced versions with AI/ML might go well beyond that.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">For the many small service providers who see FairPay as appealing, the need for such software argues for a SaaS service. That could be added on by existing SaaS providers like Patreon, Substack, Medium, and the like, or could come from new entrants. I believe this presents a huge entrepreneurial opportunity, given the economies of scale and potential network effects in such an offering.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">There is also a network effect in the FairPay reputation database that can apply in an aggregation context (subject to suitable privacy controls). The FairPay learning process will develop valuable data on what each customer values and how fair their pricing is – that data is central to deciding how to play the fairness game. And ultimately the converse -- fairness data on which providers are fair in their dealings with customers could also be applied to the consumers’ benefit.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">In an aggregator context, this consumer fairness reputation score data is much like a credit rating score. A provider could use fairness scores from a consumer’s prior relationships to decide whether to make FairPay offers to a consumer they do not know, just as businesses use credit scores to determine what credit to offer. Think of FairPay as a process of extending FairPay credit – how much value to provide on credit before seeing how fair the customer will be in paying for that value. Providers with high value services might limit offers to only consumers with high fairness ratings, while a provider seeking wide market distribution might cast a much wider net.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">This could be done <i style="mso-bidi-font-style: normal;">without divulging these fairness scores to those businesses</i>, by having the aggregator (or some other intermediary) make the determination of who to send offers to -- and to send them on behalf of the offering business -- based on a fairness threshold set by that business. The business would simply hear back from customers who accepted that offer, and only know that their fairness score at least met their threshold. Similar consumer data intermediary models have been proven in practice. (The RxRemedy/HealthScout.com business that I worked for in the late 1990s did this successfully for sensitive personal health data.) <i style="mso-bidi-font-style: normal;">[I plan to expand on how such an Offering Interest Agent might work in a future post.]<o:p></o:p></i></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Value versus privacy?<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Consumers are rightly enraged at the abuses of what Shoshana Zuboff has called<a href="https://www.amazon.com/Age-Surveillance-Capitalism-Future-Frontier/dp/1610395697"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.amazon.com/Age-Surveillance-Capitalism-Future-Frontier/dp/1610395697"><i style="mso-bidi-font-style: normal;"><span style="color: #1155cc;">Surveillance Capitalism</span></i></a>. However, there is growing awareness that there are complex issues of<a href="https://www.nytimes.com/2021/02/19/business/privacy-open-data-public.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.nytimes.com/2021/02/19/business/privacy-open-data-public.html"><span style="color: #1155cc;">shared data as a public good</span></a>, and whether the important issue is not the collection of data <i style="mso-bidi-font-style: normal;">per se</i>, but the<a href="https://www.theinformation.com/articles/data-is-the-new-sand"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.theinformation.com/articles/data-is-the-new-sand"><span style="color: #1155cc;">control of how it is used</span></a>.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Here, what matters is that FairPay presents a model of commerce based on cooperation to co-create value. That leads to the idea that, when properly managed, <i style="mso-bidi-font-style: normal;">win-win trust and transparency in dialogs about value can be more beneficial to consumers than absolute privacy</i>. It is not a zero-sum question of FairPay dialogs on <i style="mso-bidi-font-style: normal;">value versus privacy</i>, but one of <i style="mso-bidi-font-style: normal;">negotiating a win-win balance</i> of effective FairPay dialogs with agreed limits on what fairness data is tracked, how it can or cannot be used, and how it can or cannot be shared. More on this as it relates to Web Monetization and payments continues in PART 2.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><u><span lang="EN"><span style="font-size: large;">PART 2 – Enabling Fairness in Web Monetization and payments</span><o:p></o:p></span></u></i></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Monetization in perspective – it all depends on context<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">From the FairPay perspective, prices and monetary transfers are just “compensating” adjustments that balance the value exchange. People tend to think of the price and the funds transfer as the whole measure of the value exchange, but FairPay clarifies that, even with perfectly fair prices (as set by my value demon), the monetary exchange “price” is just the “compensation” adjustment that balances out the broader accounting of value exchange. When we look at the full richness of the value flow to the “consumer,” we see that the monetary price just balances out that rich exchange. If we factor in the “reverse meter” flows of value from the “consumer” to the “provider,” it is even more clear that the price is just the balancing adjustment. It is impossible to understand value, or that compensating balance price, without the full context.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">In the early days of the Web, as new business ecosystems were in their infancy, the joke was that this industry was so immature that companies doing business with one another “do not know who should be paying who” [in <i style="mso-bidi-font-style: normal;">The Red Herring</i>, around 1994]. Publishers and platforms are still having that argument (most prominently in Australia recently). YouTube <i style="mso-bidi-font-style: normal;">pays</i> some of its users millions of dollars because their user-generated content is so valuable.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Value exchange, and the balancing transfer of money, depends on many complex, situation-dependent factors. Those factors are no longer determined by the invisible hand and its rationing of scarce supply. Now they are determined by what it takes to sustain future creation, and how much share of wallet each consumer is willing to ration to that, for the services they care about.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">At core, value is highly dependent on context – who, what, when, why, and how. Similarly, prices and pricing risk (or price-value risk) is also highly dependent on context. This includes consideration of when it may be appropriate to factor in relationship or volume discounts, adjustment refunds or discounts for value disappointments, adjustment bonuses for appreciation of high value, supply chain pass-throughs to sustain creators, or donations in support of broader value contributions based on the actual experience and outcomes. Value is also highly dependent on consumption behaviors that can be tracked and validated with usage instrumentation – did a user of a content item use it intensively or repeatedly in valuable contexts, or did they merely start to sample it or briefly skim it? I have books I refer to repeatedly over months and years, and other books I have never cracked.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Even if we ignore relationship context, simple access and usage metrics -- units of items, minutes, words, months -- are a very crude measure of value (whether for actual consumption or for access rights). This is well-known, but often glossed over in how services are priced. . Minutes of access to a page of text are very different from minutes of video. Minutes of access to a Web page do not reflect the kind of attention given during those minutes, or the value obtained. Different items of a given content format and scope can be very different in value. Some items or minutes that may seem equivalent turn out to be valuable and some do not. Early online services like AOL and CompuServe charged per minute, then shifted to unlimited subscriptions -- but as explained in Part 1, both map only crudely to value.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Initial thoughts on Web Monetization and payments directions<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">My understanding is that those in the Web Monetization community are struggling to find effective payment models within desired constraints of privacy and independence from platforms. (It is hard enough to price value exchange even without those constraints!) My initial limited review of the status of these efforts suggests a need to address more clearly how strict adherence to those constraints could severely constrain how effectively those monetization services can map to the real co-creation of value for their users. That suggests a need for attention to how those constraints can be relaxed in a graceful, controlled, selective, incremental, and well architected way -- especially to the extent that low-level protocol support is to be built upon. I understand these concerns are recognized and offer this FairPay perspective to enrich that. [This is based on review of the proposed Web Monetization, payments, and Interledger standards (and of Coil) and very limited review of some specific discussions, including<a href="https://github.com/adrianhopebailie/web-monetization/issues/3"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://github.com/adrianhopebailie/web-monetization/issues/3"><span style="color: #1155cc;">WM Provider's Access to Data #3</span></a>, and<a href="https://community.webmonetization.org/projectinsulate/how-does-it-work-bin"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://community.webmonetization.org/projectinsulate/how-does-it-work-bin"><span style="color: #1155cc;">Project Insulate</span></a>, and<a href="https://community.webmonetization.org/healthyfuture/web-monetization-api-spec-changes-52b9"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://community.webmonetization.org/healthyfuture/web-monetization-api-spec-changes-52b9"><span style="color: #1155cc;">Micrio</span></a>, as well as <a href="https://yiibu.github.io/web-monetization/"><span style="color: #1155cc;">Stephanie Rieger’s article</span></a>.]<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">If monetization does not track to value, it may be frictionless, private, and independent of platforms and intermediaries, but it will not be as beneficial economically as alternatives that relax those constraints. For limited use cases, and for users with strong requirements for those constraints, that may not be a major concern, but for broader applicability, it could be very limiting.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">This is not to argue for relaxing those constraints in the low-level protocols, but for ensuring that higher-level services that support relationship and context can be supported, and for encouraging the development of those higher-level capabilities.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">It also argues for considering what, if any, functionality can enhance the mapping of monetization to value without relaxing the desired constraints. To the extent that is possible perhaps it should be provided for in the low-level protocol. Specifically, that might include provision for refunds (credits) in cases where the user feels that expected value for the current page was not received (if the provider so allows). It also suggests consideration of the opportunity for some intermediate level of high-privacy / low-relationship support that enables flexibility in pricing beyond uniform rates per item or per minute, as discussed in the next sections.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Stephanie Rieger’s “layered privacy” proposal provides a good start to this kind of thinking:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l6 level1 lfo12; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">“Level 0 is akin to what Coil offers today...their provider cannot see the sites they are visiting and ...this obfuscation extends to its exchanges with both the wallet and publisher. As Coil isn’t gathering data, it cannot provide user-facing tools such as analytics, but users are free to install third-party browser extensions that do.”<o:p></o:p></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l6 level1 lfo12; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">“At Level 1 users would opt-in to limited data collection. Doing so would unlock functionality such as charts that show their money has been spent, the ability to block sites they prefer not to pay, and boost payment to sites they most care about. The data collected to enable this would be clearly explained during opt-in, and users could at any time clear their history, or revert to Level 0.”<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in; mso-list: l6 level1 lfo12; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><span lang="EN">“At Level 2 users could opt-in to share additional data, maybe not in this case used directly by providers, but shared onward to publishers. This might unlock new APIs enabling publishers to better interface with users, track and anticipate their spend (or lack thereof if payment is blocked), or signal what perks are available.”<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">I would add another dimension to her layers: such layered extensions might provide support for multiple levels in the value chain: users, WM providers, publishers, and new kinds of actors, such as aggregators/bundlers, and infomediaries (as described below).<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">A future for privacy-protected context?<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">In seeking to exchange value with effective awareness of context, while protecting privacy, I suggest the Web Monetization community look toward providing for use cases that apply complementary efforts seeking to better manage the use of consumer data in commercial contexts.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">A classic discussion of such ideas is in the 1999 book<a href="https://www.amazon.com/Net-Worth-Shaping-Markets-Customers/dp/0875848893"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.amazon.com/Net-Worth-Shaping-Markets-Customers/dp/0875848893"><i style="mso-bidi-font-style: normal;"><span style="color: #1155cc;">Net Worth</span></i></a> by two McKinsey authors (now dated but still very comprehensive and compelling). This early proposal has been largely forgotten – presumably because of critical mass hurdles, as the advertising model and platform services came to dominate -- but there has been a recent resurgence in similar proposals. These include<a href="https://hbr.org/2018/09/a-blueprint-for-a-better-digital-society"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://hbr.org/2018/09/a-blueprint-for-a-better-digital-society"><span style="color: #1155cc;">Mediators of Individual Data</span></a> (MIDs) proposed by Jaron Lanier and colleagues,<a href="https://www.theatlantic.com/technology/archive/2016/10/information-fiduciary/502346/"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.theatlantic.com/technology/archive/2016/10/information-fiduciary/502346/"><span style="color: #1155cc;">Information Fiduciaries</span></a>, and<a href="https://www.technologyreview.com/2021/02/24/1017801/data-trust-cybersecurity-big-tech-privacy/"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.technologyreview.com/2021/02/24/1017801/data-trust-cybersecurity-big-tech-privacy/"><span style="color: #1155cc;">Data Trusts</span></a>. Related ideas are in development in the<a href="http://customercommons.org/"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="http://customercommons.org/"><span style="color: #1155cc;">Customer Commons</span></a> and<a href="http://blogs.harvard.edu/vrm/"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="http://blogs.harvard.edu/vrm/"><span style="color: #1155cc;">ProjectVRM</span></a> efforts led by Doc Searls at Harvard’s Berkman Klein Center.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">These all propose the creation of services that work on behalf of consumers to balance their power against businesses by acting as their agents (with fiduciary duty to each consumer) to manage selective sharing of data on desired terms as to use, protection, and monetary or other compensation. I summarize many of these ideas in<a href="https://www.fairpayzone.com/2018/12/reverse-biz-model-undo-faustian-bargain.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/2018/12/reverse-biz-model-undo-faustian-bargain.html"><span style="color: #1155cc;">Reverse the Biz Model! -- Undo the Faustian Bargain for Ads and Data</span></a> (with particular focus on advertising issues, as expanded on in the next section). Web Monetization and related protocols might be designed to interoperate with infomediary services of this kind to ensure proper management of the context data that FairPay relationships require.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Such infomediaries might evolve to a new and richer form of the networks of bots that were envisioned in the early days of Web commerce to work as “agents” for businesses and for consumers. My guess is that those visions faded away because of the asymmetry of power and technology between businesses and consumers. But now the FairPay repeated game structure offers a new way to balance negotiating powers that may be less affected by such asymmetry – and in a way that can post-price experience goods even after the horse has left the barn.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">Advanced forms of FairPay might appear to consumers as embodied in a <i style="mso-bidi-font-style: normal;">customer representative bot </i>that has a continuing personal relationship with them, as the business’s persistent dedicated contact representative that maintains awareness of their context and history. It would know them and what they value and manage all their interactions with the business. Of course, such a bot could partner with human agents and managers on an exception basis whenever issues needed escalation beyond what the bot can handle effectively.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">As a converse, consumers might obtain bot services from infomediaries to serve their interests. Such a <i style="mso-bidi-font-style: normal;">customer agent bot</i> could handle the customer’s interactions in the FairPay repeated game, reviewing pricing each period and requesting adjustments, and advising the customer as appropriate.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">Such agents could interact with each other in realtime during all usage of services, tracking the value exchange and ensuring there are no surprises. For example, where prices are not capped or freely adjustable, these bots could advise the user when usage might be exceeding budgeted limits to decide in a transparent manner whether to renegotiate pricing or throttle usage. They could also provide ongoing reviews of the interaction and value exchange history to alert consumers when reviews and adjustments might be needed.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Advertising-related protocol-based efforts to balance <i style="mso-bidi-font-style: normal;">identity with privacy<o:p></o:p></i></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Web advertising ecosystems involve similar issues of identity and privacy, and current efforts to better address those issues may offer synergies with Web Monetization efforts. There is a huge amount of attention focused on this now, seeking to find ways to allow user-controlled levels of advertising and targeting that offer benefits of useful, relevant, and non-intrusive ads while limiting use of personal data and activity tracking. There is a growing trend away from the current poorly controlled use of third-party data (now being accelerated by Apple and Google), toward sharper controls on first-party and second-party data, and now considering “<a href="https://www.salesforce.com/resources/articles/what-is-zero-party-data/"><span style="color: #1155cc;">zero-party data</span></a>” that is intentionally shared.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">In reaction to current abuses, many consumers oppose any Web advertising at all. However, there is a strong case that advertising can be valuable to consumers when done in a way that values and respects their attention and data – and that advertising is most valuable to advertisers when it is most valuable to those advertised to. Advertisers and publishers are increasingly focused on improving that.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">One effort that seems particularly relevant is the recent proposal,<a href="https://nytimes.github.io/std-rhea/"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://nytimes.github.io/std-rhea/"><span style="color: #1155cc;">Requirements for a Healthy Ecosystem in Advertising (RHEA)</span></a>. This proposes a Messageable Opaque Identity (MOI), which builds on<a href="https://wicg.github.io/WebID/"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://wicg.github.io/WebID/"><span style="color: #1155cc;">WebID</span></a> by adding a two-way messaging capability. It provides good background on the relevant issues in the advertising ecosystem and proposes a requirement that “the browser works for the user” as a “fiduciary agent” (much like the infomediary proposals, above), as bound by a specific “User/Agent Covenant.” This may offer a model for at least some of the relationship identity and activity tracking along with the messaging features needed for advanced monetization models – and perhaps there are opportunities for collaboration on common elements. Key parallels in the balancing of business needs with user privacy include, whether for core value propositions (and pricing) or for advertising related to potential offers:<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">Value co-created by tailoring services and service offers to each user on a 1:1 basis.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">The value of activity history data to aid in doing that well.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">Ability to learn over time what was valued and why, to predict what will be valued.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 12pt 0.5in;"><span lang="EN">·</span><span lang="EN" style="font-family: "Times New Roman",serif; font-size: 7pt; line-height: 10.7333px; mso-fareast-font-family: "Times New Roman";"> </span><span lang="EN">The value of transparent cooperation and trust in how all of that is handled, with proper concern for privacy and other dimensions of fairness.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Web Monetization services might build on the levels model of Rieger using Messageable Opaque Identities. This might provide for creation of distinct, pair-specific, messaging “tunnels” between users and selected providers (or aggregators/bundlers) that are persistent for the duration of the relationship (until revoked or paused by the user). These might work much like disposable/revocable email addresses. Users could be enabled to share opaque alias identifiers with publishers and other services they trust, and that could enable support of relationship-specific data interchange and messaging at a range of desired levels..<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">A FairPay-enhanced Web Monetization provider?<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">One way to pull these ideas together might be for an “enhanced” Web Monetization provider (EWMP) to offer separate “relationship” monetization services that depart from the strict WM requirement to not track site identity, and to act in part as an infomediary user agent in doing so. This might apply richly participative forms of FairPay, or the simpler non-participative “risk-free” (RF) form. Such a provider might offer FairPay/risk-free monetization only for specific sources that the user opts in to. They might also combine that with a plan that includes anonymous access to all sites that have not been opted in to, much as current WM provider Coil now does.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">For the simple “risk-free” offering, pricing would be entirely controlled by the enhanced WM provider. For each RF opted-in site, the EWMP might track usage and adjust the payment streaming rate in accord with that user’s usage for that site in the given period, using a volume discount curve as described above to set the per minute rate, adjusting the rate up or down as the month progresses. Instead of the single flat subscription fee per month from the user to the WM provider, that fee might start at zero, then increment in correspondence to the payment stream. There might be a cap for all usage, or a cap for each site. If capped, the payment rate might be reduced toward zero as the cap was approached. If not capped, the user might pay at month-end whatever amount corresponded to the total usage for each RF Website. Even without a cap, progressively increasing volume discounts could minimize risk of “bill shock.”<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">An enhanced WM provider offering that supports more advanced, participatory forms of FairPay might build on the same structure. It could layer on user interface features that enable the user to make retroactive adjustments up or down (within limits), and also to enable nudging by the enhanced WM provider. It might also add either direct or privacy-opaque communications between the user and the Website to support nudging by Web site and feedback on value and pricing from the user.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">Key ideas for the Web Monetization community<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">Hopefully now clearer in nature and motivation with the above background, here again are the key suggestions I offer:</span></p><p class="MsoNormal" style="margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in 0in 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> <span style="background-color: white;"> </span></span></span></span><span style="background-color: white;"><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;">Some form of persistent identity is essential to many of the most fair and efficient models for value exchange, including not only subscriptions and memberships (whether flat-rate or value/usage-based), but advanced forms of voluntary or incentivized donation/tipping/patronship/PWYW (pay what you want) models.</span></i><span lang="EN"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><span style="background-color: white;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;">A simple protocol for building on top of Web Monetization might provide that a publisher could ask as part of its initiation of an access request a “Do I know you?" Replies could be (1) "Yes, here is the reference to our relationship agreement." (2) "No, I wish to remain anonymous.” or (3) "No, but let’s negotiate a relationship agreement."</span></i><span lang="EN"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><span style="background-color: white;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;">Those who opt in could negotiate what data is tracked, for how long, and with what constraints on use by that publisher, and on any allowable sharing with others. They could also negotiate what level of personal identification is enabled </span><span lang="EN">(in a layered structure such as Rieger suggests and with possible opaqueness of identity)<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;">. Such agreements could be with individual publishers, or with an aggregator/</span>bundler<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;"> (with terms that could vary for defined publishers).</span></span></i><span lang="EN"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><span style="background-color: white;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;">This could empower users and publishers to maximize privacy and independence from one another, and from any third parties, while affording the option to relax those constraints to negotiated levels that may offer better pricing as well as other more win-win relationship features and perks.</span></i><span lang="EN"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><span style="background-color: white;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;">Such protocols could also allow for an “infomediary” with a fiduciary duty to serve the user as their agent, and to reveal only summary or limited data to publishers under defined conditions. Such infomediaries might also be delegated authority to conduct negotiations on behalf of the user, thus reducing the cognitive load that such nuance might otherwise place on the user.</span></i><span lang="EN"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><span style="background-color: white;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;">Consider adding support in the low-level Web Monetization protocol for features such as instant refunds (full and/or partial) that can enable greater user control to improve pricing fairness, even without any identification.</span></i><span lang="EN"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><span style="background-color: white;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;">Consider how Web Monetization and services built upon it relate to parallel issues of identity and relationship in Web advertising, such as in the Requirements for a Healthy Ecosystem in Advertising (RHEA) proposal.</span></i><span lang="EN"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin-left: 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><span style="background-color: white;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;">Consider to what extent</span></i><span lang="EN"><a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html"><i style="mso-bidi-font-style: normal;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext; text-decoration-line: none; text-underline: none;"> The Elements of FairPay</span></i></a><i style="mso-bidi-font-style: normal;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;"> can be supported, individually and in key combinations, at the protocol level, independent of any software platform.</span></i><o:p></o:p></span></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span style="background-color: white;"><span lang="EN"></span></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; margin: 0in 0in 12pt 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;"><span style="background-color: white;"><!--[if !supportLists]--><span lang="EN"><span style="mso-list: Ignore;">●<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><!--[endif]--><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; mso-color-alt: windowtext;">Consider whether many of the above capabilities can be enabled by an “enhanced” WM provider (EWMP) offering separate “relationship” monetization services that depart from the strict WM requirement to not track site identity, and to act in part as an infomediary user agent in doing so.</span></i></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><span lang="EN">---<o:p></o:p></span></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN">Note: Pro-bono support on advanced forms of FairPay<o:p></o:p></span></i></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">I offer free consultation to those interested in evaluating and applying FairPay and to address questions and advise on development projects (on an as-available basis). All my ideas on FairPay are in the public domain. Contact me at fairpay [at] teleshuttle [dot] com.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="background: white; color: #222222; mso-highlight: white;">Personal note: The roots of these ideas<o:p></o:p></span></i></b></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">I clicked a hyperlink in 1969 and saw the future. Around that time, I saw Doug Engelbart give his demo, and then met with Ted Nelson to explore his vision (including “transclusion” and micropayments).<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">My career has spanned digital content and services businesses of all sizes in diverse technology management and entrepreneurial roles, including Standard & Poor's and Dow Jones, pioneering consumer online services in the early-mid 1990s, and as CTO of HealthScout.com during the initial dot-com boom. While I have worked in both large and small companies, my focus has always been on how technology can serve and augment humans. My 52 media-related patents have been licensed to over 200 companies to serve billions of users.<o:p></o:p></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">After reading Esther Dyson's prescient<a href="http://cdn.oreillystatic.com/radar/r1/12-94.pdf"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="http://cdn.oreillystatic.com/radar/r1/12-94.pdf"><span style="color: #1155cc;">Intellectual Property on the Net</span></a> in 1994 and watching the slow-motion train-wreck of the content business model crisis, the core idea of the FairPay repeated game struck me in 2010 as a new way forward. The broadening of that vision into the “framework” can be seen in my<a href="https://www.fairpayzone.com/p/more.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/p/more.html"><span style="color: #1155cc;">FairPayZone.com</span></a> blog. Notable people who have recognized the appeal of FairPay include Jimmy Wales, Dan Ariely, and Richard Thaler. My perspectives on broader aspects of user-centered media are in my other blog,<a href="https://ucm.teleshuttle.com/p/items.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://ucm.teleshuttle.com/p/items.html"><span style="color: #1155cc;">SmartlyIntertwingled.com</span></a>. (More in my<a href="https://www.fairpayzone.com/p/reisman-bio.html"><span color="windowtext" style="text-decoration-line: none; text-underline: none;"> </span></a><a href="https://www.fairpayzone.com/p/reisman-bio.html"><span style="color: #1155cc;">Bio</span></a>.)</span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN">----</span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="font-size: medium;"><b>The introductory sections of this post are cross-posted to the <a href="https://community.webmonetization.org/rreisman/web-monetization-and-payments-meet-the-relationship-economy-and-fairpay-2cjk" target="_blank">Web Monetization Community</a>. </b></span></i></span></p><p class="MsoNormal" style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 12.0pt; margin: 12pt 0in;"><span lang="EN"><i style="mso-bidi-font-style: normal;"><span lang="EN" style="font-size: medium;"><b>It is suggested that any comments/questions be posted there, to maximize collaborative focus within that active community.</b></span></i></span></p></div></div>Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.comtag:blogger.com,1999:blog-7557842240801039419.post-58431434594772920132020-12-16T16:58:00.005-05:002020-12-18T14:58:36.542-05:00Marketing Journal Paper on FairPay Wins Industry Relevance Award<p>It is a pleasure to report that my invited paper on FairPay, co-authored with two prominent marketing scholars, won the first-ever <a href="https://www.canva.com/design/DAEQnHSzKRA/Vo-d97yYrfWOfTVosTSAtw/view" target="_blank">ANZMAC AMJ Industry Relevance Award</a>:</p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiM-7t9DhP0H0YTenG6PjM-37XAoBnjAOYsmehyphenhyphenDxK870QijKESiJyKOFyqGdPVLhTzsxMReZWoeNAxo38XWgOpKEJDZfenynleGppIh6qfH7gPgU6ZQaEu9Pww7CwgBg-Age3zOm0KE8i/s903/ANZMAC+Award.PNG" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="903" data-original-width="720" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiM-7t9DhP0H0YTenG6PjM-37XAoBnjAOYsmehyphenhyphenDxK870QijKESiJyKOFyqGdPVLhTzsxMReZWoeNAxo38XWgOpKEJDZfenynleGppIh6qfH7gPgU6ZQaEu9Pww7CwgBg-Age3zOm0KE8i/s320/ANZMAC+Award.PNG" /></a></div><p></p><div><blockquote><i>For the Australasian Marketing Journal article that makes the most significant contribution to advancement of the practice of marketing, sponsored by the Australian Marketing Institute.</i></blockquote><div>The article, <a href="https://doi.org/10.1016/j.ausmj.2019.07.002" target="_blank">Pricing in consumer digital markets: A dynamic framework</a>, was co-authored with Adrian Payne, Professor of Marketing at the University of New South Wales School of Marketing, and Pennie Frow, Professor of Marketing at the University of Sydney. The selection panel considered all articles in the AMJ for the past three years. Their statement on selecting our article:</div><blockquote><i>The selection panel believes this article developed a pricing framework (Fairpay) that is novel and stimulating for marketing managers. The article analyses new possibilities for pricing to implement personalised and participative pricing schemes that may become feasible which may have advantages to both consumers and marketers. The paper discusses how to handle the risks to marketers, such as some consumers underpaying, by for example removing the opportunity for further Fairpay participation for those consumers and dropping them back into conventional fixed price payment. From the perspective of this award, it is pleasing to see an industry co-author on this article.</i></blockquote></div><div>My thanks to ANZMAC and AMJ for enabling this publication and for the honor of this recognition of the practical significance of the new possibilities that FairPay enables. And, thanks to Adrian and Pennie for the invaluable insights, support, and academic rigor they added to this effort.</div>Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com44tag:blogger.com,1999:blog-7557842240801039419.post-33639298815955102082020-10-08T16:39:00.011-04:002020-10-12T15:14:42.186-04:00Technology Can Harness Stockholder Profit to Drive Social Responsibility [a teaser]<p></p><div class="separator" style="clear: both; text-align: left;"><div class="separator" style="clear: both; text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibls807KiofDvKrVTGPQlMw94USLce3RsUirKG0MILQ6xq2KhZqQLvTFBc0VMEqc3NzlM80D-0Ikn9eQMbkv4sqHkLmwHzYQImzG_6bPdYm27R0uUZn8I6CqDp1ItiK3U6UAVSV5OLoXRo/s907/CSR+sustainable-investing-ESG.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="510" data-original-width="907" height="113" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibls807KiofDvKrVTGPQlMw94USLce3RsUirKG0MILQ6xq2KhZqQLvTFBc0VMEqc3NzlM80D-0Ikn9eQMbkv4sqHkLmwHzYQImzG_6bPdYm27R0uUZn8I6CqDp1ItiK3U6UAVSV5OLoXRo/w200-h113/CSR+sustainable-investing-ESG.jpg" width="200" /></a></div>Is stockholder capitalism inherently harmful? It is widely felt that that the legacy of Milton Friedman and his “primacy” of stockholder profit have taken us to a bad place. But we have ignored how the digital era enables a new reconciliation of <i>stockholder </i>versus <i>stakeholder </i>capitalism. </div><div class="separator" style="clear: both; text-align: left;">Digital markets can make new levels of stakeholder participation efficient in determining <i>how much</i> of <i>who's</i> money to spend on <i>what </i>Corporate Social Responsibility (CSR) programs – and in ensuring that translates to increases in long-term profit for all to share in. This can break through the still-unresolved dilemma that Milton Friedman <a href="https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html" target="_blank">cited</a> in his <a href="https://www.nytimes.com/2020/09/11/business/dealbook/milton-friedman-doctrine-social-responsibility-of-business.html" target="_blank">now-maligned</a> article.</div></div><p>This new opportunity that technology creates relates to Friedman’s observation that <i>an executive spending on social responsibility is “in effect imposing taxes” on the shareholders, customers, and employees</i>. He argues that is beyond the ability or proper authority of an executive of a private business. </p><p>But now we can apply increasing levels of “digital democracy” to the workings of Corporate Social Responsibility. <i>Digital democracy can inform mechanisms to poll stockholders, customers, and employees on what level of CSR taxes they will accept, to be spent on what programs.</i></p><p><i></i></p><blockquote><span style="background-color: #fff2cc;"><i>I </i><i>previously </i><i>wrote about how my FairPay framework can be expanded to address customer-driven CSR . Recent coverage of Friedman spurred me to expand that to also address stockholders and employees, and have submitted an article on this theme for publication. In the meantime, here is a teaser.</i></span></blockquote><p></p><p><a href="https://www.fairpayzone.com/p/more.html" target="_blank">FairPay</a> suggests how computer-mediated dialog and emerging forms of “impact data” can help elucidate the ends that consumers seek and what they are willing to pay toward those ends. This customer participation can apply not only to the pricing of services they purchase, but to the “Social Responsibility-as-a-Service” (SRaaS) ends they agree to be “taxed” on for the benefit of others. Some detail on how that can work is in my post from a year ago, <a href="https://www.fairpayzone.com/2019/08/the-reformation-of-market-capitalism-in.html" target="_blank">The Reformation of Market Capitalism in The Age of the Customer -- Profiting From "Social Responsibility as a Service"</a>. Since it is the customers who pay directly to fund the business -- including whatever revenue makes its way to stockholders and employees -- it seems only right that customers should have the most say in how their “tax” money is raised and spent for CSR. </p><p>Digital democracy methods can also be applied to learn the willingness of the stockholders and employees to be "taxed" for CSR. Of course any of these stakeholders "could separately spend their own money" on similar ends, as Friedman observes, but the business is in a unique position to be efficient (and nimble) in optimizing the social effects of its own operations.</p><p>It is evident that increasing numbers of customers, stockholders, and employees believe CSR is important and want to contribute to such efforts in efficient ways. Markets are unrivaled in seeking efficiency, but have limitations in dealing with unrepresented stakeholders and other externalities. To the extent we can efficiently represent those stakeholders and internalize the externalities in the course of routine business operations, markets become more efficient – and more win-win. </p><p>As such methods mature, SRaaS can have all the efficiency we expect of market-based mechanisms and entrepreneurial incentives, thus enabling an invisible hand to distill the wisdom of the crowd and mass-customize broadened value propositions tailored to individual stakeholders and the impacts they desire. </p>Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com24tag:blogger.com,1999:blog-7557842240801039419.post-71674293309611359282020-09-11T13:25:00.000-04:002020-09-11T13:25:35.551-04:00The Disruptive Power of the Ends Game, Part 2: Invite the Customer to Help<b>The best way to understand how to best provide value to your customers? Ask them</b><br />
<blockquote class="tr_bq">
<b><i>(This is slightly expanded from <a href="https://www.inc.com/richard-reisman/the-disruptive-power-of-ends-game-part-2.html" target="_blank">the version published in </a></i><a href="https://www.inc.com/richard-reisman/the-disruptive-power-of-ends-game-part-2.html" target="_blank">Inc. </a><i><a href="https://www.inc.com/richard-reisman/the-disruptive-power-of-ends-game-part-2.html" target="_blank">magazine</a> on 9/11/20.) </i></b></blockquote>
<div class="separator" style="clear: both; text-align: center;">
</div>
As we discussed in Part 1 (<a href="https://www.inc.com/richard-reisman/book-review-disruptive-power-of-the-ends-game.html" target="_blank">at Inc.,</a> and slightly expanded <a href="https://www.fairpayzone.com/2020/09/the-disruptive-power-of-ends-game-part.html" target="_blank">here</a>), <i><a href="https://mitpress.mit.edu/books/ends-game" target="_blank">The Ends Game</a></i> argues that today's organizations are addressing "only half the battle" concerning the central question of "What are we asking customers to pay for?" The other half, which has only recently been made practical by new ways of collecting real-time information, is to evaluate how you're helping a customer achieve desired ends.<br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhM_Rvav2kKuifJ7EIq8orCQ3as-zzh_OUqHh2YTRst5F-OXVzlU3EoiW-WuRXTxwfGMdfL3s7qo61RnaFCcNO2si-RAmDZS-P4zesLKZtsbn0YAzZWi3RFWMU9kcwYEBIetH1u1vwbe5wN/s1600/co-op+devops.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="800" data-original-width="1600" height="100" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhM_Rvav2kKuifJ7EIq8orCQ3as-zzh_OUqHh2YTRst5F-OXVzlU3EoiW-WuRXTxwfGMdfL3s7qo61RnaFCcNO2si-RAmDZS-P4zesLKZtsbn0YAzZWi3RFWMU9kcwYEBIetH1u1vwbe5wN/s200/co-op+devops.jpg" width="200" /></a><br />
There is another important aspect to answering that question still to address. That is to directly engage the customer's unique ability to help you be even more efficient and adaptive in understanding what you are asking them to pay for.<br />
<br />
<a href="https://www.fairpayzone.com/p/more.html" target="_blank">FairPay</a> shows how we can more fully enlist the customer as ally in understanding impact, outcomes, and ends, and in modeling value in terms of satisfaction of their needs and wants. FairPay is a rich framework for increased cooperation with the customer in playing the Ends Game. The proven principles underlying that framework make a strong argument for <i>enlisting each willing customer in helping to determine what you should be asking them to pay for. </i><br />
<br />
I do not argue here for the specific methods of FairPay. My point here is simply directional -- that the strategies of FairPay point to how the unique wisdom of each customer can help cut through the most knotty challenges of the Ends Game.<br />
<br />
The breakthrough in the FairPay framework is to restructure the price-setting process using the continuity and context of an <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">ongoing relationship</a> to get customers to cooperate with you in determining what is a fair price. Why is that vitally important? Because, as Marco and Oded say, "[t]he ultimate outcome, of course, is value...Actual satisfactions." The customer is the final arbiter of which of their outcomes matter and how much value and satisfaction they deliver. They decide to become and remain your customer on the basis of their perception of value, and of the fairness of your price. You can use all the modeling and impact data you can find, but until you are able to know what is in your customer's mind, you may not get to the answer that counts.<br />
<br />
FairPay begins as a price-setting matter (and so may seem of relatively narrow interest). But price is just the monetary balancing of net value exchange. FairPay works for two reasons:<br />
<br />
<ul>
<li>Each customer has insights into the value they obtain that you can only understand if they share those insights.</li>
<li>You can draw those insights out because most customers (especially your best customers) <a href="http://www.fairpayzone.com/2014/10/making-customers-want-to-pay-you.html" target="_blank">want to be fair</a> about what they pay you -- if you gain their trust and motivate their cooperation. </li>
</ul>
<br />
FairPay centers on the point of price-setting, by asking each participating customer to have a say in what the fair price is. How much of a say is determined in the context of the relationship, recognizing that the game of commerce is usually a "repeated game" that involves repetition of transactions over time. A repeated game works best when both parties benefit from cooperation, and so can be motivated to build on that in a virtuous cycle.<br />
<br />
FairPay makes that motivation to cooperate central and explicit: "You, the customer, can have a say in what the price is for each transaction, but we, the business, will continue to play that kind of FairPay game with you only as long as we agree that your pricing is reasonably fair. We agree to have ongoing dialogs about value -- so we can agree (or not) whether the price for any interval of service is fair." But wait, there is more...<br />
<br />
<b>Price-setting is just the start of how FairPay changes the Ends Game</b><br />
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Price-setting can only be fair if the revenue model is fair. The FairPay dialog is not just about the price, but also about "What are we asking customers to pay for?" The customer has an intuitive, but richly multidimensional, model of what value they want, what value they are getting, and what they think is a fair price for that value. Dialog can surface whatever outcomes or other <a href="https://www.fairpayzone.com/2016/09/customer-journeys-of-value-measuring.html" target="_blank">value metrics</a> the customer thinks are relevant to justify their sense of what is fair for them to pay at any given stage in the game. The business may suggest and counter with any factors that it thinks relevant. This creates a new dynamic that opens up the kind of inter-party negotiating range and nuance that is familiar in traditional bargaining, but with a key difference: the ends of the negotiation are explicitly on lifetime value over the relationship rather than on one-time transactions.<br />
<br />
That ongoing cooperation simplifies the challenge of finding proper metrics of value. That effort becomes more nuanced and forgiving, because it is just a stage in an adaptive process that <a href="https://www.emerald.com/insight/content/doi/10.1108/S1069-0964(2012)0000019011/full/html" target="_blank">emerges</a> as this dialog unfolds. Different value metrics may be posited by either party. Any working agreement on fairness can be reopened as the context changes and other metrics emerge as more relevant. The exact choice of metrics (and of price) at any point in the game becomes just a working approximation in an ongoing process of continuous learning. The process of identifying and eliminating barriers to access, consumption, and performance is no longer just a process of one-sided inference by the business, but also of asking the customers what barriers they see.<br />
<br />
The process becomes more fuzzy -- but that is its benefit. Modern business abhors fuzziness as unpredictable and hard to manage, but value to humans is inherently fuzzy. The "proof" of the value is in the customer's agreement to that value as being fair, not in some abstract mathematical construct of value metrics. Those constructs are only a tool for reaching human agreement.<br />
<br />
As Marco and Oded say, "The challenge lies in accountability, which means cultivating the relationship between organization and individual in a manner that is sustainable and mutually beneficial. The right revenue model is what sustains that relationship." <i>FairPay is a method for enlisting the customer in a process for converging on accountability and agreement on the right revenue model (and adjusting it when needed) -- even if that model is a fuzzy one</i>.<br />
<br />
<b>Managing an emergent and cooperative process of value discovery</b><br />
<br />
None of this is counter to the lessons of <i>The Ends Game</i>. To manage this process at scale, a business must be able to reduce decisions to algorithms that can be automated in a way that requires more nuanced human judgment only on an exception basis. We need to study the barriers and be creative about finding the right metrics of value and combining them with the right weights.<br />
<br />
<i>That is how we evaluate whether the customer's assessment fair value is one that we should consider fair enough for us to be able to benefit from doing business with them</i>. We work with all the impact data we can glean, and use it the best way we know how.<br />
<br />
[<i>Not included in the Inc version:</i> Without FairPay, we have to slog through the swamp of incompleteness that Marco and Oded allude to in describing the Pay per Laugh example: "...an organization that uses a performance model lives and dies by the 'quality' of the metric it adopts. Some people may enjoy the show immensely but laugh very little, while others may attempt to stifle laughter in order to save some money. These concerns are always going to exist unless the metric is a perfect, tamper-proof proxy of the actual value derived by customers. Finally, the right technology is essential to make pay-by-outcome work."]<br />
<br />
FairPay dialogs provide a way to work heuristically around the limitations that Marco and Oded describe in how our impact data inform us about the outcomes and their perceived value -- when they are not meaningful, measurable, robust, and reliable enough, or lacking in breadth and depth. We build a tentative valuation model for each customer, and use that model to suggest a price that seems fair based on what we know about the value they received. But then, if the customer disagrees with our assessment of value, that is where we work to build in a new level of learning. We can use multiple choice dialogs to ask the customer why they disagree.<br />
<br />
The power of FairPay to draw out the customer's perspective in a trustworthy way can be better understood by considering the three building blocks that drive this process (a formulation Marco contributed to in <a href="http://link.springer.com/article/10.1057/s41272-018-0143-3" target="_blank">our journal paper</a> on FairPay):<br />
<br />
<ol><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg4V1_fiRze2qqkMBcq7B-o9TWzkvZpbk1DI6CZyaN295i1GpRbL8AF9r0n1_xGb97Y0TJt6mGBFKqk14lbYNf82fYNyuxdx1B4S2bLrgZIieWC61fy07V3rjcM-Aso5ZR90cxaQbmT2UqL/s1600/ESADE+fairplay-esade.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="209" data-original-width="800" height="83" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg4V1_fiRze2qqkMBcq7B-o9TWzkvZpbk1DI6CZyaN295i1GpRbL8AF9r0n1_xGb97Y0TJt6mGBFKqk14lbYNf82fYNyuxdx1B4S2bLrgZIieWC61fy07V3rjcM-Aso5ZR90cxaQbmT2UqL/s320/ESADE+fairplay-esade.jpg" width="320" /></a>
<li><i>Empowerment </i>to participate in pricing. (Asking customers to participate in pricing decisions is empowering, and empowerment is known to foster engagement and satisfaction.)</li>
<li><i>Dialog </i>that is open to considering the price in terms of all aspects of value, including needs, wants, features, services, pain points, barriers, and price levels.</li>
<li><i>Reputation</i>, as the way to build trust that the customer's use of that empowerment will be acceptably fair. (Develop a fairness rating for each customer. continuously update it, and use it to decide how to reward generosity and when to warn or restrict customers who are repeatedly unfair.)</li>
</ol>
<br />
This drives the new form of <a href="http://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html" target="_blank">repeated game structure</a> of FairPay, and informs it to serve as a cooperative value discovery engine that iterates to be adaptively win-win (as explained in detail in my <a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">book</a> and the many works listed on my <a href="https://www.fairpayzone.com/p/more.html" target="_blank">blog</a>).<br />
<br />
Algorithms can become increasingly effective in understanding how the value metrics of the customer differ from our models for that customer, determining if that is fair, and if so, adjusting our model for that customer, to build a new and better model for them. We can apply heuristic thresholds (simply, or with machine learning) to determine what price is fair enough to continue the game profitably and what is not. We can also draw on human intervention to deal on an exception basis with an ordinarily fair customer that surprises our algorithms by seeming unfair in a given context.<br />
<br />
FairPay might appear to each customer as a "bot" that acts as a customer contact who knows them as an individual -- representing the business, understanding that customer's needs and values, interacting with them in whatever way works best for them, and managing the relationship. This FairPay bot serves as an approximation of <a href="http://www.fairpayzone.com/2017/12/the-ghost-of-pricing-future-thought.html" target="_blank">my value demon</a>, to learn how the customer thinks about value -- and to nudge them to see the value that the business would like them to pay for. It manages a 360 degree relationship of cooperation (a much expanded level of CRM), to co-create value in whatever way is desirable to both parties, and to divide the value surplus fairly. (Again, for exceptional cases where the bot hits its limits, human managers can intervene.) This adaptive learning process can drive service improvements, bundling, up-selling, and development.<br />
<br />
<b>What the customer knows and thinks</b><br />
<br />
This dialog with the customer about value should be central to all business. How can you expect to understand the value and satisfaction your customers perceive if you don't ask them? How can you make it easy and natural for them to tell you when you don't seem to get it?<br />
<br />
Sure, even without these formalized dialogs, some subset of customers alert you with complaints about the most egregious outcome problems, but how many don't bother -- because they don't have an easy mechanism, and they don't think you really want to hear from them (or that you will not really listen if they do tell you). Instead, it seems that, outside of small, carefully managed focus groups, businesses are afraid to talk with customers, to ask what they think about value, and seek only to talk at them about the wonderfulness of their offerings.<br />
<br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjuS6pbU5-ZvJKfEIlRrVxqWhtddYEOsaFLoreXBjmoDPqWFU4-w_SpfaGNzyiikjz1i-Z7M8r1DcNAKfHR-tYEPQTeTE8hto9XBwULCkfsKoQD2GLUsKHjU184uu7CPy2pLNmjJCqVM7Ao/s1600/Drunkard+Search+muttjeff01.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="201" data-original-width="485" height="81" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjuS6pbU5-ZvJKfEIlRrVxqWhtddYEOsaFLoreXBjmoDPqWFU4-w_SpfaGNzyiikjz1i-Z7M8r1DcNAKfHR-tYEPQTeTE8hto9XBwULCkfsKoQD2GLUsKHjU184uu7CPy2pLNmjJCqVM7Ao/s200/Drunkard+Search+muttjeff01.jpg" width="200" /></a>As Marco and Oded say, "There may be factors that contribute to an outcome that the organization cannot observe, measure, or control. To the extent that there are significant differences in the value customers derive from a product or service, then the chosen outcome measure must be 'personal' enough to reflect this." Making that personal enough will be a tall order for the foreseeable future if we only look through a one-way glass, and don't find a good way to ask the customer for help.<br />
<br />
This FairPay process helps to more fully address "...the trillion dollar question...the extent to which customers are willing to share their information with firms and fuel the Ends Game ...companies must be able to communicate that sharing one's data has never been a more valuable investment." The FairPay repeated game structure seeks to constantly drive that communication and generate the proof to the customer that it beneficially results in value at a fair price. In parallel, you can use whatever impact data you can glean to validate what the customer reports, and determine if they are being honest with you or trying to game the system.<br />
<br />
Marco and Oded argue that "when customers know firsthand that an organization can use these [impact] data to deliver the outcomes they desire, it puts both parties in the exchange in an enviable position." The deeper cooperation of FairPay gives businesses a way to play the Ends Game in a way that is seen to be win-win -- to deepen their relationship with those who want to play fairly, and to cull out those customers who choose not to deal fairly. Some businesses, and some customers, may be slow to recognize how powerful this is, but those who do will find new power to co-create and share in value that more one-sided approaches cannot equal.<br />
<br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNsTLcY6f9ucKQSpNBngDiYMvArQxAtL9ZmYL_1nmc0vwgphlHsnfNSh8Fxjqh3xW4ACcZMvgTP4LrTuNCc8nxPRHQHXexJFR_nBm6PYyZnZ-yJ4iVtLlkI1jN7ItTB5eSz692P-VuZnhd/s1600/Dore+5fc7520df85bf9da392f46fa31355272.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="602" data-original-width="475" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNsTLcY6f9ucKQSpNBngDiYMvArQxAtL9ZmYL_1nmc0vwgphlHsnfNSh8Fxjqh3xW4ACcZMvgTP4LrTuNCc8nxPRHQHXexJFR_nBm6PYyZnZ-yJ4iVtLlkI1jN7ItTB5eSz692P-VuZnhd/s200/Dore+5fc7520df85bf9da392f46fa31355272.jpg" width="157" /></a>Opening this level of dialog with customers will take learning and experimentation. But finding the right impact data and using that to build the right revenue model without asking the customer will also be very challenging -- especially wherever customer needs and wants are diverse and subject to change with context and time. FairPay points to ways to harness what the customer can tell you, combine it with what you can figure out for yourself, and continuously adapt your revenue models accordingly.<br />
<br />
This kind of deeply cooperative relationship can enable you to play the Ends Game more effectively -- to attract and retain more customers, make them better customers, and increase the lifetime value that you and they share in.<br />
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<b><i>More about FairPay</i></b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-size: x-small;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" style="cursor: move;" width="133" /></span></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><span style="font-family: inherit;"><i>A very brief and simple introduction is in </i>Techonomy<i>, </i></span></b></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span></div>
<ul>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><span style="font-family: inherit; font-size: x-small;"><i>More in the </i><a href="http://www.fairpayzone.com/p/overview.html" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). </i></span></b></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><span style="font-family: inherit; font-size: x-small;"><i>There is also </i><a href="http://www.fairpayzone.com/p/more.html" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i><b style="background-color: transparent;">And these journal articles, <a href="http://rdcu.be/HTfJ" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i><b style="font-family: inherit;"><i>Or, my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i>To stay updated and interact with others interested in FairPay, please join the <a href="https://www.linkedin.com/groups/8571310/" target="_blank">LinkedIn group, “FairPay: Adaptively Win-Win Customer Relationships.</a>”</i></b></span></span></li>
</ul>
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<span style="font-size: x-small;"><i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></span></div>
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<b><i>To stay updated and interact with others interested in FairPay, please join the <a href="https://www.linkedin.com/groups/8571310/" target="_blank">LinkedIn group, “FairPay: Adaptively Win-Win Customer Relationships</a>.” </i></b></div>
</div>
Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com7tag:blogger.com,1999:blog-7557842240801039419.post-6496426705373347842020-09-08T09:00:00.001-04:002020-09-15T15:20:26.472-04:00The Disruptive Power of the Ends Game (Part 1 of 2)<b>Why businesses should not just ask what customers want, but measure whether they are getting what they need.</b><br />
<blockquote class="tr_bq">
<i>This is a slightly expanded version of <a href="https://www.inc.com/richard-reisman/book-review-disruptive-power-of-the-ends-game.html" target="_blank">Part 1, published in </a></i><a href="https://www.inc.com/richard-reisman/book-review-disruptive-power-of-the-ends-game.html" target="_blank">Inc. </a><i><a href="https://www.inc.com/richard-reisman/book-review-disruptive-power-of-the-ends-game.html" target="_blank">magazine</a> on 9/8/20. <b>This Part 1</b> concentrates on what is in the book, The Ends Game. <b>Part 2</b> takes off from there, to explain how FairPay strategies can enable businesses and customers to play the Ends Game in a way that is even more efficiently win-win -- and thus create and share in even more value. (See <a href="https://www.inc.com/richard-reisman/the-disruptive-power-of-ends-game-part-2.html" target="_blank">the Inc. version of Part 2</a>, or slightly expanded <a href="https://www.fairpayzone.com/2020/09/the-disruptive-power-of-ends-game-part_11.html" target="_blank">here</a>.)</i></blockquote>
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<i><a href="https://mitpress.mit.edu/books/ends-game" target="_blank">The Ends Game</a></i> is the title of an important new book that explains why now is the time to focus on helping customers achieve the ends they seek, and sharing in the value that they co-create with them. It argues that the ways enlightened and sophisticated companies currently attend to their customers are excellent, but only half the battle. This book presents a concise and clear manifesto of what is missing, why it is essential to focus on it now, and how to embark on the path to do that. It is written by <a href="https://marcobertini.com/" target="_blank">Marco Bertini</a> and <a href="https://www.london.edu/faculty-and-research/faculty-profiles/k/koenigsberg-o" target="_blank">Oded Koenigsberg</a>, professors of marketing known for their insights into pricing strategy.<br />
<br />
I had the pleasure of reading a pre-release copy because Marco co-authored with me two articles about the <a href="https://www.fairpayzone.com/p/more.html" target="_blank">FairPay</a> framework. This new book by Marco and Oded concentrates on how to think about "What are we asking customers to pay for?" As they say, that is essentially a question of revenue models. (It is also foundational to how FairPay addresses a related question: how do you harness new levels of cooperation with customers to be even more efficient and adaptive in doing that?)<br />
<br />
<b>Why read -- and play -- the Ends Game now?</b><br />
<br />
This is a deeply researched and insightful work, offering a coherent vision of why playing the Ends Game is the future of business. It lays out a concise manifesto for business model disruption, centered on revenue models, and explains why pricing models are the essence of business. It offers conceptual grounding supported by a wide range of examples, in a style that is neither abstract nor buried in anecdote.<br />
<br />
Marco and Oded show how businesses have been focused on the <i>means </i>for serving customers, but rarely focus on the real <i>ends </i>that customers want. It explains how all the work of customer care, market research, design of customer journeys, and operational skill and responsiveness are typically directed at the means not the ends. Businesses pride themselves on their focus on the customer, the authors note, "but then the same company pays hardly any attention to customers when it decides how to earn revenue from them."<br />
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This focus on ends is not a new idea, but it has been neglected because we lacked the technology and data to address the customers' ends at scale. The authors point (as Marco and I have in our co-authored papers) to the invention of the price tag around 1850 as a key turning point from which traditional business decoupled itself from consideration of individual customer value proposition in order to scale: "organizations gradually shifted their pricing decisions away from customers and what they value, which was the focus of haggling, to the one piece of information they could trust and readily collect: information on the cost of making an offering and bringing it to market." (Of course competitor pricing has also been an important factor.) Pricing for value on an individualized basis has long been understood to be the ideal in theory, but in very hard to do at scale in practice. The compromise has been to sell the means to the ends, and hope that was close enough.<br />
<br />
What has changed to make the Ends Game feasible is the growing availability of new kinds of "impact data." Impact data provide "information on when and how customers consume products and services, and how well these offerings actually perform." That new data lets businesses "move from promises to proof." Technology makes the achievement of ends transparent and accountable. Companies can now record consumption events and, increasingly, even observe the value obtained from them. This "post-purchase behavior" can now be "observed directly, completely, and in real time."<br />
<br />
Marco and Oded make a strong case for the value of these new strategies to benefit not just businesses, but their customers: "The powerful combination of real-time consumption patterns, personalization, and rich contextual data--all at scale--provides companies a basis to establish and reinforce trust with their customers, one by one." I was struck by how this positive vision provides an important counterbalance to the fatalistic view of Shoshana Zuboff's influential <a href="https://www.amazon.com/Age-Surveillance-Capitalism-Future-Frontier/dp/1610395697" target="_blank"><i>The Age of Surveillance Capitalism</i></a>, and how <i>The Ends Game</i> rightly highlights the benefits that could come from <i>responsible, opt-in</i> uses of data by businesses.<br />
<br />
<b>Applying impact data to enable revenue models that are accountable for the ends</b><br />
<br />
The essential point of <i>The Ends Game</i> is that businesses profit best from relationships with customers that enable them to achieve the customers' ends in ways that are accountable, sustainable, and mutually beneficial.<br />
<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1NWPBV3O5XZPUVN4JrUQnUumZN7xlk4BVdLg-USz-C3LoM7UHNi-W8PyBUMxyQzrhz_v069EBNQC3fJXf0ETDbm0Hl3Vdyi9SPpC_L-q5GdpxB2hk2E4-c8Q8FOYKXjMGsdyI-3gHAOcY/s1600/Ends+Game+fig+0.2.JPG" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1340" data-original-width="1259" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1NWPBV3O5XZPUVN4JrUQnUumZN7xlk4BVdLg-USz-C3LoM7UHNi-W8PyBUMxyQzrhz_v069EBNQC3fJXf0ETDbm0Hl3Vdyi9SPpC_L-q5GdpxB2hk2E4-c8Q8FOYKXjMGsdyI-3gHAOcY/s320/Ends+Game+fig+0.2.JPG" width="300" /></a></div>
To make revenue models efficient, businesses must address three levels of barriers to value co-creation:<br />
<br />
<ol>
<li>Access waste: “Customers can’t get it.”</li>
<li>Consumption waste: “Customers don’t or can’t use it.”</li>
<li>Performance waste: “The customer has access to it and consumes it, but the end result simply isn’t satisfactory.</li>
</ol>
<br />
The authors explore the already widely recognized and duplicated successes of addressing <i>access waste</i> through subscription and membership models. This is already the topic of many excellent books, but as they point out, subscriptions and other shifts from ownership to access are "only the first of many potential moves.”<br />
<br />
Their treatment integrates this access waste with the bigger picture of consumption waste and performance waste. They expand on how <i>consumption waste </i>can be addressed with models that apply metering of usage, or sharing, of resources, products, or services.<br />
<br />
From there they move on to the ultimate question: outcomes and <i>performance waste</i> -- and how new kinds of impact data can make the often very subjective and elusive questions of outcomes far more tractable. “[t]he ultimate outcome, of course, is value...Actual satisfactions.” That is what your customers really want.<br />
<br />
Marco and Oded address a related question that is also central to FairPay: <i>risk</i>. Customers are reluctant to take risks on access, consumption, and performance. Companies can "attract more customers by lowering barriers to purchase and boost willingness to pay by progressively taking on the risk inherent in the exchange.”<br />
<br />
The middle part of the book digs deeper into examples of how companies are already playing the Ends Game, spanning a broad range of industries with B2B and B2C products and services of all kinds. Some of the revenue and pricing models will be familiar, some not.<br />
<br />
Especially striking to me was the example of a Spanish comedy theater with a "Pay per Laugh" model (which had a price cap "so that no one would need to cry because they laughed more than they could afford") -- a creative use of sensing technology to measure laughs, clever framing of the model, and use of a price cap for added risk avoidance.<br />
<br />
Pay per Laugh may seem fanciful, but as the authors observe, "Value is the ultimate outcome. If a firm could charge its customers based directly and precisely on the tangible and intangible satisfactions they derive in an exchange, then there would be no need for an intermediate measure to calibrate the exchange and access, consumption, and performance waste are minimized. Value establishes the natural equilibrium between You get what you pay for and You pay for what you get."<br />
<br />
They come back to this as the “Existential question…What are we asking customers to pay for?” I have emphasized much the same fundamental point through a <a href="https://www.fairpayzone.com/2017/12/the-ghost-of-pricing-future-thought.html" target="_blank">thought experiment</a> where a value "demon" is capable of reading the minds of the customer and the provider to reveal their direct value perceptions and how that value should be shared.<br />
<br />
Most industries are at the early stages of a process that will unfold over the next few years, with improving technology making performance models not only feasible, but also practical and profitable. The primary concern for organizations in the meantime is understanding the true source of the value they create for customers. If value itself cannot be measured, the choice of outcome is critical. There may be factors that contribute to an outcome that the organization cannot observe, measure, or control. To the extent that there are significant differences in the value customers derive from a product or service, then the chosen outcome measure must be “personal” enough to reflect this.<br />
<br />
<b>The quest for ends</b><br />
<br />
The final portions of <i>The Ends Game</i> dig deeper into these challenges -- how to take action and how to define outcomes. Attention is given to collecting and analyzing impact data without abusing the privilege and to "ensuring that customers are active and positive participants in the creation of quality outcomes."<br />
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Marco and Oded outline four conditions for a suitable measure of outcomes: to be <i>meaningful</i> (thus valuable to customers, even if highly subjective like "enjoyment"), <i>measurable</i>, <i>robust</i>, and <i>reliable</i>. Metrics must address the <i>breadth </i>of heterogeneous customer needs and wants, and the <i>depth </i>of the task of meeting them, including the complexity of who contributed what when multiple parties are involved in a solution. I add a further issue to be considered in my second part: how customers can become more direct participants in <i>defining </i>what the relevant outcomes and metrics are, as they perceive them.<br />
<br />
[<i>Not included in the Inc. version:</i> Barriers to moving toward outcomes include the "quality paradox ...when a company obsessively directs its efforts toward continuously innovating its products and services, it risks becoming accountable to its offering rather than to its customers." One important form of this is <i>surrogation</i>, when the metric that is the surrogate for an objective distracts from the objective itself, creating a form of tunnel vision that is reinforced by its partial and temporary success.]<br />
<br />
The authors grant that overcoming these barriers is hard, but complacency is dangerous. They are realistic in suggesting that managers focus on the quest, not just the destination. In some contexts the quest may be long, and only partial steps will be practical now -- to be extended gradually.<br />
<br />
Impact data present particular challenges because they are so personally intrusive and invasive compared to the more traditional market research data and data on customer journeys: "the trillion dollar question...the extent to which customers are willing to share their information with firms and fuel the Ends Game ...companies must be able to communicate that sharing one's data has never been a more valuable investment." Building trust and transparency are essential to getting customers to opt-in to truly collaborative efforts to play the Ends Game. It all comes down to accountability -- that means not only creating, but demonstrating value. This is another theme central to FairPay: what matters is not only what a business does, but also <i><a href="https://www.jstor.org/stable/40752468" target="_blank">how</a> </i>it does it.<br />
<br />
Last, but not least, there are organizational obstacles to change. The authors point to the opportunity for disruptive startups that can start fresh without legacy concerns -- and also to how established businesses can begin to move before a startup or some bold competitor can steal their markets. "Often it is a newcomer that succeeds in reducing waste by introducing a revenue model conceived to improve access to the market, mirror consumption, or perhaps even guarantee performance."<br />
<br />
[<i>Not included in the Inc. version:</i> That brings us back to the centrality of truly partnering with customers, with the ultimate principle being "to profit only when customers do." The authors point out that impact metrics can create a moral hazard, where customers can try to game the metrics. There are tactical measures to limit that, but at a strategic level we return to two central tasks for the business: “…questioning the gap between what it promises customers and what they actually pay for" and ensuring that the customers "benefit proportionally—if not disproportionally—as outcomes improve.”]<br />
<br />
This quest has many challenges that will unfold in stages over time. But the authors make a strong case that this quest that must be undertaken if a business seeks lasting success -- and they provide clear directions on how to embark on it.<br />
---<br />
<br />
<i><b>Part 2 of this commentary (<a href="https://www.inc.com/richard-reisman/the-disruptive-power-of-ends-game-part-2.html" target="_blank">in Inc</a>, and slightly expanded <a href="https://www.fairpayzone.com/2020/09/the-disruptive-power-of-ends-game-part_11.html" target="_blank">here</a>) explores how FairPay restructures the Ends Game -- as a new form of repeated game over the course of the relationship with each customer -- to directly motivate collaboration, transparency and trust to use impact data in this quest to define and meet each customer's desired ends -- in a win-win way that is emergent and adaptive.</b></i><br />
<i><b><br /></b></i>
(An article by Marco and Oded summarizing the book, <i>The Ends Game</i>, <a href="https://sloanreview.mit.edu/article/competing-on-customer-outcomes/" target="_blank">Competing on Customer Outcomes</a>, appeared in MIT Sloan Management Review.)<br />
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<b><i>More about FairPay</i></b></div>
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<b><i><span style="font-size: x-small;"><br /></span></i></b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-size: x-small;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" style="cursor: move;" width="133" /></span></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><span style="font-family: inherit;"><i>A very brief and simple introduction is in </i>Techonomy<i>, </i></span></b></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span></div>
<ul>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><span style="font-family: inherit; font-size: x-small;"><i>More in the </i><a href="http://www.fairpayzone.com/p/overview.html" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). </i></span></b></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><span style="font-family: inherit; font-size: x-small;"><i>There is also </i><a href="http://www.fairpayzone.com/p/more.html" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i><b style="background-color: transparent;">And these journal articles, <a href="http://rdcu.be/HTfJ" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i><b style="font-family: inherit;"><i>Or, my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i>To stay updated and interact with others interested in FairPay, please join the <a href="https://www.linkedin.com/groups/8571310/" target="_blank">LinkedIn group, “FairPay: Adaptively Win-Win Customer Relationships.</a>”</i></b></span></span></li>
</ul>
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<span style="font-size: x-small;"><i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></span></div>
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<b><i>To stay updated and interact with others interested in FairPay, please join the <a href="https://www.linkedin.com/groups/8571310/" target="_blank">LinkedIn group, “FairPay: Adaptively Win-Win Customer Relationships</a>.” </i></b></div>
</div>
Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com62tag:blogger.com,1999:blog-7557842240801039419.post-8387567835673184332020-08-20T14:41:00.004-04:002020-08-28T15:07:13.536-04:00Price Discovery for a New App? – A Trial of the FairPay Strategy BeginsWhat is the right price for an entirely new application? What if customer needs are diverse and the value is not yet clear? What if functionality and features are being expanded? What if the customer base is potentially large, but you are starting small?<br />
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A Dutch firm in the construction industry is trying a transformative new way to sort that out. They have been developing a new app to enable contractors and homeowners to manage any home renovation project. Their pre-market survey of potential customers showed a wide variation in willingness to pay, and it was unclear how to segment the market. They learned of FairPay, a radically new strategy for value-based price discovery, and decided to try that for their beta test. FairPay may also prove to be attractive for them on an ongoing basis, but in any case, it offers unique power for price discovery for a new service.<br />
<br />
FairPay has been recognized as having broad potential to change the way subscription and service relationships work, but many businesses have been waiting for proof of concept testing before they would try it. This is the first real-world trial of how FairPay can work in a scalable way.<br />
<b><br /></b>
<b>How to price a new app?</b><br />
<br />
The original thought was to price the service at €2,50 a day per active project, but there were questions of whether that price point -- and that value metric -- were right, and whether the right answer might vary by customer segment. They had acquired 350 interested leads -- 30% of the interviewed leads confirmed the price level they had in mind as reasonable, but 30% said it was expensive, and 40% said they first want to experience the power of the app before having an opinion about the value and price. It was not clear what to do.<br />
<br />
Hugo van Schaik and Floris Meulensteen, of the <a href="https://translate.google.com/translate?sl=nl&tl=en&u=https%3A%2F%2Fverbouw.app%2Feerlijke-prijs%2F" target="_blank">RenovationApp</a> reviewed their dilemma with a consultant, Tijs Rotmans at <a href="http://www.thepricingcompany.com/" target="_blank">The Pricing Company</a>, and he suggested they try FairPay. They contacted me for advice, since I had developed and written about the concepts of <a href="https://www.fairpayzone.com/p/more.html" target="_blank">FairPay</a> (and had offered to assist with trials).<br />
<br />
On our first Zoom call, I was impressed that they had read my book and already had a good understanding of the strategies. It was apparent that this was a well-conceived beta test of both their RenovationApp and of FairPay and so I was happy to begin working with them. As we were speaking, they got word that their board had approved their 6-month beta test plan for the MVP version of the product, and they began to move ahead with FairPay for that.<br />
<b><br /></b>
<b>Why FairPay?</b><br />
<br />
The introduction of digital services has changed the basic assumptions of economics. The marginal cost of providing a digital content or application service to an additional customer becomes negligible, but the investment in creating, supporting, and expanding that content or application service is high. So now neither businesses nor customers have any clear sense of what the right price should be. Cost-based pricing does not work and there is not yet any competition to base a price on (whether sensibly or not). Value-based pricing is the answer, but it still takes the <a href="http://www.fairpayzone.com/2017/12/the-ghost-of-pricing-future-thought.html" target="_blank">combined perspective</a> of the supplier and the customer to know what that value (and thus the price) should be. People are coming to see that what is needed is a new kind of <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">relationship-based "social contract:"</a> the idea that the customer is not really paying for their access to the current service, but to sustain a continuing supply of content, support, and enhancements. If they are willing to pay now to fund future services, then the business is sustainable. This is already becoming clear in <a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">content</a> and other <a href="https://www.inc.com/richard-reisman/covid-19-future-of-passion-economy.html?cid=search" target="_blank">Passion Economy</a> businesses.<br />
<br />
This requires transparency and trust, but that is not really cause for concern when the relationship is structured effectively. Modern behavioral economics has led to the recognition that humans have been bred for fairness and reciprocity in social relationships and that that can be harnessed in business as well. In many ways FairPay revives the norms of the traditional village market, where prices were individually worked out to address the needs of both parties in the relationship. High-end B2B services already rely on value-based pricing as best practice. FairPay offers a <a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html" target="_blank">framework</a> that combines old and <a href="http://link.springer.com/article/10.1057/s41272-018-0143-3" target="_blank">new ways</a> to do that at scale that works for digital relationships – for SMB and consumer services.<br />
<b><br /></b>
<b>FairPay as a price discovery engine</b><br />
<br />
In his introductory emails to me on June 18-19, Floris had put their situation this way:<br />
<blockquote>
A renowned Dutch price strategist reviewed our case, and he suggested to take a look at the work you have done, regarding a FairPay price strategy. We really got interested in this way of working - mostly because our app doesn’t exist yet and it seems like the best thing to do as we launch our MVP. We will welcome more customers, develop a better relationship with those customers, which will result in a longer customer lifetime and higher customer life time value. And we will be able to learn a lot during the 6 months FairPay beta period.</blockquote>
<blockquote>
… we expect to have the ready product live in August. We plan to do a phased roll-out to our evangelist testers, then testers, then live connection with new facebook campaigns for new leads. After we learned during the 6 months FairPay beta period, we will adjust the product, features and pricing (price point and price strategy) accordingly. Once mature, we will roll out to the active customers base that we have in other business units of the group we work for.</blockquote>
<blockquote>
…We want to use FairPay for the first couple of versions of the RenovationApp. If we see a positive change in our business case, it can be that we keep using your model for a longer period. The main goal of using FairPay is to learn more about our target group, their (online) behaviour and what buyer persona's value the app the most. We let our users try our app for one project (around 6 weeks) and after that, we will send them to a form where they can pay a fair price. If they offer an unfair price for the upcoming 2 projects, they will go back to a fixed price and get kicked out of the FairPay zone. We will keep adding features to the app for premium users that pay a higher price.</blockquote>
We had a very productive call on June 23 and reviewed some of their questions and I agreed to work with them informally (at no charge). We began with a review of the framing and choice architectures they are developing for the initial launch. (I also contacted my <a href="https://www.fairpayzone.com/p/supporting-trials.html" target="_blank">colleagues</a> in academia with whom I co-authored journal papers on FairPay, who were pleased at this news. They are hopeful that we can consider a rigorous comparative test of FairPay versus conventional set-price models, with and without free trials, after the beta test provides initial results on what pricing metrics and levels work for which customer segments.)<br />
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The beta test began August 1, and soon after that we had another call to review initial versions of how they were presenting this to customers. I was again pleased with their approach and made some additional suggestions. Some of this can be seen in <a href="https://translate.google.com/translate?sl=nl&tl=en&u=https%3A%2F%2Fverbouw.app%2Feerlijke-prijs%2F" target="_blank">their page on pricing</a>, which includes an FAQ (this Google translation of the original Dutch is awkward, but workable).<br />
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My expectation is that FairPay will not only be effective for initial price discovery but will also prove to be the superior strategy for the long term. If it is effective at finding what works for a diverse set of customers and contexts during the beta, why stop? Customer needs and contexts will change, and product features will evolve, so why lock in price levels when you can use FairPay to continue this adaptive discovery process? Some customer segments may not behave well, and will need to have pre-set prices imposed to prevent free-riding, but with customers who can be enticed to be supportive, FairPay can be the basis of a very effective long term partnership that builds shared value.<br />
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In any case, the attractions of FairPay for this initial discovery phase seem compelling. I look forward to assisting as it develops, and to reporting on the findings.<br />
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<b><i>To stay updated and interact with others interested in FairPay, please join the <a href="https://www.linkedin.com/groups/8571310/" target="_blank">LinkedIn group, “FairPay: Adaptively Win-Win Customer Relationships</a>.” </i></b><br />
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<b><i><span style="font-size: x-small;">More about FairPay</span></i></b><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-size: x-small;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></span></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><span style="font-family: inherit;"><i>A brief introduction is in </i>Techonomy<i>, </i></span></b></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br />
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<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><span style="font-family: inherit; font-size: x-small;"><i>More in the </i><a href="http://www.fairpayzone.com/p/overview.html" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). </i></span></b></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><span style="font-family: inherit; font-size: x-small;"><i>There is also </i><a href="http://www.fairpayzone.com/p/more.html" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i><b style="background-color: transparent;">And these journal articles, <a href="http://rdcu.be/HTfJ" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i><b style="font-family: inherit;"><i>Or, my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><span><b><i>To stay updated and interact with others interested in FairPay, please join the <a href="https://www.linkedin.com/groups/8571310/" target="_blank">LinkedIn group, “FairPay: Adaptively Win-Win Customer Relationships.</a>”</i></b></span></span></span></li>
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<span style="font-size: x-small;"><i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></span></div>
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Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com10tag:blogger.com,1999:blog-7557842240801039419.post-53903147204211666132020-05-21T14:57:00.003-04:002021-07-01T16:35:16.098-04:00Covid-19 and the Future of the Passion Economy<div class="separator" style="clear: both; text-align: center;">
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[<a href="https://www.inc.com/richard-reisman/covid-19-future-of-passion-economy.html" rel="canonical" target="_blank">Originally published in<i> Inc.</i>, 4/29/20</a>] <i><o:p></o:p></i></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixIF2-eO6_kX9FDP2L7Rb9OWpE5JGmeJjzK64hel7xJitKYCeMVatfcbj_oLdx-DNeTs1euO9BqBWD8E-gq2O0Ll_hgul0F0BN8UQVprnNQZEq7_0JXKR6mIcOVUX_uylX50v6qVn0_YVU/s1600/Inc+tight+no+pic.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="480" data-original-width="634" height="302" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixIF2-eO6_kX9FDP2L7Rb9OWpE5JGmeJjzK64hel7xJitKYCeMVatfcbj_oLdx-DNeTs1euO9BqBWD8E-gq2O0Ll_hgul0F0BN8UQVprnNQZEq7_0JXKR6mIcOVUX_uylX50v6qVn0_YVU/s400/Inc+tight+no+pic.png" width="400" /></a></div>
<br /><b><blockquote><i style="background-color: #fff2cc;">NOTE: The Creator Economy has become the more widely used term for this. And it of course this not specific to Covid.</i></blockquote></b></div><div class="BodyA">The “Passion Economy”—the emerging sector of individuals using technology to make a living by direct support from the people they serve—is an emerging force. According to one study, <a href="https://www.recreatecoalition.org/wp-content/uploads/2019/02/ReCreate-2017-New-Creative-Economy-Study.pdf">17 million Americans earned nearly $7 billion</a> in this way in 2017. Who participates in this? Many are creators frustrated with modern modes of livelihood who seek a return to the traditional values of work. They want to “follow their passion” in their economic life in ways that embrace their individuality -- to restore the self-actualizing joy of creation, and of earning sustenance and support from direct human bonds with those they serve. They typically do this as an artisan or service-provider in a small business, doing what they love with a customer focus (but even some larger businesses now seek to enable a similar passion). And now, the Covid-19 pandemic has given this new urgency, highlighting how these strong, direct relationships enable resilience though unstable times. </div>
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This passion economy, described in a recent <a href="https://a16z.com/2019/10/08/passion-economy/"><span class="Hyperlink0">article</span></a><span class="None"> and a </span><a href="https://www.amazon.com/gp/product/0385353529/"><span class="Hyperlink1"><span lang="NL">book</span></span></a><span class="None">, is a way for “passion entrepreneurs” to escape from the rat race of conventional companies – and of the newer Gig Economy that has turned out to be little better.<o:p></o:p></span></div>
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<span class="None">But many passion entrepreneurs face a revenue dilemma. Their creations are typically “experience goods” (at least in large part, and often intangible digital ones). Those are hard to put a value on, and sold via relationships that are remote and digitally mediated. Customers who know and love their offerings become “</span><span class="None"><span lang="DA">superfans</span>” who happily pay a premium price, but how do you get there? Unlike artisanship in the village marketplace, producers and consumers find it hard to know and trust one another, and struggle to design effective pricing strategies. Some even turn (with sometimes surprising success) to seemingly impractical donation models like </span><a href="https://www.patreon.com/"><span class="Hyperlink0">Patreon</span></a><span class="None"> and “pay what you want” (PWYW).</span><o:p></o:p></div>
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<span class="None">A growing number of Passion Economy entrepreneurs have reached out to me about this problem. I have outlined a framework of strategies, called FairPay, that structure a new economics for digital creation. (These are </span><a href="https://www.fairpayzone.com/p/more.html">described</a><span class="None"> in my blog and book, and in works co-authored with prominent marketing scholars.) This builds on why donations and PWYW work surprisingly well: people will pay, even when they don’t have to – if they can pay what they feel is fair.</span><o:p></o:p></div>
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The insight of FairPay is that our new economics begs for a new social contract. In our digital world, we pay not because current products are scarce, but because we want to sustain the creation of future products that we expect to value. We pay because we want to fairly compensate and sustain those who create that value for us -- and for others. That is how humans are wired. (That motivation applies to real goods, as well.)<o:p></o:p></div>
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Achieving that requires rich and honest dialog about value propositions. Providers must empower their customers to try what is offered, ensure both parties have a common understanding of the value realized, and build trust in each other’s reputation to work out and maintain a truly fair relationship. Relationships are “repeated games” over a series of transactions. When the game is played well, it is win-win and builds cooperation to continue it. Both sides see that they are co-creating value as a surplus over and above the cost, and they agree to share fairly in that surplus. Conventional, set-price commerce tends to devolve into a zero-sum game in which each side seeks to extract the entire surplus. That is inherently alienating. Pre-set prices are simple, but cannot adjust for the unpredictable value of experience goods.<o:p></o:p></div>
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To see how FairPay’s simple twist changes the game, consider a subscription:<o:p></o:p></div>
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<span style="font-family: "symbol";">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span>The conventional repeated game is <span class="None"><i>a one-sided game of customer loyalty</i></span>: “Here is our monthly price, take it or leave it. <span class="None"><i>We hope you will take the risk</i></span> -- and be satisfied enough that you will continue this game.”<o:p></o:p></div>
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<span style="font-family: "symbol";">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><a href="http://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html"><span class="Hyperlink3">The FairPay repeated game</span></a> is <span class="None"><i>a cooperative game of joint fairness</i></span>: “<span class="None"><i>We will remove your pricing risk</i></span> by letting you pay what you think fair for you <span class="None"><i>after</i></span> each month’s use -- but we will continue this game (beyond a few trial cycles) only if we agree that you are being reasonably fair.”<o:p></o:p></div>
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Think of this new social contract as an <a href="http://www.fairpayzone.com/2015/05/an-invisible-handshake-for-digital.html"><span class="Hyperlink4">invisible handshake</span></a> -- an agreement to cooperate to seek a fair level of financial support to sustain future creation of desired services. That is based on rich, ongoing conversations about value. What value do I want from you? What value can you offer to me? What does it cost to produce? What outcomes can I achieve with it? How do we share fairly in the surplus? Instead of the old invisible hand that <span class="None"><i>works across a market at a point in time</i></span>, it is an agreement that <span class="None"><i>works over the course of our relationship</i></span>.<o:p></o:p></div>
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<span class="None">Modern behavioral economics sheds light on how
this strategy leverages human nature.
People are not </span><span class="None"><i><span lang="ES-TRAD">homo economicus</span></i>, purely rational
profit maximizers who will never pay any more than they have to. Thousands of PWYW success stories and dozens
of journal papers prove that people are </span><span class="None"><i><span lang="PT">homo reciprocans</span></i>, driven to
reciprocate fairness with fairness (and even altruism). </span><o:p></o:p></div>
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<!--[if !supportLists]--><span style="font-family: "symbol"; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]-->Behavioral economics also shows that people are
not purely rational about risk. Set-price offers put <span class="None"><i>consumers
at risk</i></span>. Will I enjoy the
product? Will I use enough of my
subscription services to be worth the cost?
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<!--[if !supportLists]--><span style="font-family: "symbol"; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]-->At the other extreme, purely voluntary donation
or PWYW offers put <span class="None"><i>providers at risk</i></span>. How many customers will underpay because they
don’t perceive the value, or just don’t care?<o:p></o:p></div>
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The FairPay game balances both risks. Providers can report what each customer consumed, what it cost, and why it is valuable. Each customer can adjust the suggested price and explain why that seems fair to them (with multiple choice options). Suppliers can evaluate that with simple software to track each customer’s fairness reputation and nudge them to be more fair. The customer never fears paying for no value. The provider risks some of their product (much as with free trial offer), but within a few cycles of the game they can determine who does not play fairly, nudge them, warn them, and cut them off, if necessary.<o:p></o:p></div>
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<span class="None">Providers can put a toe in these waters before jumping into this new logic for commerce. Basic </span><a href="https://urldefense.proofpoint.com/v2/url?u=https-3A__www.fairpayzone.com_2019_07_the-2Delements-2Dof-2Dnext-2Dgen-2Drelationships.html&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=OoQg5htqJy7zVcangwStgg&m=PSIykJIfe0PQT9qNB9ubuxMPkcliHBVClerjBckQ2Z0&s=h0_Ay48XiCi0sjDSiXxV1KBhy2vmPqUpiVY38PUV-fc&e=">elements</a><span class="None"> include being relationship- and value-centered, making prices risk-free by finalizing them after the experience, and enhancing dialog to frame value perceptions and nudge toward fairness, transparency and trust. Advanced elements include customer participation in price-setting, individualized nudging and reputation tracking. Providers can enforce minimum fairness levels by revoking unfair consumers’ power to participate in pricing. Both parties can consider flexible adjustments for ability to pay.</span><o:p></o:p></div>
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Providers who are hesitant to empower their customers to help set prices can control both sides of the FairPay game: Set individualized prices after use, based on their own hindsight judgment on how each customer consumed services, so the price is always reasonably fair and the game is still nearly risk-free to the consumer.<o:p></o:p></div>
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This new game will take learning -- but is more natural than it may first seem. It is highly adaptable, to enlarge the passion entrepreneur’s market with a wide range of value propositions. It enables them to learn just what their market values, how to deliver it, and how to be sustained for that. Anyone can try their offerings without risk. It is resilient when things change. Each party can nudge the other to create more of the kinds of value that are desired, and to share fairly in the surplus. That is what humans were bred to do.<o:p></o:p></div>
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This may seem peculiar at first, but it is a return to of traditional human values. We forget that the price tag was <a href="https://urldefense.proofpoint.com/v2/url?u=https-3A__www.fairpayzone.com_2014_12_so-2Dlast-2Dcentury-2Dits-2Dtime-2Dto-2Dend-2Dtyranny.html&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=OoQg5htqJy7zVcangwStgg&m=PSIykJIfe0PQT9qNB9ubuxMPkcliHBVClerjBckQ2Z0&s=NXkPPFeRrgi-9z3OSjUWpfVu_o8fxwDATBASg3qAAdQ&e=">invented</a> less than 200 years ago. For millennia, prices were set by individual negotiation. But department stores needed a simpler system in order to scale. That take-it-or-leave-it value proposition led to today’s alienation, distrust, and bargain hunting. Now we can do better. In our digital world of abundance, it is hard to negotiate prices before the experience as we once did. But with a social contract for sustaining future services, we can apply this new invisible handshake. That is what some Passion Economy entrepreneurs are increasingly seeking to do. And now the stress of the coronavirus pandemic has made it even more clear that we can -- and must -- return true human cooperation to be the driving force of our economy. <o:p></o:p><br />
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<i><b>Update notes [4/29/20] </b></i><br />
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In addition to the links about the Passion Economy included in my Inc article (above), this very recent posting from a European VC adds insights: <a href="https://medium.com/gaia-voice/a-primer-on-the-passion-economy-bf8bfb7d7a8d" target="_blank">A primer on the Passion Economy</a>.<br />
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Also, the term Passion Economy has been in use for a while. It dates back at least to this 1/13/16 article by another VC that also provides good background: <a href="https://generalassemb.ly/blog/the-passion-economy-how-to-actually-do-what-you-love/" target="_blank">The Passion Economy: How to Actually Do What You Love</a><br />
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(While the focus of the Passion Economy -- and this article -- centers on profiting from the kind of customer-centered co-creation of value that drives passion entrepreneurs in <i>small businesses</i>, the same principles can transform <i>large businesses</i> as well, as explained in my other writings on this blog -- see the tabs at the top.)<br />
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Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com8tag:blogger.com,1999:blog-7557842240801039419.post-20139916510834153952020-04-29T16:17:00.001-04:002021-07-01T16:39:13.242-04:00Inc Magazine: Covid-19 and the Future of the Passion Economy<div class="separator" style="clear: both; text-align: center;">
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<div><i style="background-color: #fff2cc; font-weight: 700;">NOTE: The Creator Economy has become the more widely used term for this. And it of course this not specific to Covid.</i></div><div><div class="separator" style="clear: both; text-align: center;">
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Inc Magazine has just published my article, <a href="https://www.inc.com/richard-reisman/covid-19-future-of-passion-economy.html?cid=search" target="_blank"><b>Covid-19 and the Future of the Passion Economy</b></a> -- with this teaser: <b><i>An emerging new infrastructure allows people to make a living doing things they love. The big question: How to properly value what you do</i>.</b><br />
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<b>From the opening...</b><br />
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The “Passion Economy”--the emerging sector of individuals using technology to make a living by direct support from the people they serve--is an emerging force. According to one study, <a href="https://www.recreatecoalition.org/wp-content/uploads/2019/02/ReCreate-2017-New-Creative-Economy-Study.pdf" target="_blank">17 million Americans earned nearly $7 billion</a> in this way in 2017. Who participates in this? Many are creators frustrated with modern modes of livelihood who seek a return to the traditional values of work. They want to “follow their passion” in their economic life in ways that embrace their individuality -- to restore the self-actualizing joy of creation, and of earning sustenance and support from direct human bonds with those they serve. They typically do this as an artisan or service-provider in a small business, doing what they love with a customer focus (but even some larger businesses now seek to enable a similar passion). And now, the Covid-19 pandemic has given this new urgency, highlighting how these strong, direct relationships enable resilience though unstable times. </blockquote>
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This passion economy, described in a recent <a href="https://a16z.com/2019/10/08/passion-economy/" target="_blank">article</a> and a <a href="https://www.amazon.com/gp/product/0385353529/" target="_blank">book</a>, is a way for “passion entrepreneurs” to escape from the rat race of conventional companies – and of the newer Gig Economy that has turned out to be little better. </blockquote>
<blockquote class="tr_bq">
But many passion entrepreneurs face a revenue dilemma...[<a href="https://www.inc.com/richard-reisman/covid-19-future-of-passion-economy.html?cid=search" target="_blank"><i>read more...</i></a>]</blockquote>
(While the focus of the Passion Economy -- and this article -- centers on profiting from the kind of customer-centered co-creation of value that drives passion entrepreneurs in <i>small businesses</i>, the same principles can transform <i>large businesses</i> as well, as explained in my other writings -- see below.)<br />
<br />
-------<br />
<i><b>Update notes [4/29/20] </b></i><br />
<br />
In addition to the links about the Passion Economy included in my Inc article, this very recent posting from a European VC adds insights: <a href="https://medium.com/gaia-voice/a-primer-on-the-passion-economy-bf8bfb7d7a8d" target="_blank">A primer on the Passion Economy</a>.<br />
<br />
Also, the term Passion Economy has been in use for a while. It dates back at least to this 1/13/16 article by another VC that also provides good background: <a href="https://generalassemb.ly/blog/the-passion-economy-how-to-actually-do-what-you-love/" target="_blank">The Passion Economy: How to Actually Do What You Love</a><br />
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<br />
<i><b>If you got here from Inc Magazine... </b></i><br />
<i><b><br /></b></i>
<i><b>Learn more here about FairPay and how it empowers the Relationship Economy and the Passion Economy</b>.</i> See the tabs at the top, especially the <a href="https://www.fairpayzone.com/p/overview.html" target="_blank">Overview</a> and <a href="https://www.fairpayzone.com/p/more.html" target="_blank">Selected Items</a>. Some especially relevant items:<br />
<ul style="text-align: right;">
<li style="text-align: left;">A big-picture overview post, <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">The Relationship Economy -- It's All About Valuing Customer Experiences</a></li>
<li style="text-align: left;">A more structured guide, <a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html" target="_blank">The Elements of Next-Gen Relationships and Pricing -- A Unifying Framework</a></li>
<li style="text-align: left;">A detailed use case, <a href="http://www.fairpayzone.com/2015/08/patron-izing-journalism-beyond-paywalls.html" style="text-align: right;" target="_blank">Patron-izing Journalism -- Beyond Paywalls, Meters, and Membership</a><span style="text-align: right;">.</span></li>
<li style="text-align: left;">A simpler and more conventional "80/20" step toward customizing digital subscriptions,<span style="text-align: right;"> </span><a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" style="text-align: right;" target="_blank">"Risk-Free" Subscriptions to The Celestial Jukebox?</a></li>
<li style="text-align: left;">The game theory algorithm enabling this,<span style="text-align: right;"> </span><a href="https://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html" style="text-align: right;" target="_blank">FairPay Changes the "Game" of Commerce</a><span style="text-align: right;">.</span></li>
<li style="text-align: left;"><span style="text-align: right;">A though experiment to keep in mind, </span><a href="http://www.fairpayzone.com/2017/12/the-ghost-of-pricing-future-thought.html" target="_blank">The Ghost of Pricing Future -- A Thought Experiment</a></li>
</ul>
Important scholarly coverage of FairPay is in the <i>Journal of Revenue and Pricing Management</i>, <a href="https://link.springer.com/article/10.1057/s41272-018-0143-3" target="_blank">A novel architecture to monetize digital offerings</a>, and in the <i>Australasian Marketing Journal</i>, <a href="https://www.blogger.com/Pricing%20in%20Consumer%20Digital%20Markets:%20A%20Dynamic%20Framework" target="_blank">Pricing in Consumer Digital Markets: A Dynamic Framework</a>, as well as an earlier introduction in <a href="https://hbr.org/2013/11/when-selling-digital-content-let-the-customer-set-the-price" target="_blank"><i>Harvard Business Review</i></a>.<br />
<br />
<div>
<b><i>LinkedIn Group for FairPay and related innovations</i></b></div>
<div>
<span style="background-color: white;">Please join the <span style="background-color: white;"><a href="http://bit.ly/FPLIgp" target="_blank">LinkedIn Group</a>,</span> </span>FairPay: Adaptively Win-Win Customer Relationships, to connect with others who share interest in applying FairPay and related strategies.</div>
===========================================================Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com27tag:blogger.com,1999:blog-7557842240801039419.post-90127601587618599332020-04-07T11:58:00.002-04:002020-04-07T11:59:25.492-04:00The Forever Promise - The Key to Lifetime Value...and Profit<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiGqEuWDfN7DSJ4n3tHJgi6pisJuX0dagdbnxXcf79oawzVmqz2lpkWzxuKMqbpCdFs9Gx0RP1_KW5w194ToW3PuZGWPR8MAujBe7bxsljdLyIjzFbhSGeY8mJ4QAHlKyYvh_XXoB85AYKM/s1600/Baxter+Forever+41eSDakA8SL._SX324_BO1%252C204%252C203%252C200_.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="499" data-original-width="326" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiGqEuWDfN7DSJ4n3tHJgi6pisJuX0dagdbnxXcf79oawzVmqz2lpkWzxuKMqbpCdFs9Gx0RP1_KW5w194ToW3PuZGWPR8MAujBe7bxsljdLyIjzFbhSGeY8mJ4QAHlKyYvh_XXoB85AYKM/s200/Baxter+Forever+41eSDakA8SL._SX324_BO1%252C204%252C203%252C200_.jpg" width="130" /></a></div>
<blockquote class="tr_bq">
<b><i>How to Build a Subscription Model So Compelling, Your Customers Will Never Want to Leave</i> </b></blockquote>
That is the accurate subtitle to <i><a href="https://www.amazon.com/Forever-Transaction-Subscription-Compelling-Customers-ebook/dp/B07XMB4GW2" target="_blank">The Forever Transaction</a></i>, the new book by Robbie Kellman Baxter, consultant and author of <i><a href="https://www.amazon.com/gp/product/0071839321/" target="_blank">The Membership Economy</a></i>.<br />
<br />
Baxter refers to "a forever transaction, as an outgrowth of a forever promise of value." That forever promise "is focused on a long-term customer need or desire." She draws on subscription models like Netflix to say:<br />
<blockquote class="tr_bq">
I want to show you how to create your own forever transaction. It’s about orchestrating the moment when customers remove their “consumer hats” and don “member hats,” commit to your organization for the long term, and stop considering alternatives. For many companies this is the holy grail: loyal recurring customers, often paying automatically, indefinitely. </blockquote>
<blockquote class="tr_bq">
To earn a “forever transaction” you must offer a “forever promise” in return. You commit to deliver a result, solve a pain point, or achieve an outcome for your members forever, in exchange for their loyalty.</blockquote>
Baxter's first book, <span style="font-style: italic;">The Membership Economy</span>, was an introduction to subscription models and why they are increasingly important -- this book is intended to dig deeper into how to do them well. As such the new book provides excellent advice, and expands the list of essential reading on exploiting recurring revenue business models (along with important books by <a href="https://www.amazon.com/Subscription-Marketing-Strategies-Nurturing-Customers/dp/0999624881" target="_blank">Anne Janzer</a> and <a href="https://www.amazon.com/Subscribed-Subscription-Model-Companys-Future-ebook/dp/B078GCWL9D" target="_blank">Tien Tzuo</a> that I have commented on in <a href="https://www.fairpayzone.com/p/more.html" target="_blank">this blog</a> and listed in my <a href="https://www.fairpayzone.com/p/pricing.html" target="_blank">Resource Guide</a>.)<br />
<br />
I reviewed a pre-press version of this new book, and had some dialog with Baxter on how my work on FairPay builds on and extends her ideas in new directions that can potentially transform B2C relationships. (My thanks to Baxter for including a reference to my own book, <i><a href="http://bit.ly/FPZBook" target="_blank">FairPay</a></i>, on page 122.)<br />
<br />
===================================================================<br />
<i><b><u>TL;DR</u>: The forever promise is the future of business, as Baxter ably explains. We are just beginning the journey. The promise will be stronger and more durable when it becomes more balanced and mutual.</b></i><br />
===================================================================<br />
<br />
<b>The why and how of a forever promise</b><br />
<br />
To encapsulate <i>The Forever Transaction</i>, I cannot put it better than Charlene Li's blurb: "Recurring revenue is the holy grail, and Robbie Baxter is giving us the map to find it. Building on 15 years of experience in Silicon Valley and beyond, Baxter provides fresh case studies and practical tools to disruption-proof your organization."<br />
<br />
Businesses of all kinds have realized that digital business enables continuing deep relationships with customers, and that it is far more profitable to retain customers than to acquire them, lose them, and acquire others. They study "customer journeys" and build "loyalty loops."<br />
<br />
Baxter emphasizes the forever promise as the critical bond that builds loyalty to retain customers. She explains how you can plan what promise you can offer, to what customers, and the importance of ongoing experimentation to test, learn, and adjust. Then, with many examples from her consulting with varied companies, she gets into the details of scaling, including technology, pricing, and metrics, and building for continuing leadership and evolution in whatever promise you are offering.<br />
<br />
I find it hard to recommend a single one of these books to the exclusion of the others. I recommend studying all of them -- each offers a wealth of ideas in very useful form, based on varied experience in this space, and each provides unique insights.<br />
<br />
<b>Building the best possible forever relationship with each customer</b><br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgH3rWy_uPYkTf2T1NGC7-AOCt-vQclpkd6hv0Sb7-6WRAPFAOOt-vnNbSwTPJXaSYXWs384miIKx5AGYuP6ChfX2mQttCoHxobk7PvQUL_foVGchyW6U9r_rfqXqS3YSH2fIf4wP13xC42/s1600/9781631574771.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="648" data-original-width="432" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgH3rWy_uPYkTf2T1NGC7-AOCt-vQclpkd6hv0Sb7-6WRAPFAOOt-vnNbSwTPJXaSYXWs384miIKx5AGYuP6ChfX2mQttCoHxobk7PvQUL_foVGchyW6U9r_rfqXqS3YSH2fIf4wP13xC42/s200/9781631574771.jpg" width="133" /></a></div>
The forever promise is the future of business. We are just beginning the journey. The promise will be stronger and more durable when it becomes more balanced and mutual. The idea of the forever promise is very resonant with my work. My perspective builds on the foundation of this book (as well as the other books mentioned). What FairPay adds is to suggest a focus on <i>mass-customizing forever relationships by designing individualized value propositions to suit the values and behaviors of each customer -- in ways that adapt dynamically, as the relationship unfolds</i>. (Right now, FairPay is especially relevant to digital content and services, and to other low-marginal-cost offerings, but over time it can apply far more broadly.)<br />
<br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfnyqiI0gQkwPqlixj73NyPIywmyZxWuPFD0UTErnnPcHRDgrDRt7Yj6MzbVdLvWv6iMh0bv2agQcs_u6lBTY_CR-65y0sKNlaxJW9EBcIL0RoeJ5lcycTOUwOZtqn0rr2hT4lX7OI_JUB/s1600/handshake.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="242" data-original-width="366" height="131" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfnyqiI0gQkwPqlixj73NyPIywmyZxWuPFD0UTErnnPcHRDgrDRt7Yj6MzbVdLvWv6iMh0bv2agQcs_u6lBTY_CR-65y0sKNlaxJW9EBcIL0RoeJ5lcycTOUwOZtqn0rr2hT4lX7OI_JUB/s200/handshake.jpg" style="cursor: move;" width="200" /></a>The big-picture of this perspective is outlined in my post, <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">The Relationship Economy -- It's All About Valuing Customer Experiences</a>. Modern business is returning to a focus on long-term relationship-building, as opposed to the transaction-focused mass-marketing mind-set of the past century or so. But most business-people have yet to see how we can return to a forever promise with each customer that mass-customizes value propositions just as humans once did in village markets. It is true that we cannot scale traditional transaction-level haggling, but few realize that we can structure a new form of forever promise with customer participation. That can be done with what I call an <i><a href="http://www.fairpayzone.com/2015/05/an-invisible-handshake-for-digital.html" target="_blank">invisible handshake</a></i> in which both provider and consumer promise to cooperate in seeking a a value proposition, and a price, that is fair for each customer, and for the business.<br />
<br />
Baxter's chapter on pricing is an excellent summary of best-practices in subscription/membership pricing, as generally understood. FairPay points to ways to go beyond currently understood best-practice, and to give the consumer more say in what pricing model works for them -- and to change that whenever changes in desires, needs, and usage warrant. We can create forever transactions that apply modern e-commerce technology to return to the more flexible trust and fairness-based forever relationships of the village bazaar -- but in a new way that works at Internet scale.<br />
<br />
Perhaps the simplest statement of how the full form of FairPay changes the forever transaction/relationship game is this:<br />
<ul>
<li><i>From today’s conventional repetition game</i>: “Here is our monthly price, take it or leave it. We hope you will take the risk — and be satisfied enough to continue this game.”</li>
<li><i>To <a href="https://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html" target="_blank">the FairPay game</a></i>: “We will grant you the power to pay what you think fair for you after each month’s use — but we will continue that game (beyond a few trial cycles) only if we agree that you are being reasonably fair.”</li>
</ul>
That changes everything -- from a one-sided game of loyalty to a more win-win game of fairness and trust – on top of which a whole range of features can be layered, at many levels. It creates <i>a new kind of haggling: not over price at the time of a given transaction, but over the criteria for what is considered fair value exchange over the relationship</i>. It give the customer some new power to to shape the forever promise, but lets the business frame the terms, and retain control over whether the relationship remains beneficial enough to continue to offer that promise to that customer.<br />
<br />
Baxter's pricing chapter raises the valid concern that “the more complex the pricing, the less customers trust it” (paraphrasing Einstein: “Keep your pricing as simple as possible, but no simpler”). FairPay may at first seem complex, but I submit that it offers a deeper simplicity. It seems complex because it is a change in perspective, but it is simple at heart: “<i>our forever promise to each other is that we both agree to continually seek a price and a value proposition that is fair for both of us</i>” – what could elicit more trust (if it is done transparently, in good faith)? Instead of zero-sum games in which both sides view the other as being inherently unfair (back to Einstein, who was the master of rethinking perspectives), I suggest that <i>most pricing is actually simpler than is possible to avoid unfairness</i>. The result is resentment, alienation, and a ongoing zero-sum battles over who extracts value from who.<br />
<br />
Instead, FairPay seeks to motivate customers to cooperate with the vendor, to motivate the vendor to create more value to be shared fairly. The customer will (as Baxter recommends) “know how the pricing works and why they paid what they did.” Pricing in the village bazaar was intuitive, in a way that had nuance across a full range of value metrics. Baxter explains that the idea (again) is to establish a forever promise so trustworthy that "people say things like 'I don’t even care exactly what I’m paying because this organization solves my problems and helps me achieve my goals. It’s like they know exactly what I need. I trust them.'” Conversely, the business takes it in stride if an customer known to usually be fair might seem to be a bit out of line once in a while.<br />
<br />
Baxter also has a helpful chapter on metrics. Those metrics combine with pricing to get to the broader issues. FairPay shifts our perspective on the entire value exchange, and how balanced and fair it is. Recurring revenue business understand that what matters is not the short-term value of transactions, but Customer Lifetime Value (CLV) -- perhaps the most important metric in current best practice. Baxter concludes the book with a very important Venn diagram: "Operate at the intersection of 'what’s in it for the customer,' 'what’s in it for us,' and 'what’s in it for everyone else.'"<br />
<br />
That intersection is where FairPay brings a new focus. This was addressed in <a href="https://www.fairpayzone.com/p/chapter-23-competing-on-vendor-lifetime.html" target="_blank">a chapter in my book</a>, and in a post that discuss <a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank"><i>value from the vendor to the consumer</i>, and the risk of not getting the value expected</a>:<br />
<blockquote class="tr_bq">
…Subscription providers seem to ignore this. They focus on customer acquisition and customer retention (and its converse, churn), but how many of them consider the dynamic value propositions of value/risk to each individual consumer? They optimize for CLV, the Customer Lifetime Value <i>to them</i>, but not for VLV, their Vendor Lifetime Value <i>to the customer</i>. How many businesses really think about how they justify their share of the consumer's wallet?</blockquote>
While VLV may be hard to quantify, it is important to seek to view the lifetime value proposition through the customer’s eyes, not just the vendor’s. Baxter observes: "Because you’ve made a forever promise, you need to ensure that products and pricing continue to support the value you’re creating for the people you serve."<br />
<br />
Of course giving customers the amount of pricing power that FairPay suggests is daunting to many, even though FairPay provides mechanisms to enforce fairness (downgrading or declining to make further offers to those who free-ride). But there are many component elements to FairPay, and many ways to apply some of those elements while retaining full price control. That is addressed in two of my posts:<br />
<ul>
<li><a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html" target="_blank">The Elements of Next-Gen Relationships and Pricing -- A Unifying Framework</a> – an overview of the individual elements that can be mixed and matched, and applied in stages, to be as conventional or radical as desired.</li>
<li><a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">"Risk-Free" Subscriptions to The Celestial Jukebox?</a> -- highlighting one of those simpler elements. That is a simple change to a more adaptive customer-value-based pricing model that <i>maintains full pricing control for the business</i>, but finds a new way to blend the best of all-you-can-eat and of usage-based models. This seeks to largely eliminate consumer pricing risk, and thus avoid subscription fatigue.</li>
</ul>
But businesses are missing an opportunity when they fear giving customers more say about pricing and value propositions. More businesses have been beginning to realize that -- and COVID-19 has triggered new openness to dropping paywalls and gaining goodwill by trusting customers. Voluntary membership payments have proven successful in important use cases, perhaps most notably <i>The Guardian</i> (which recently <a href="https://www.niemanlab.org/2019/05/want-to-see-what-one-digital-future-for-newspapers-looks-like-look-at-the-guardian-which-isnt-losing-money-anymore/" target="_blank">turned a profit</a> with voluntary memberships at user-selected prices). <a href="https://www.patreon.com/" target="_blank">Patreon</a> and similar services have had notable traction in some markets. Some small consulting services (including a <a href="https://www.valoremlaw.com/value-adjustment-line" target="_blank">law firm</a> and <span id="goog_1751893179"></span><a href="https://www.summitlaw.com/our-story/pricing" target="_blank">another</a> <span id="goog_1751893180"></span>and a <a href="https://www.circlecpa.com/faq" target="_blank">CPA firm</a>) have found success with simplified forms of the same kind of user participation in pricing with intuitive forms of enforced fairness much like what FairPay proposes to be automated. <a href="https://www.fairpayzone.com/p/pricing.html" target="_blank">Studies have shown</a> that even simple forms of PWYW (pay what you want) can outperform conventional pricing in some contexts.<br />
<br />
As companies grow more customer-value centered, and gain a better understanding of digital products/services (and other low marginal cost services), the line between voluntary and enforced payments will blur, and will depend on the specific value proposition at issue. The invisible handshake is especially relevant to digital because there is no scarcity of distribution once a content or service is created. The invisible hand of traditional economics does not work because of digital abundance ("information wants to be free") -- so we need a new social contract to sustain creation of future content and services. This will increasingly be seen as best practice for low-marginal cost services (or low-marginal cost components of costly services) -- and will become more familiar and widely applicable as automation and robotics enable low-cost replication of more and more services.<br />
<br />
So, as I said at the start -- the forever promise is the future of business. We are just beginning the journey. The promise will be stronger and more durable when it becomes more balanced and mutual.<br />
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<b><i><span style="font-size: x-small;">More about FairPay</span></i></b><br />
<b><i><span style="font-size: x-small;"><br /></span></i></b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-size: x-small;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></span></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>A brief introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br />
<ul>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit; font-size: x-small;"><i>More in the </i><a href="http://www.fairpayzone.com/p/overview.html" style="font-style: italic;" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" style="font-style: italic;" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). </i></span></b></span></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit; font-size: x-small;"><i>There is also </i><a href="http://www.fairpayzone.com/p/more.html" style="font-style: italic;" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i><b style="background-color: transparent;"><span style="font-style: italic;">And these journal articles, </span><a href="http://rdcu.be/HTfJ" style="font-style: italic;" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i><b style="font-family: inherit;"><i>Or, my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></i></b></span></span></li>
</ul>
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<div style="margin: 0px;">
<span style="font-size: x-small;"><i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></span></div>
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<br />Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com12tag:blogger.com,1999:blog-7557842240801039419.post-640449495358689002020-01-30T16:14:00.002-05:002020-01-30T16:14:11.258-05:00Value Nurturing -- A New Edition of Anne Janzer's "Subscription Marketing"<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmXDu72mXDAA6thr5TOBTFjDeGkMet-TuloirWLFGxjXeaZ0lf45CSsqh-W2tXFjI7E3mDULYHKLDcWaDdumDEAepjE_ZGfI3Lob8iG3uDaoZemw4EM_9PrA9BC8Ti2HKNuS1kzWGxzfU/s1600/Janzer+3rd+ed+41eSkbmc46L.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="500" data-original-width="386" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmXDu72mXDAA6thr5TOBTFjDeGkMet-TuloirWLFGxjXeaZ0lf45CSsqh-W2tXFjI7E3mDULYHKLDcWaDdumDEAepjE_ZGfI3Lob8iG3uDaoZemw4EM_9PrA9BC8Ti2HKNuS1kzWGxzfU/s320/Janzer+3rd+ed+41eSkbmc46L.jpg" width="246" /></a></div>
Anne Janzer is continuing to nurture the value offered in her classic book, <a href="https://www.amazon.com/Subscription-Marketing-Strategies-Nurturing-Customers-ebook/dp/B083JPXB8K/ref=sr_1_9" target="_blank"><i>Subscription Marketing</i></a> -- a <i>Third Edition</i> was just released (with a special offer of the Kindle edition for <a href="https://www.amazon.com/Subscription-Marketing-Strategies-Nurturing-Customers-ebook/dp/B083JPXB8K/ref=sr_1_9" target="_blank">just 99 cents</a> through February 7).<br />
<br />
Her subtitle is "Strategies for Nurturing Customers in a World of Churn" -- that to me is the heart of subscription businesses -- and of my related work on FairPay.<br />
<br />
As she puts it:<br />
<blockquote class="tr_bq">
Subscription Marketing is two-way communication between your company and customers in a subscription relationship, with the purpose of sustaining the value of that relationship for both parties.</blockquote>
<blockquote class="tr_bq">
While this book focuses on marketing after the sale (which I call <i>value nurturing</i>), those activities are part of a broader shift in the marketing discipline. Subscription marketing is marketing with a long-term perspective. It’s changing your mindset to focus on the relationship rather than revenue alone. It’s looking beyond lead generation to cultivating both trust and value, before and after the point of conversion.</blockquote>
Anne's new edition focuses more deeply on how that mindset is critical to success. Additions include:<br />
<br />
<ul>
<li>"a new chapter on trust and value -- the true marketing imperatives of the Subscription Economy"</li>
<li>updated and expanded examples of value nurturing</li>
<li>new chapters on startups, small businesses, and large, established businesses.</li>
</ul>
<br />
Anne and I are in full agreement on the vital importance of value nurturing. Several years ago she wrote <a href="https://annejanzer.com/disrupting-subscription-pricing-fairpay/" target="_blank">a very nice review of my own book on FairPay</a>, where she observed:<br />
<blockquote class="tr_bq">
In many ways, the FairPay pricing model is the perfect complement to the practice of value nurturing outlined in <i>Subscription Marketing</i>. Organizations that adopt a FairPay pricing must work hard to nurture the customer’s perception of value, both within the solution and beyond.</blockquote>
Her book has been the perfect complement to mine -- with far more detail on the basics of that mindset, and the practice of value nurturing. Drawing on her background as a professional business writing consultant, Anne's new edition expands very nicely on that.<br />
<br />
If you want to succeed in a subscription business, you should read Anne's book carefully. If you want to do more than succeed, read her book and mine.Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com55tag:blogger.com,1999:blog-7557842240801039419.post-55969812574873750892019-12-26T13:08:00.001-05:002019-12-26T15:37:20.527-05:002020 Vision -- The Restoration of the Customer<div class="separator" style="clear: both; text-align: center;">
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<b>The Age of the Customer: You Ain't Seen Nothin' Yet</b><br />
<br />
Nearly a decade has passed since Forrester said we were entering <a href="https://boxonline.s3.amazonaws.com/SM/Forrester_Age_of_Customer_Report.pdf" target="_blank">The Age of the Customer</a>. That is apparent and has obvious implications. But as the decade of the 2020's dawns, I call out a deeper vision -- The <i>Restoration </i>of the Customer -- that could bring far more fundamental changes in the coming decade.<br />
<br />
There are two surprising turns that may be taken in this decade to restore power to customers -- one that can fundamentally change how we conduct business, and one that can fundamentally change how we collaborate.<br />
<br />
<i>Those turns might just begin to undo many of the ills of the industrial revolution and of the computer revolution</i>. Both turns center on a return to enlightened human values:<br />
<ul>
<li>The customer is not just a persona with a bundle of attributes that a business can learn how to manipulate, but a unique human being that has been bred since pre-history to thrive on a cooperative effort to create value and share it.</li>
<li>The user is not just a a source of attention that can be engaged to be sold to advertisers, but a customer to be served what they value -- again, a cooperative effort to create value and share it.</li>
</ul>
<b>What those paying attention see</b><br />
<br />
<a href="https://go.forrester.com/age-of-the-customer/" target="_blank">Forrester</a> put the basic drivers nicely (emphasis added):<br />
<blockquote class="tr_bq">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaXjEADP2-l7EaSOx1ccxZ4ENCJyQIcq79BDAjBnYBU799nDKv1js-KfGU6toE_pk-OThJDBFWXWRcRr4lUgco5wsIdII5lD2BNPIIenNi5IPf8E6FWS3mGRSJlHqEPLCjNBu4MmLdiJRj/s1600/Customer+Age+Forrester.gif" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="608" data-original-width="600" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaXjEADP2-l7EaSOx1ccxZ4ENCJyQIcq79BDAjBnYBU799nDKv1js-KfGU6toE_pk-OThJDBFWXWRcRr4lUgco5wsIdII5lD2BNPIIenNi5IPf8E6FWS3mGRSJlHqEPLCjNBu4MmLdiJRj/s320/Customer+Age+Forrester.gif" width="315" /></a><i>In this era, digitally-savvy customers would change the rules of business,</i> creating extraordinary opportunity for companies that could adapt, and creating existential threat to those that could not. ...<i>It requires leaders to think and act differently – in ways that feel foreign, unfamiliar, and counter-intuitive. </i>And honestly, it is simply hard to do. ...<i><b>These dynamics will endure as new technologies like artificial intelligence and robotics emerge to challenge core notions of what it means to be a company, what it means to build human capital, and what it means to compete and win</b>.</i></blockquote>
<b>...And, a deeper vision</b><br />
<br />
Here I point to some little recognized ideas on how re-centering on value can change not only the dynamic of commerce, but also a parallel dynamic of customer value that is equally important.<br />
<ul>
<li><b>First, the commercial dynamic that Forrester describes is just the foundation for reversing how the "progress" of technology cost us the human dimension in commerce -- a dimension that we had when commerce was just the way villagers did business with one another -- with human beings on both sides of an ongoing relationship. </b></li>
<li><b>Second, we humans, as "customers" of Web services, have lost control of our experience of the world. Our central experience of human interaction has been hijacked by platforms who "engage" us in order to profit from bombarding us with advertising and paid propaganda.</b></li>
</ul>
<b><i>First: Back to the future of commerce</i></b><br />
<br />
Consumers are increasingly alienated from the companies they do business with. Instead of neighbors or shopkeepers, we deal with soulless <i>institutions </i>that we distrust and feel abused by. That has been, increasingly, the price of productivity and material riches. But now technology has advanced far enough to restore the dimension of human values -- if we applied to do so. That does not require that we abandon the miracle of capitalism, but only that we bring it back to the marketplace of human value. Technology now makes it possible for even large faceless <i>institutions </i>to build human interfaces that behave with human values. That will drive institutions to interact with human in ways that are more truly human.<br />
<br />
FairPay is a framework for centering on why and how to do that. The key is to recenter on relationships and the creation and sharing of value in ways that are tailored to each individual. Specifics on how to do that are in my <a href="https://www.fairpayzone.com/p/more.html" target="_blank">FairPayZone</a> blog, some articles written with prominent marketing scholars, and my 2016 book. Some of the best places to begin to understand this are:<br />
<ul>
<li><a href="http://www.fairpayzone.com/2017/12/the-ghost-of-pricing-future-thought.html" target="_blank">The Ghost of Pricing Future -- A Thought Experiment</a> -- a simple vision of human value.</li>
<li><a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">The Relationship Economy -- It's All About Valuing Customer Experiences</a> -- how the restoration begins.</li>
<li><a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html" target="_blank">The Elements of Next-Gen Relationships and Pricing -- A Unifying Framework</a> -- deconstructing the elements of value.</li>
<li><a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">"Risk-Free" Subscriptions to The Celestial Jukebox?</a> -- a simpler, 80/20 step toward value based subscriptions.</li>
<li><a href="http://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html" target="_blank">FairPay Changes the "Game" of Commerce</a> -- a game theory method for seeking human value in business relationships.</li>
<li>...and for those with a more scholarly bent, <a href="http://link.springer.com/article/10.1057/s41272-018-0143-3" target="_blank">A Novel Revenue Architecture to Monetize Digital Goods</a> and <a href="https://doi.org/10.1016/j.ausmj.2019.07.002" target="_blank">Pricing in Consumer Digital Markets: A Dynamic Framework</a>.</li>
</ul>
<b><i>Second: Who does it serve? - a course correction in how we experience the world</i></b><br />
<br />
Social media and other online content services have changed how we experience the world, including how we interact with other people. Computer-mediation began with great hopes, but now it seems we have built a Frankenstein's monster. As growing calls for change are beginning to focus on <a href="http://www.gmfus.org/events/debate-over-new-digital-platform-agency-developing-digital-authority-and-expertise" target="_blank">new levels of regulation</a>, it is not enough to regulate <i>against </i>specific harms. Instead we must refocus on what we want to regulate <i>for</i> -- who these "services" serve, and what we want these platforms to facilitate. They were supposed to make us happy and smart -- instead they are making us angry and stupid. But technology can reverse that, if we incentivize that.<br />
<br />
We can design new architectures for our interactive media that create value for us. The key is to recognize that each of us is an individual, and we should be able to individualize our services, mixing and matching offerings to make just the service we want for what we are doing now. The most urgent part of that is to shape our media services to give each of us what we value. The Web stated out seeking to do that, and we can return to that vision. It won't be free, but it can be affordable. And we have seen that "free" is not really affordable (because it is not really free). If we do not change direction, our democracies and our civilization will collapse. Some starting points for seeing how:<br />
<br />
<ul style="margin-top: 0in;" type="disc">
<li class="MsoNormal"><a href="https://ucm.teleshuttle.com/2019/12/our-digital-platforms-what-we-want-to.html" target="_blank">Our Digital Platforms -- What We Want to Regulate For (Not Just Against)</a> -- a preliminary summary of my comments at an excellent event on this theme.</li>
<li class="MsoNormal"><a href="https://ucm.teleshuttle.com/2018/07/the-augmented-wisdom-of-crowds-rate.html" target="_blank">The Augmented Wisdom of Crowds: Rate the Raters and Weight the Ratings</a> -- a vision for how social media can make us smarter and happier.<o:p></o:p></li>
<li><a href="https://www.fairpayzone.com/2018/12/reverse-biz-model-undo-faustian-bargain.html" target="_blank">Reverse the Biz Model! -- Undo the Faustian Bargain for Ads and Data</a> -- why the ad model was "the original sin of the Internet."</li>
<li class="MsoNormal"><a href="https://ucm.teleshuttle.com/2018/08/the-tao-of-fake-news.html" target="_blank">The Tao of Fake News</a> -- how truth emerges from what humans value as an informed consensus.</li>
<li class="MsoNormal"><a href="https://ucm.teleshuttle.com/2018/04/architecting-our-platforms-to-better.html" target="_blank">Architecting Our Platforms to Better Serve Us -- Augmenting and Modularizing the Algorithm</a> <o:p></o:p>-- further suggestions on designing for human values.</li>
<li class="MsoNormal"><a href="https://ucm.teleshuttle.com/2019/10/free-speech-not-free-targeting-using.html" target="_blank">Free Speech, Not Free Targeting! (Using Our Own Data to Manipulate Us)</a> -- how this clarifies the issues in the 2020 election crisis.</li>
</ul>
<div>
(Cross-posted with my other blog, <a href="https://ucm.teleshuttle.com/" target="_blank">Smartly Intertwingled</a>.)</div>
Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com25tag:blogger.com,1999:blog-7557842240801039419.post-61023807395260789012019-11-25T14:45:00.000-05:002019-12-13T10:32:55.179-05:00Tim Berners-Lee's "Contract for the Web" Forgets One Thing!<div class="separator" style="clear: both; text-align: center;">
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Tim Berners-Lee's "Contract for the Web" (today in his <a href="https://www.nytimes.com/2019/11/24/opinion/world-wide-web.html" target="_blank">NY Times op-ed</a>) is a worthy effort -- but it seems to ignore the key contract element that he called on us to fight for a year and a half ago.<br />
<br />
The new <a href="https://contractfortheweb.org/" target="_blank">Contract</a> lists Principle 4, "Make the internet affordable and accessible to everyone" -- but the sub-points for that principle gloss over the fundamental problem he raised in <a href="https://webfoundation.org/2018/03/web-birthday-29/" target="_blank">his message</a> on the 29th birthday of the Web (3/12/18, emphasis added):<br />
<blockquote class="tr_bq">
Today’s powerful digital economy calls for strong standards that balance the interests of both companies and online citizens. This means thinking about <b>how we align the incentives of the tech sector with those of users and society at large</b>…</blockquote>
<blockquote class="tr_bq">
<b>Two myths currently limit our collective imagination: the myth that advertising is the only possible business model for online companies, and the myth that it’s too late to change the way platforms operate. On both points, we need to be a little more creative.</b></blockquote>
<blockquote class="tr_bq">
…<b>Create a new set of incentives and changes in the code will follow</b>. We can design a web that creates a constructive and supportive environment."</blockquote>
The Contract for the Web should include a new Financial Contract to align incentives to benefit not only Web platforms, but their users.<br />
<ul>
<li>The contract should require that user pay at a level that corresponds to the value they get with consideration to their ability to pay. </li>
<li>It should shift from the zero-sum game of "artificial scarcity" to a win-win game of fairly sharing our digital abundance to benefit both service providers and each consumer. </li>
<li>It should also shift from the opaque extraction of attention and data in exchange for supposedly "free" services, to transparently negotiating with each consumer how (and at what price) advertising and commerce should serve all three parties involved: the service provider, the advertiser, and that consumer. </li>
</ul>
<div>
I have written on this blog and elsewhere about why that is essential, and how it can be done. Two of the simplest statements of those proposals were published in Techonomy:</div>
<ul>
<li><a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a> </li>
<li><a href="https://techonomy.com/2019/02/regulate-facebook-google-turn-users-customers/" target="_blank">To Regulate Facebook and Google, Turn Users Into Customers</a>.</li>
</ul>
Details of how that can be accomplished using the FairPay framework have been published in <a href="https://hbr.org/2013/11/when-selling-digital-content-let-the-customer-set-the-price" target="_blank">Harvard Business Review</a>, and in journals on <a href="http://link.springer.com/article/10.1057/s41272-018-0143-3" target="_blank">pricing </a>and on <a href="https://doi.org/10.1016/j.ausmj.2019.07.002" target="_blank">marketing</a>. Specific comments on Berners-Lee's 2018 message are in <a href="https://www.fairpayzone.com/search?q=berners" target="_blank">these several blog posts</a>.<br />
<br />
---<br />
<b><i>[Update 12/13:]</i></b> It has been pointed out to me that the Contract does address the topic of business models (with regard to privacy and data rights) in Principle 5, Clause 3(b): "Promoting innovative business models that strengthen data rights, respect privacy, and minimize data collection practices." I am pleased to note that, and look forward to seeing progress. At the same time, this underlines an important point that may not have been clear in my original post.<br />
<b><i><br /></i></b>
<b><i>This question of business models -- while very important to privacy and data rights</i></b><b> -- </b><i><b>is of even greater importance and urgency with regard to deeper issues of how the Web benefits or harms society</b></i>.<br />
<ul>
<li>As we see in the growing concerns about past and upcoming elections, the harm is not just to personal privacy and data, but to how the advertising-based business models of dominant Web services are inflaming polarization and radicalization of users (with clear effects on politics, elections, and society), rather than enlightening us.</li>
<li>The reason is that inflaming users increases their engagement and thus the number of ad impressions to be sold, while enlightening users does not advance that business incentive. </li>
<li>Social media and search engines could be world-changing forces to not only "bring the world closer together" but to augment human intellect and enlightenment -- instead they are driving us apart and making us stupid.</li>
<li>That threatens not only our privacy and data, but the foundation of our democracy and freedom.</li>
</ul>
<div>
The articles and blog posts I have linked to above address privacy and data rights as just one aspect of this broader theme. Two additional post that dig deeper into these broad issues are:</div>
<div>
<ul>
<li><a href="https://ucm.teleshuttle.com/2018/07/the-augmented-wisdom-of-crowds-rate.html" target="_blank">The Augmented Wisdom of Crowds: Rate the Raters and Weight the Ratings</a></li>
<li><a href="https://www.fairpayzone.com/2018/12/reverse-biz-model-undo-faustian-bargain.html" target="_blank">Reverse the Biz Model! -- Undo the Faustian Bargain for Ads and Data</a></li>
</ul>
</div>
Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com76tag:blogger.com,1999:blog-7557842240801039419.post-78751222416133982672019-11-09T12:26:00.003-05:002022-01-09T17:06:50.290-05:00The Streaming War to End All-You-Can-Eat Streaming Wars<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
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<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: xx-small;">(Image: Wall Street Journal)</span></td></tr>
</tbody></table>
Do you hear the giant sucking sound of tens of billions of dollars of content production cost and corporate debt going down the drain? ...of tens of millions of consumers missing out on content they want to watch?<br />
<br />
Much like World War I, great powers are massing armies and entrenching content libraries for a Great War that may have no real winners. And once again those great powers (and other contenders) are relying on inflexible strategies that will drain resources, and get mired in a long and costly war of attrition. This time the inflexible trenches that will suck up armies of content dollars are not in the ground, but in the deadweight loss of all-you-can-eat (AYCE) subscription models.<br />
<br />
News of this streaming war is everywhere. The Wall Street Journal provided a good summary of the <a href="https://www.wsj.com/articles/the-great-streaming-battle-is-here-no-one-is-safe-11573272000" target="_blank">order of battle</a>, and of the <a href="https://www.wsj.com/articles/disney-apple-tv-and-more-how-to-watch-tv-in-this-confusing-age-11573272000" target="_blank">collateral damage</a> that consumers will face. <a href="https://www.axios.com/media-streamers-debt-netflix-att-disney-8cbe1706-757b-4c64-bb53-76df5812d186.html" target="_blank">Axios</a> notes the huge debt being incurred to create these arsenals of content.<br />
<br />
The nimbleness of the German Blitzkrieg ("lightning warfare") demonstrated how WWI strategies of trench warfare could be overcome quickly, and with far less carnage. The players in this streaming war should be looking for a similar Blitzkrieg business model. But I predict it will be the smaller players, less able to throw money at this, who will be driven to experiment with less familiar, but more agile, strategies.<br />
<br />
We wanted a "Celestial Jukebox" -- instead we got "subscription hell" and "subscription fatigue." This is the era of "peak content," but only a fraction of it is within any one person's reach -- its costs and its price are unsustainable. Can't we find an ecosystem business model that can sustain a celestial jukebox for the video industry?<br />
<br />
Earlier this year I suggested how more agile strategies might operate, in <a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">"Risk-Free" Subscriptions to The Celestial Jukebox</a>. The essence of the risk-free subscription is to be flexible, in order to be value-based -- cheap or free at low or zero usage, and rising at a reasonable rate as usage and other aspects of value received increase in that month, up to a set monthly cap. <i>Think of it as a pay-ramp instead of a pay-wall</i>. This kind of flexibly affordable model that is <i>based on the value that each individual viewer actually receives</i> (and that ramps up less prohibitively than pay-per-view) will get more viewers to buy more subscriptions. That will generate more profit from more viewers for every provider who has content that viewers want.<br />
<br />
Such a pricing model also offers sensible economics across a mix of providers and aggregators. Disney could leave most of its content on Netflix for those who are only occasional viewers, while attracting its more regular fans to direct relationships on Disney+ with added features (such as its newest and hottest shows, and extra perks).<br />
<br />
Instead of the all-or-nothing battle for AYCE subscriptions, providers can build relationships with all or most of their potential viewers. Think of this as <i>agile pricing</i> for a good <i>customer value experience</i> (CVX) -- and for a fair revenue share to platforms, content providers, and creators.<br />
<br />
Disney is apparently ignoring such options, presumably thinking its Magic Kingdom will enthrall enough users to take the risk that they will not view (and enjoy) $7 worth every month. All of the great powers may similarly be too <i>entrenched </i>in their thinking to want to experiment.<br />
<br />
But less dominant providers -- and entrepreneurial upstart aggregators of many providers -- may come to embrace agility and Blitzkrieg asymmetry, seeing that the <i>biggest risk for them is not to take the risk that a risk-free model </i>will empower them to <i>fight a win-win battle</i> -- one based on desirability of their content, not just overwhelming scale.<br />
<br />
More on this theme:<br />
<ul>
<li><a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">"Risk-Free" Subscriptions to The Celestial Jukebox? (A Working Draft)</a></li>
<li><a href="http://www.fairpayzone.com/2015/08/post-bundling-packaging-better-tvvideo.html" target="_blank">Post-Bundling -- Packaging Better TV/Video Value Propositions with 20-20 Hindsight</a></li><li><a href=""The Case Against Micropayments" versus "Subscription Hell" -- Finding Flexibility" target="_blank">"The Case Against Micropayments" versus "Subscription Hell" -- Finding Flexibility</a> (added 11/13/19)</li>
</ul>
<div>
</div>
------------------------<br />
<div>
<div>
<b><i><span style="font-size: x-small;">More about FairPay</span></i></b><br />
<b><i><span style="font-size: x-small;"><br /></span></i></b></div>
<div style="margin: 0px;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-size: x-small;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></span></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white; font-size: x-small;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>A brief introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br />
<ul>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><span style="font-family: inherit; font-size: x-small;"><i>More in the </i><a href="http://www.fairpayzone.com/p/overview.html" style="font-style: italic;" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" style="font-style: italic;" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). </i></span></b></span></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><span style="font-family: inherit; font-size: x-small;"><i>There is also </i><a href="http://www.fairpayzone.com/p/more.html" style="font-style: italic;" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white; font-size: x-small;"><b><i><b style="background-color: transparent;"><span style="font-style: italic;">And these journal articles, </span><a href="http://rdcu.be/HTfJ" style="font-style: italic;" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white; font-size: x-small;"><b><i><b style="font-family: inherit;"><i>Or, my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></i></b></span></span></li>
</ul>
</div>
<div>
<div style="margin: 0px;">
<span style="font-size: x-small;"><i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></span></div>
</div>
</div>
<br />Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.comtag:blogger.com,1999:blog-7557842240801039419.post-52114461770121562392019-09-27T15:19:00.000-04:002019-09-27T15:19:05.694-04:00NYCML19 Workshop Deck - "21st Century Customer Relationships, Value Propositions, and Pricing - A New Economics for Digital Services" (A FairPay Perspective)<i><b><a href="https://www.slideshare.net/rreisman/nycml19-reisman-workshop-21st-century-relationships-value-propositions-and-pricing-a-new-economics-for-digital-services-a-fairpay-perspective" target="_blank">My deck is now available on SlideShare</a> – it contains many thought-provoking links...</b></i><br />
<i><b><br /></b></i>
<b><i>21st Century Customer Relationships, Value Propositions, and Pricing</i></b><br />
<b><i>A New Economics for Digital Content and Services.</i></b><br />
<br />
I had the pleasure of presenting a wide-ranging <a href="https://summit.nycmedialab.org/workshops" target="_blank">workshop</a> -- designed to break through old biz-model blinders -- to a very engaged audience at <a href="https://summit.nycmedialab.org/" target="_blank">NYCML19</a> (the annual summit of <a href="http://nycmedialab.org/" target="_blank">NYC Media Lab</a>) on Thursday, 9/26/19.<br />
<br />
<i><b>We are now at a critical juncture in business, marketing, and broader aspects of market capitalism. If we do not rethink some dangerous unspoken presumptions, we will fail to reap the true promise of this emerging digital era.</b></i><br />
<br />
The workshop was an exploratory “think tank” workshop 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. Participants will be shown a promising architecture for a new logic that includes “risk-free subscriptions” (as a pay-ramp rather than a pay-wall), and that customizes prices based on value. We will explore how to chart a strategic path that rethinks conventional approaches and points to incremental steps toward a deepening transformation. This workshop relates to the “relationship economy” in which recurring revenue, subscription, and membership models are becoming mainstream, all driven by the win-win potential of the “post-scarcity” economics of digital media. It will draw on AI, machine learning, and operationalizing ethics in business models."<br />
<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdMqKNPfd5CVmrDEaOA6p5kNcEr0XzKsdz8cnL6P1eRMH2Tusi7dMvOUa_KneVVHmXRStYSaO89BlKlmfWwJyFO7VFWGwHyPnMslnXtyUgAFI8kjg6xHL_MwmInyLT1115yTbc0wNJOWNo/s1600/zuora+old+new+business+model+subscribed-nyc-2017-keynote-50-638.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="359" data-original-width="638" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdMqKNPfd5CVmrDEaOA6p5kNcEr0XzKsdz8cnL6P1eRMH2Tusi7dMvOUa_KneVVHmXRStYSaO89BlKlmfWwJyFO7VFWGwHyPnMslnXtyUgAFI8kjg6xHL_MwmInyLT1115yTbc0wNJOWNo/s320/zuora+old+new+business+model+subscribed-nyc-2017-keynote-50-638.jpg" style="cursor: move;" width="320" /></a></div>
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.<br />
<br />
posts, <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">The Relationship Economy -- It's All About Valuing Customer Experience</a>, and <a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html" target="_blank">The Elements of Next-Gen Relationships and Pricing -- A Unifying Framework</a>.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBmiiGw5E7zIUaErvYaD1rjTkhbDuBjGPf6JpEL6nvz1Fq0IDplfNsxYKa9FfP4Fr-jZEvtC_srAvMABjF5Hy3qi5px8bFZ9gqf6xy5fw6ZLJCPM6mwhq99I8sYOVmKSdy0nuZaapanNqW/s1600/NYCML.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="283" data-original-width="1500" height="37" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBmiiGw5E7zIUaErvYaD1rjTkhbDuBjGPf6JpEL6nvz1Fq0IDplfNsxYKa9FfP4Fr-jZEvtC_srAvMABjF5Hy3qi5px8bFZ9gqf6xy5fw6ZLJCPM6mwhq99I8sYOVmKSdy0nuZaapanNqW/s200/NYCML.png" width="200" /></a></div>
<i><b>NYCML'19 is a snapshot of the best thinking, projects and talent from across the City's industry and university ecosystem. </b></i><br />
<i><b><br /></b></i>
------------------------<br />
<div>
<div>
<b><i><span style="font-size: x-small;">More about FairPay</span></i></b><br />
<b><i><span style="font-size: x-small;"><br /></span></i></b></div>
<div style="margin: 0px;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-size: x-small;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></span></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>A brief introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br />
<ul>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit; font-size: x-small;"><i>More in the </i><a href="http://www.fairpayzone.com/p/overview.html" style="font-style: italic;" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" style="font-style: italic;" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). </i></span></b></span></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit; font-size: x-small;"><i>There is also </i><a href="http://www.fairpayzone.com/p/more.html" style="font-style: italic;" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i><b style="background-color: transparent;"><span style="font-style: italic;">And these journal articles, </span><a href="http://rdcu.be/HTfJ" style="font-style: italic;" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white; font-size: x-small;"><b><i><b style="font-family: inherit;"><i>Or, my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></i></b></span></span></li>
</ul>
</div>
<div>
<div style="margin: 0px;">
<span style="font-size: x-small;"><i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></span></div>
</div>
</div>
Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com27tag:blogger.com,1999:blog-7557842240801039419.post-62730339980633400162019-08-26T13:10:00.000-04:002019-08-26T13:16:57.195-04:00Open Letter to Business Roundtable and Council of Institutional Investors on "Social Responsibility"<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipcn9AQtnhyphenhyphen44oZoDP1mJa_9NRA4mB_M2fO8uNAEINQewUbqz4fRBST8lqbIu8RkzFNsGaMJrv3mlZ7UJ0vJ4JTbSPXrhcTqoqbKURXJyL0gdBMlkEV6RMK5BcNlLPZjnzgd2nuwxbLzLl/s1600/WallST+Girl+and+Bull.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="503" data-original-width="615" height="261" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipcn9AQtnhyphenhyphen44oZoDP1mJa_9NRA4mB_M2fO8uNAEINQewUbqz4fRBST8lqbIu8RkzFNsGaMJrv3mlZ7UJ0vJ4JTbSPXrhcTqoqbKURXJyL0gdBMlkEV6RMK5BcNlLPZjnzgd2nuwxbLzLl/s320/WallST+Girl+and+Bull.jpg" width="320" /></a></div>
You both represent critical interests in the current crisis over Corporate Social Responsibility, and you both issued dueling statements last week that seem to do little more than continue a debate that is generating more heat than light.<br />
<br />
That was catalyst for my new post, "<a href="https://www.fairpayzone.com/2019/08/the-reformation-of-market-capitalism-in.html" target="_blank">The Reformation of Market Capitalism in The Age of the Customer -- Profiting From 'Social Responsibility as a Service' [Working Draft]</a>", which suggests a new, win-win way forward.<br />
<br />
Both of your interest groups should consider working to achieve that new reality. The thesis is that <i>it is customers, not shareholders who ultimately bear the costs of Corporate Social Responsibility</i>, and <i>it is customers, not your members, that should vote with their wallets on how that is addressed</i> -- but that <i>businesses must facilitate that, as agents of their customers</i>. Your members have the power to make that happen, and will profit from doing that. I hope you will consider making this sorely overdue Reformation of Market Capitalism a reality. A capsule on why:<br />
<ul>
<li><i>Concern -- and confusion -- about whether and how market capitalism can have social responsibility is reaching a crisis point.</i></li>
<li><i>An exhorted responsibility of shareholders to be beneficent to other stakeholders (customers, employees, suppliers, community,...) can have only limited and uncertain effectiveness -- even if CEOs truly wish to be more beneficent. </i></li>
<li><i>Customers have the prime authority, since the funding comes from the customers. Social responsibility is ultimately a "tax" on the customer. To be "represented," each customer should be able to vote with their wallet on how much tax they pay, for what.</i></li>
<li><i>Businesses now have new powers to involve each customer in mass-customizing the service value propositions that they pay for -- including payments for </i>Social Responsibility as a Service (SRaaS)<i>. </i></li>
<li><i>That will apply the genius of the market -- enabling businesses to profit from being socially responsible as each customer supports. Think of it as a social responsibility tax that each customer agrees to pay -- at an individualized level that both parties agree is fair for that customer.</i></li>
</ul>
(I have been developing the ideas that underlie this, as published in two journal articles co-authored with prominent scholars. This is a pro-bono project and I would be pleased to assist in exploring this new way forward.) <i>[If reading this on my <a href="http://fairpayzone.com/">FairPayZone.com</a> blog, <a href="https://www.fairpayzone.com/2019/08/the-reformation-of-market-capitalism-in.html" target="_blank">the full post</a> is just prior.]</i>Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.comtag:blogger.com,1999:blog-7557842240801039419.post-36577307355234747962019-08-26T09:50:00.001-04:002022-01-04T11:37:51.681-05:00The Reformation of Market Capitalism in The Age of the Customer -- Profiting From "Social Responsibility as a Service" [Working Draft]<div style="text-align: right;">
<i>[Updated 9/3/19, see update notes at end </i><br />
<i>--the 9/3 <b>update on corporate-customer matching funds</b> is especially notable]</i></div>
<br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaxAEGXg0vM0ZgoWN94z1m23c-yJcjwWXSyt0PyeUUTya34g4OAhHPePo1Dyuqe4dVJ4ZGISISEVvOcL2O5Pmg46RdnnGQPvG9cpW4ksQScRXhKY0xix22sJEWLwtzABRtmxIaE5icoth4/s1600/WallST+Girl+and+Bull.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="503" data-original-width="615" height="260" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjaxAEGXg0vM0ZgoWN94z1m23c-yJcjwWXSyt0PyeUUTya34g4OAhHPePo1Dyuqe4dVJ4ZGISISEVvOcL2O5Pmg46RdnnGQPvG9cpW4ksQScRXhKY0xix22sJEWLwtzABRtmxIaE5icoth4/s320/WallST+Girl+and+Bull.jpg" width="320" /></a>We are at a crisis in our view of the role of business in society, as highlighted in front page stories last week. But I suggest both sides of this long-running debate misread the underlying issues. My work points to a new perspective, one that suggests a "reformation" of market capitalism. This is based on a new <i>co-primacy of customer power</i> that will make most reasonable people on both sides happy...<br />
<blockquote class="tr_bq">
And here we are. Americans mistrust companies to such an extent that the very idea of capitalism is now being debated on the political stage.</blockquote>
So <a href="https://www.nytimes.com/2019/08/20/business/dealbook/business-roundtable-corporate-responsibility.html" target="_blank">Andrew Ross Sorkin</a> observed in the NY Times, applauding the Business Roundtable's 8/19 "<a href="https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans" target="_blank">Statement on the Purpose of a Corporation</a>," calling it "a significant shift, and a welcome one." Many others applauded -- but as Sorkin and others noted, there is still good reason to be skeptical of any real change.<br />
<br />
On the surface, the Rountable statement may seem pretty mild: "We share a fundamental commitment to <u>all</u> of our stakeholders." But things are hardly that simple. <a href="https://www.cii.org/aug19_brt_response" target="_blank">The Council of Institutional Investors</a> (CII) came out expressing strong concerns:<br />
<blockquote class="tr_bq">
It is government, not companies, that should shoulder the responsibility of defining and addressing societal objectives with limited or no connection to long-term shareholder value.</blockquote>
<blockquote class="tr_bq">
While it is important for boards and management to have and articulate long-term vision, ...a fundamental strength of the U.S. economy has been and continues to be efficient allocation of equity capital. If “stakeholder governance” and “sustainability” become hiding places for poor management, or for stalling needed change, the economy more generally will lose out.</blockquote>
Since the CII represents "primarily pension funds, state and local entities charged with investing public assets and endowments and foundations," one would expect them to have relatively enlightened view of the shareholder interest.<br />
<br />
The WSJ editorial board was so apoplectic they did lead editorials two days in a row, the second quoting the 1970 article “<a href="http://umich.edu/~thecore/doc/Friedman.pdf" target="_blank">The Social Responsibility of Business is to Increase its Profits</a>” by Milton Friedman of the "Chicago School" of economics (in The NY Times!) that many blame for the current malaise.<br />
<br />
(It also seems that the <a href="https://www.sullcrom.com/files/upload/SC-Publication-Business-Roundtable-Statement-on-the-Purpose-of-a-Corporation-Proposes-New-Paradigm.pdf" target="_blank">current legal framework</a> for corporate governance and fiduciary duty to shareholders limits the discretion of corporations to fund social responsibility: "a decision by a board that is not grounded in the best interests of the corporation and its stockholders likely would not be protected by the business judgment rule under the current state of the law.")<br />
<br />
The dilemma here can be resolved by recognizing that it is not shareholders alone, but customers who share primacy. Customers are the stakeholders who actually fund the costs of social responsibility, and they have the market power to influence the allocation of those costs (or take their business elsewhere).<br />
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<span style="color: #0b5394;">==================================================================</span><br />
<div style="text-align: center;">
<b><i><span style="color: #0b5394;">The Ideas in Brief</span></i></b></div>
<ul>
<li><i><b><span style="color: #0b5394;">Concern -- and confusion -- about whether and how market capitalism can have social responsibility is reaching a crisis point.</span></b></i></li>
<li><i><b><span style="color: #0b5394;">An exhorted responsibility of shareholders to be beneficent to other stakeholders (customers, employees, suppliers, community,...) can have only limited and uncertain effectiveness -- even if CEOs truly wish to be more beneficent. </span></b></i></li>
<li><i><b><span style="color: #0b5394;">Customers have the prime authority, since the funding comes from the customers. Social responsibility is ultimately a "tax" on the customer. To be "represented," each customer should be able to vote with their wallet on how much tax they pay, for what.</span></b></i></li>
<li><b><span style="color: #0b5394;"><i>Businesses now have new powers to involve each customer in mass-customizing the service value propositions that they pay for -- including payments for </i>Social Responsibility as a Service (SRaaS)<i>. </i></span></b></li>
<li><i><b><span style="color: #0b5394;">That will apply the genius of the market -- enabling businesses to profit from being socially responsible as each customer supports. Think of it as a social responsibility tax that each customer agrees to pay -- at an individualized level that both parties agree is fair for that customer.</span></b></i></li>
</ul>
<div>
<blockquote class="tr_bq" style="text-align: center;">
<span style="color: #0b5394;"><i>Very basic examples of SRaaS offers: </i><i>[</i><i>Added 8/28]</i></span></blockquote>
<ul>
<li><i><span style="color: #0b5394;">Would you be willing to pay an extra $4 for environmentally-friendly, biodegradable packaging and no-fossil-fuel shipping?</span></i></li>
<li><i><span style="color: #0b5394;"><i><u>Matching grant</u>: Would you be willing</i> to pay an extra $1, $5, or $20 (select amount) to fund on-the-job training for ex-coal miners who seek to upgrade their skills to work in our factory in Appalachia, <u>if we match your grant dollar for dollar</u>? [revised 9/3]</span></i></li>
<li><i><span style="color: #0b5394;">Do you want to rank your product search results 1) by price alone, 2) by price weighted by ESG score, or 3) by ESG score alone?</span></i></li>
<li><i><span style="color: #0b5394;">Do you want to filter your product search to require an ESG score of greater than 1, 2. or 3 stars?</span></i></li>
</ul>
</div>
<span style="color: #0b5394;">==================================================================</span><br />
<br />
<b>Oversimplifying the problem</b><br />
<br />
There has been a long history of contention (and confusion), and I suggest the issue is not so much a matter of what capitalism is inherently, but of simplistic thinking about how it works. As Sorkin recounts,<br />
<blockquote class="tr_bq">
For nearly 50 years — following the publication of a seminal academic treatise in 1932 ... — corporations, for the most part, were run for all stakeholders. It was a time defined by organized labor, corporate pension programs, gold-watch retirements and charitable gifts from companies that invested heavily in their communities and the kind of research that promised future growth.</blockquote>
That came to be seen as muddle-headed and inefficient, and Friedman forcefully argued that a business's only duty was to serve its stockholders. Now that view is in growing disrepute -- but the truth is not so black and white.<br />
<br />
The Business Roundtable had said in <a href="https://books.google.com/books?id=YBkCCwAAQBAJ&pg=PT72&lpg=PT72&dq=%22business+roundtable%22+The+paramount+duty+of+management+and+of+boards+of+directors+is+to+the+corporation%E2%80%99s+stockholders,%E2%80%9D&source=bl&ots=0m9sNeLFhR&sig=ACfU3U2pF4jm5zKgDeIN9TFpffHh6G84JA&hl=en&sa=X&ved=2ahUKEwiru7aGho_kAhUHtlkKHdeWBsQQ6AEwA3oECAcQAQ#v=onepage&q=%22business%20roundtable%22%20The%20paramount%20duty%20of%20management%20and%20of%20boards%20of%20directors%20is%20to%20the%20corporation%E2%80%99s%20stockholders%2C%E2%80%9D&f=false" target="_blank">1997</a> (as recounted in <a href="https://qz.com/work/1690439/new-business-roundtable-statement-on-the-purpose-of-companies/" target="_blank">Quartz</a>) that “The paramount duty of management and of boards of directors is to the corporation’s stockholders.” Now their new statement changes this, to affirm "a fundamental commitment to <u>all</u> of our stakeholders," listing them in this order: customers, employees, suppliers, communities, and shareholders. Some are pleased to see shareholders listed last, some incensed. But others point out that it is not clear 1) whether this has any real operational meaning, and 2) what might actually change, or how.<br />
<br />
<b>Making sense of the stakeholders and how they are served</b><br />
<br />
My work on how the digital world changes business relationships provides a new perspective that cuts through much of this confusion with a powerful new simplicity (see <a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">my book</a> and/or <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">this post</a>).<br />
<br />
It all comes down to the operational roles of the different stakeholders. We have customers, employees, suppliers, communities, and shareholders. We also have managers, who may be the shareholders, but often are the representatives* of the shareholders. Clearly, the shareholders own the business, and the managers are hired to be the shareholders' representatives*. The owners have power because our whole system of private property-based capitalism gives owners special rights. <i>[*See 8/27/19 update below on the agency theory of corporate ownership.]</i><br />
<br />
There have always been critiques of this system, including communism, socialism, cooperativism, and many other variations on shifting ownership/control of the means of production to other stakeholders. But before we throw the baby of market-based capitalism out with the bathwater of its abuses, let's look deeper.<br />
<br />
The question is how shareholder's rights interplay with the rights of the other stakeholders, and that is where it gets interesting.<br />
<br />
Those who favor market capitalism argue that its genius is that the market creates value with the economic efficiency and emergent wisdom of Adam Smith's invisible-hand of the crowd -- something that other systems are unable to match. Whether you approve of Friedman or not, it is worth reading his 1970 article to understand the mechanism he describes.<br />
<br />
I think Friedman oversimplifies how the stakeholder interests interplay, but much of his core argument about how profit-driven market mechanism work is valid, and many critics fail to understand how hard it is to make sound economic decisions without profits as an incentivizing and score-keeping mechanism. Friedman and the CII are right that the Business Roundtable statement offers no meaningful operational guidance to the hard questions of how competing interests are effectively and fairly served.<br />
<br />
<b>The co-primacy of the customer</b><br />
<br />
Without customers there is no business. The central role of business is to create value by selling services to customers. Doing that effectively produces revenues, and hopefully some profit, both of which enable the business to continue to create value by selling services to customers. Other stakeholders may be more or less important (sometimes very important), depending on context, but none have as fundamental a role in making a business work.<br />
<br />
Businesses can do well by doing good. To the extent a business successfully creates value and obtains revenue from customers, it can share that value (in the form of revenue) with the other stakeholders. Properly managed, it can pay employees and suppliers, and support its community. Good management recognizes that creating and sharing that value enables the creation of more value.<br />
<br />
But the only money that comes in is from customers. No value can long be created or shared, except as funded by customers, who pay for the what they value.<br />
<br />
<b>You forget one thing, Milton!</b><br />
<br />
Milton Friedman was right, up to a point:<br />
<blockquote class="tr_bq">
What does it mean to say that the corporate executive has a "social responsibility" in his capacity as businessman? ...the corporate executive would be spending someone else's money for a general social interest. Insofar as his actions in accord with his "social responsibility" reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers' money. Insofar as his actions lower the wages of some employees, he is spending their money. ...if he does this, he is in effect imposing taxes, on the one hand, and deciding how the tax proceeds shall be spent, on the other.</blockquote>
But what Friedman seems to forget is that the customer has a say in how much they pay, and will take their business elsewhere if the price does not map to the value they perceive that they get.<br />
<ul>
<li>If the customer will not pay a "tax" to support whatever level of "social responsibility" to other stakeholders they see as desirable and fair, no tax is received. </li>
<li>If the customer willingly allocates part of the price they pay to such a tax, shareholders will be fine with that. </li>
<li>If the customers refuse to allocate any payment for social responsibility, shareholders will not be able to sustain paying to share that value with other stakeholders.</li>
</ul>
<div>
No amount of exhortations to "social responsibility" can change that fundamental reality. <i>Friedman knows that shareholders control the business, and that they do not want to pay an unnecessary tax, but he forgets that the customer may be more than willing to do so, and may go elsewhere if stymied in doing so</i>. It is ultimately the customer, not the shareholder who pays the tax.<br />
<br />
<i>Why should we expect the shareholders to spend money on social responsibility unless the customer is willing pay for it?</i> The question is what level of tax will each customer pay, to be spent on what kinds of "social responsibility?" </div>
<div>
<br /></div>
<div>
This is what the FairPay framework is focused on, as outlined in my blog, and in two journal papers co-authored with eminent marketing scholars (<a href="http://link.springer.com/article/10.1057/s41272-018-0143-3" target="_blank">one suggesting where digital business is going</a>, and <a href="https://doi.org/10.1016/j.ausmj.2019.07.002" target="_blank">one digging deeper into its human roots</a>).<br />
<br />
<b>A new precision in individual consumer power</b><br />
<br />
This is something entirely new -- a new precision in consumer power, to be applied at the individual level for individual ends. We already see growing consumer power in boycotts and social media, but those are very blunt instruments, with little more wisdom than a mob (and generally reactive, not proactive).<br />
<br />
When computer-mediated dialogs and AI work with each customer to decide specifically what to offer to them and what price to accept from them, this can become an effective commercial layer of digital democracy about precisely what social responsibilities the business fulfills -- <i>working as a representative* of each customer and their individual values</i>. That is the theme of this post.</div>
<br />
<b>Back to the future of human commerce</b><br />
<br />
First, some perspective -- look back at the history of how humans behave as commercial creatures. We naturally think about the norms of commerce as we experience them, but we are locked in the anomalous mindset of recent decades.<br />
<br />
Traditionally commerce was dominated by local economies of individuals and small groups who had long-term relationships with those they traded with. It was natural to view value broadly, to consider the human dimension of the value of goods and services, and their impact on the local stakeholders. Traders who failed to consider their stakeholders did not thrive.<br />
<br />
Behavioral economics has rediscovered in the past few decades that people are social creatures. They have an inbred desire to cooperate, to value fairness, transparency, reciprocity, and even altruism, and they are swayed by emotion and self-image. They refer to this as <i>homo reciprocans</i> (reciprocating man). That is in contrast to the older narrow conception of classical economics, of <i>homo economicus</i> (economic man), who acts purely in his rational self-interest. Commerce was very communal, and people evolved over many millennia to develop and thrive on the traits for cooperation and trust that supported that.<br />
<br />
That direct connection was lost as business scaled to mass production in factories, and mass-marketing in department stores. Instead of individually negotiated prices, prices were pre-set, take it or leave it. Customers became just numbers, not people. Businesses became alienated from their customers and both lost sight of this dynamic of win-win co-creation. Short-term profit became decoupled from long-term sustainability, managers optimized what was easy to measure, and stockholders became fixated on this simple zero-sum game of quarterly profits. There have been ups and downs, but the overall trend has been a devolution of the human center of commerce.<br />
<br />
But over the past decade or so, modern marketing has realized that there is a longer game of customer journeys, loyalty loops, and recurring revenue (especially subscriptions and memberships) that it is measured by customer lifetime value (CLV), not current-period profit. That longer game enables a business to grow sustainably and become even larger and more profitable. Digital customer relationships and digital services are enabling and fueling a re-awakening of more traditional business norms, but we have <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">not really understood where it will lead</a>.<br />
<br />
<b>The Age of the Customer</b><br />
<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaXjEADP2-l7EaSOx1ccxZ4ENCJyQIcq79BDAjBnYBU799nDKv1js-KfGU6toE_pk-OThJDBFWXWRcRr4lUgco5wsIdII5lD2BNPIIenNi5IPf8E6FWS3mGRSJlHqEPLCjNBu4MmLdiJRj/s1600/Customer+Age+Forrester.gif" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="608" data-original-width="600" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaXjEADP2-l7EaSOx1ccxZ4ENCJyQIcq79BDAjBnYBU799nDKv1js-KfGU6toE_pk-OThJDBFWXWRcRr4lUgco5wsIdII5lD2BNPIIenNi5IPf8E6FWS3mGRSJlHqEPLCjNBu4MmLdiJRj/s320/Customer+Age+Forrester.gif" width="315" /></a></div>
Forrester has called this <a href="https://go.forrester.com/age-of-the-customer/" target="_blank">The Age of the Customer</a> (emphasis added):<br />
<blockquote class="tr_bq">
<i>In this era, digitally-savvy customers would change the rules of business</i>, creating extraordinary opportunity for companies that could adapt, and creating existential threat to those that could not. ...In this new world, companies have struggled to make hard choices and act. <i>It requires leaders to think and act differently – in ways that feel foreign, unfamiliar, and counter-intuitive</i>. And honestly, it is simply hard to do. ...<i>These dynamics will endure as new technologies like artificial intelligence and robotics emerge to challenge core notions of what it means to be a company, what it means to build human capital, and what it means to compete and win</i>.</blockquote>
Businesses like Amazon and Apple and startups like Warby Parker already profit by delighting the customer, and by listening to what the customer values. FairPay shows how this can go much farther, so that businesses can shift their offers to mass-customize them to what each customer values and is willing to pay for.<br />
<br />
That shift can undo the negative, zero-sum turn of the last century, and show companies how to profit from more win-win relationships with their customers. That is where the new leverage is.<br />
<ul>
<li><i>If customers will pay for it, it can generate profit. </i></li>
<li><i>If customers value it, they will pay for it. </i></li>
<li><i>If customers value win-win behavior that benefits not only themselves, but their broader desire to be good citizens, they pay for it, it generates profit, and so businesses profit from that. </i><b> </b></li>
</ul>
That hits the real bottom line, making their stockholders happy.<br />
<ul>
<li>To the extent that happens, there is less need for exhortations to consider secondary bottom lines and ESG (environmental, social, governance) criteria that are hard to manage without direct market incentives. </li>
<li>The genius of the invisible hand will, itself, drive managers to maximize profit by being socially responsible.</li>
</ul>
FairPay hearkens back to something reminiscent of old-style negotiation, except instead of negotiating <i>a price for a transaction</i>, we negotiate <i>a logic for how generously to price over a series of transactions, and what forms and levels of value the price should cover</i>. It is a relationship-based social contract. Much as the invisible hand sets prices to allocate scarcity of supply across a market, FairPay has the effect of <a href="http://www.fairpayzone.com/2015/05/an-invisible-handshake-for-digital.html" target="_blank">an invisible handshake</a> that sets prices to allocate share of wallet along a relationship.<br />
<br />
Each consumer votes with their wallet. As Milton Friedman said, the manager’s responsibility “will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom.” <i>To do that, the manager will seek to demonstrate whatever level of social responsibility the customers are willing to pay for. The customers will decide how much they are willing to be “taxed,” and what the manager should spend those “taxes” on</i>. [This can get very specific, at an individual level, as explained in the 8/28/19 update below.] The shareholders will want that, and external political mechanisms will be less needed because market mechanisms will do the job.<br />
<br />
<b>Social Responsibility as a Service (SRaaS)</b><br />
<br />
Consider how this constitutes a more or less explicit category of service -- <i>social responsibility service</i>, analogous to <i>customer service</i>.<br />
<ul>
<li>In the case of <i>customer service</i>, business used to sell naked products, at the buyer's risk. Gradually they added guarantees and support call-centers and white glove service -- all for a fee (more or less explicit) and often with a choice of options as to service levels.</li>
<li><i>Social responsibility service</i> (to other stakeholders) can be similarly customized and funded at different levels by customers, in tiers and sectors. Then it becomes just another service the business can offer to customers who will pay for it. Plenty of behavioral economics assures that customers can be enticed to voluntarily pay for services they value.</li>
</ul>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEql3i3cA6TDLlKTY430-Y67rd1Lq9VzSKbyCfeTRfzlugLr7FZFnB6AFyGawjR2kl4wbMrv86OYpWWGaDRjxMoGIXO923H-q9J6dPD5FJZJ3_Xdfxu25JDtMjlba53QBYDyG6owF3p9Jf/s1600/HELPING-HAND-facebook.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="800" data-original-width="1600" height="160" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEql3i3cA6TDLlKTY430-Y67rd1Lq9VzSKbyCfeTRfzlugLr7FZFnB6AFyGawjR2kl4wbMrv86OYpWWGaDRjxMoGIXO923H-q9J6dPD5FJZJ3_Xdfxu25JDtMjlba53QBYDyG6owF3p9Jf/s320/HELPING-HAND-facebook.jpg" width="320" /></a></div>
<div>
<div style="text-align: left;">
Thus every business can offer<i> Social Responsibility as a Service</i>, as a companion service to whatever other services they offer. That can make their customers happier and more loyal -- and they can earn a fair profit for doing it. Smart businesses realize that listening to customers is in their own profit-maximizing interest. We need only exhort both businesses and consumers to focus on more directly effective dialogs about value of all kinds.</div>
<br />
FairPay does this by more explicitly structuring each customer's ongoing journeys as a repeated game that builds cooperation on adaptively customizing value propositions that provide that customer the value they desire at a price both parties agree is fair. It draws on a synergistic combination of elements, each proven individually. It also points to simpler combinations of just some of those elements that can be good enough in many use cases.<br />
<br />
<div style="text-align: left;">
<i>>>>>>>For more specifics on just how FairPay does this, see </i><i>the </i></div>
<div style="text-align: left;">
<i>>>>>>>"Sidebar: Pricing, FairPay and Allocation by the Customer" (below).</i></div>
</div>
<br />
<b>Reforming capitalism from inside</b><br />
<br />
What we need to do, is not to try to heal capitalism from outside (which no one has a good solution to), but to encourage managers to reform it from inside (thus exploiting the genius of market economics). I refer to this as<i> a reformation</i> because the Protestant Reformation was driven by the realization that what mattered was the relationship between each man and God, with the priesthood as facilitator, not as intermediary. <i>The Capitalist Reformation will be driven by the realization that what matters is the relationship between each customer and each business, with government as facilitator and guardrail, not as intermediary</i>.<br />
<br />
So before we throw out the baby of market incentives with the bathwater of perverse incentives, we should see if the baby of reformed capitalism in the 21st Century can learn to walk with social responsibility. I think we will be very happily surprised.<br />
<br />
<i>The challenge is that we are still stuck in our old logic</i>. In an economy dominated by scarcity and uniformity, being responsive to the customer is hard, and done only at the margins. But as the digital economy gains from automation, abundance, and personalized relationships, being responsive and customizing value propositions gets easier and more essential. Businesses are just beginning to understand <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">the new logic of how to leverage that</a>.<br />
<br />
<i>As businesses learn to elicit what each customer values at a fine-grained level, and to seek to deliver it, they will learn to actually profit from social responsibility</i>. As they do that, we will all benefit from the fairness, altruism, and reciprocity of <i>homo reciprocans</i>, We will awaken their willingness to support Corporate Social Responsibility (CSR) with their own wallets, and to fairly reward the <i>businesses that cooperate with them in that, working as their representatives</i>.* Friedman’s title will become correct, but just not quite as he understood it: “The Social Responsibility of Business is to Increase its Profits.” The customers will see to directing that properly, using their power of the purse.<br />
<br />
<div class="graf graf--p" name="e84b">
Perhaps we should be calling it “Corporate/Customer Social Responsibility.” (CCSR? C2SR?)</div>
<br />
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<br /></div>
<div style="text-align: center;">
<b><i>SIDEBAR</i></b></div>
<div style="text-align: center;">
<b>Pricing, FairPay and Allocation by the Customer</b></div>
<br />
To clarify my points, we need to go back to basics -- pricing. Pricing may seem boring, but it is at the heart of how we allocate resources among stakeholder "actors." The power of pricing calculations to ensure desirable allocations is at the heart of debates over capitalism and socialism. It is also at the heart of FairPay and my points about customer power. FairPay suggests a broad reformation of how businesses relate to their customers, and how we consider all aspects of value, not just social responsibility.<br />
<br />
Pricing is where digital changes everything, and that is what FairPay seeks to reform. We are seeing it first for digital services like news and other content. But over time, increasing automation will shift the economics of scarcity for almost everything. Scarcity of materials and labor, and other marginal or variable costs needed to replicate goods and services, was the core of classical economics, but is now becoming a non-issue. The scarcity that remains is increasingly in the human effort to create <i>new </i>services (and new factories and robots and AI) that then run and <i>replicate services with little added cost</i>. Adam Smith's invisible hand works by using price to allocate scarce supply against demand -- but <i>it cannot allocate abundance</i>. That is why we have confusion over what the price of digital information should be, and why we need a new logic for pricing. This new logic is primarily applicable to ongoing relationships, but more and more of commerce is moving from isolated transactions to <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">recurring relationships</a>.<br />
<br />
One early and very telling example is the business of news. Most publishers are still stuck in the old logic – to counter the death of scarcity they seek profit by imposing artificial scarcity, locking their news behind a one-size-fits-few paywall that only their most avid readers can afford. More enlightened publishers (like The Guardian) have learned that readers will voluntarily pay for news (for themselves, as well as for those who do not or cannot not pay) -- just because they value having the quality news available to all. Similarly, creators of all kinds have learned to use crowdfunding services -- and that the seemingly crazy logic of <a href="http://www.fairpayzone.com/p/pricing.html" target="_blank">pay-what-you-want</a> can actually be sustaining. These may seem very narrow markets, but most markets have a blend of elements that are costly and not shareable, and elements that are abundant and shareable.<br />
<br />
<b>The repeated game of fairness</b><br />
<br />
The new fairness game that we have outlined shows how this new logic may be applied with increased power and controllability, in a way that works for both the business and the customer. Consider how we can change the game for a subscription, from:<br />
<blockquote class="tr_bq">
<i>Here is our monthly price, take it or leave it. We hope you will take the risk -- and be satisfied enough that you will continue this game.</i></blockquote>
to:<br />
<blockquote class="tr_bq">
<i>We will reduce the risk and let you help decide the fair price after each month’s use -- but we will continue this game (beyond a few trial cycles) only if we agree that you are being reasonably fair.</i></blockquote>
The logic of the FairPay game is that <a href="http://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html" target="_blank">each customer pays for what that customer values</a>, within limits of fairness that the business can accept. Thus each customer decides what social responsibilities they are willing to pay for. They vote with their wallet, and the business collects those votes as dollars going into their bottom line.<br />
<br />
So, with a new logic like this, how can we hack Milton Friedman's concerns about social responsibility? Consider these examples that address the growing trend toward digital and experience goods that cannot be effectively valued until after they are purchased and used:<br />
<ul>
<li>A digital newspaper lets readers subscribe and decide what to pay after each month of use. It reminds them what they read, what writing those stories cost per reader, and what share of its revenue goes to the reporters and investigative expenses. It reminds them of how its recent reporting benefited the community and the prizes earned. It lets readers pay bonuses specifically to reporters they wish to support. (A non-profit Guardian might accept any level of fairness, but a for-profit New York Times might warn a reader who it thinks is being repeatedly unfair that it will shunt them back to a conventional set-price subscription unless they meet higher standards of fairness.)</li>
<li>An online retailer of furniture lets established customers pay for items in two stages, first, at-sale, to cover the marginal costs of the items (and perhaps a small profit margin), then, after it has been experienced for a month, with an added bonus that reflects the customer’s perceived value of the purchase, plus the perceived value of the business’s employment, sourcing/curation, and sustainability practices. (Again, customers it deems to be repeatedly unfair might be shunted back to standard set prices.)</li>
</ul>
In each of these cases the business has a dialog with customer in which price relates to value received. The customer has co-equal power to define <a href="http://www.fairpayzone.com/2017/12/the-ghost-of-pricing-future-thought.html" target="_blank">what aspects of value matter</a>.<br />
<ul>
<li>For the newspaper, value is not just how many weeks the subscription was accessible, or how many stories were read, but whether those stories had real value, what costly investigative journalism or analysis was done, how much was paid to valued reporters, what community values were supported, what waste was prevented, and the like. Some of these "social" values might be segregated to be paid for with explicit "bonus" payments to these other stakeholder categories. To the extent customers value those elements by paying for them, that is no longer "taxation without representation" as Friedman claimed. (<a href="http://www.fairpayzone.com/2015/08/patron-izing-journalism-beyond-paywalls.html" target="_blank">See operational details for this example</a>.)</li>
<li>For the retailer, value is not just the raw utility of an item, but the quality and style of design, the conditions for employees and at supplier factories, support of local and source communities, environmental practices, and the like. Again, these could be identified as "bonus" payments and again, "taxation" voluntarily paid. (<a href="https://www.fairpayzone.com/2015/12/fairpay-what-you-want-for-costly.html" target="_blank">See operational details for this example</a>.)</li>
</ul>
<i>[Update 8/28/19>] </i><b>Examples of discrete social responsibility offers to customers</b><br />
<br />
This can get richly nuanced, but to clarify how these SRaaS offerings can be made discrete and easy for individual customers to opt in (or not), at whatever level they choose, consider these simple forms of SRaaS offers:<br />
<ul>
<li>Would you be willing to pay an extra $4 for environmentally-friendly, biodegradable packaging and no-fossil-fuel shipping?</li>
<li><u>Matching grant</u>: Would you be willing to pay an extra $1, $5, or $20 (select amount) to fund on-the-job training for ex-coal miners who seek to upgrade their skills to work in our factory in Appalachia, <u>if we match your grant dollar for dollar</u>? [revised 9/3] </li>
<li>Do you want to rank your product search results 1) by price alone, 2) by price weighted by ESG score, or 3) by ESG score alone?</li>
<li>Do you want to filter your product search to require an ESG score of greater than 1, 2. or 3 stars?</li>
</ul>
Just like any other product pricing, packaging and bundling decision, such offers can be put to the customers as a menu of options. A business can start with a few narrow trials with selected segments of customers with a propensity to support social responsibility -- to begin this new kind of cooperation, and then grow from there. (The specifics of such offers and the corresponding usage of funds can be validated to customers with independent impact certifications and metrics, very much as is now being demanded by impact investors.) <i>[See further update 9/3 on matching funds, below.] <end end="" i="" of="" update=""><br />
<i><br /></i>
<b>The invisible handshake -- one-to-one markets for social </b><b>responsibility</b><br />
<i><br /></i>
<i>Increasingly, businesses will earn premium profits by catering to customers' desires to support social responsibility</i>. Customers who cannot afford to pay such premiums could be supported by more affluent customers who see that as their duty to support, not only for themselves but for those less fortunate. (Those who could pay but refuse to might be shunted to set-price models -- FairPay can be offered as a revocable privilege.) Some businesses will cater to the segment of recalcitrant customers who refuse to allocate any of their wallet to that kind of social responsibility, but the profit margins for doing so will be smaller.<br />
<br />
<i>(Further detail on FairPay is <a href="https://www.fairpayzone.com/p/more.html" target="_blank">here</a>, including a variety of use cases, and discussion of how and where to start, and how to grow from there.)</i><br />
<br />
Instead of exhorting managers and shareholders to pay out of the customers' wallets for competing social benefits that that the managers have no clear basis to decide among (and perhaps in conflict with their legal fiduciary duty), we should be exhorting customers to pay from their own wallets for the social benefits they want to support.<br />
<br />
If we do that, we may solve 80% of the problem, and do it with high market efficiency, leaving just the remaining 20% to be addressed by regulatory protections.<br />
</end></i><br />
<blockquote class="tr_bq">
<i><i>The greatest danger in times of turbulence is not the turbulence, it is to act with yesterday's logic.</i></i></blockquote>
<i>
</i>
<br />
<div style="text-align: center;">
<i> -- Peter Drucker </i></div>
<i>
</i>
<br />
<div>
<i><br /></i>
<i>------------------------</i><br />
<i><br /></i>
<i><i><b>[*UPDATE 8/27/19:]</b> <b>Terminology: agency vs representation</b></i></i><br />
<i><i><br /></i></i>
<i><i>My original use of the term "agent," now replaced by "representative," may have been too strong and loaded with issues, for reasons outlined in the 2017 HBR article, <a href="https://hbr.org/2017/05/managing-for-the-long-term" target="_blank">The Error at the Heart of Corporate Leadership</a>. I now use "representative," to make it clear that it is the possibly contingent role as a representative of an interest, whether as agent, fiduciary, or otherwise, often in balance with other interests, that I refer. </i></i><br />
<i><i><br /></i>
<i>The relevant thrust of my argument is that managers are naturally driven by financial incentives to themselves and to the shareholders they serve (in whatever legal capacity) in the calculus of their decision-making and allocation of resources. The surplus of the revenue they take in, net of costs and reinvestment, goes to the shareholders. The revenue comes from the customers. One can shift from agency theory to entity theory and broader views of roles and constituencies to be served, but the question remains -- what objective function are boards and managers to maximize in each resource allocation decision? I suggest that rather than an undifferentiated mix of interests to be balanced in vaguely defined ways, the best claim to a vote generally goes to the customer (especially when the customers are a broad base of consumers). That argument may be situation dependent, and market forces may to some extent enable the votes of other stakeholder constituencies to be quantified into bottom line terms. But it is usually customers who have by far the clearest bottom line market power with respect to each business -- it is customers that businesses must increasingly listen to. </i></i><br />
<i><i><br /></i>
<i>Thus it seems both desirable and practical that primacy of the customer in driving a market calculus for resource allocation will be the best way to manage allocations of resources to all forms of social responsibility. My argument is that we need to get far more systematic and granular in getting the customers to vote with their wallets on all of those allocation decisions. That is not at odds with efforts to quantify effects on other stakeholders -- it is supportive of them, in that a customer-driven social value calculus is the most practical driver for the balancing of other social value quantification efforts. We are already moving to customer-driven enterprise -- this just applies that driving force to social responsibility.</i></i><br />
<i><i><br /></i>
<i>This HBR article notes that the key weakness to company/entity-centered governance is "complex relationships and responsibilities; success is difficult to assess." What I suggest here is a new and sensible way to balance those responsibilities and to assess success at the bottom line.</i></i><br />
<div>
<br /></div>
<i><b>[UPDATE 8/28/19:]</b> </i><i><b>Social responsibility down the value chain - B2B2C</b></i><br />
<i><br /></i>
<i>While this was written with primary focus on B2C companies, it should be understood that it applies equally to B2B2C. </i><br />
<i><br /></i>
<i>B2B business is primarily driven by </i>homo economicus<i>, but the ultimate customer of B2B businesses is usually a customer in a B2C relationship. Consumers want social responsibility down their supply chain, so that implies a corresponding social responsibility chain. B2C businesses will want to be able to demonstrate that </i><i>social responsibility </i><i>to their customers, and so their B2B suppliers will need to demonstrate that </i><i>social responsibility </i><i>along each step in their chain so they can pass it up the chain to their consumers. Sounds complicated, but not really very different from any supply chain value issue.</i><br />
<i><br /></i>
<i><b>[UPDATE 9/3/19:] Matching funds, for new leverage in CSR</b></i><br />
<i><b><br /></b></i>
<i>An important variation on the above suggestions for customer-funded CSR is to add a "matching funds" feature. To offers to facilitate CSR efforts like this one suggested above...</i><br />
<ul>
<li><i><i><u>Matching grant</u>: Would you be willing</i> to pay an extra $1, $5, or $20 (select amount) to fund on-the-job training for ex-coal miners who seek to upgrade their skills to work in our factory in Appalachia, <u>if we match your grant dollar for dollar</u>? [as revised 9/3]</i></li>
</ul>
<div>
<i>...<b>the business could </b></i><i><b>make a matching funds offer: "We will put in $1 for every $1 you put in."</b></i></div>
<div>
<i><br /></i></div>
<div>
<i>This has two significant benefits:</i></div>
<div>
<ol>
<li><i><b>It explicitly shares in the cost</b>. Instead of putting all of the burden on the customer to fund such efforts (and even possibly taking a profit margin out of that, as suggested above), the business may invest some of its own funds. That would be a "tax" on the shareholders only to the extent that it is not recouped in higher profit margins, and only for efforts that the customers signal with their wallets that they really care about. (That results in high likelihood that the investment will lead to higher profits as well as greater social welfare, so it is less likely to really be a "tax.")</i></li>
<li><i><b>It motivates the customer to contribute</b>. Matching funds are accepted as effective practice in charitable and political fundraising, and have also been proven to motivate pay what you want business payments (see the Gneezy paper in my <a href="http://www.fairpayzone.com/p/pricing.html" target="_blank">Resource Guide</a>). <b>This brings clear business-customer cooperation to directing and funding CSR efforts.</b></i></li>
</ol>
<div>
<i>Matching gift programs are widespread for business-employee cooperation, but I am not aware of similar efforts to enable </i>business-customer<i> cooperation in directing and funding CSR. Why not adapt that already proven model to this most important stakeholder?</i></div>
</div>
<div>
<br /></div>
<div>
<br /></div>
<i>
</i>
<i>------------------------</i><br />
<div>
<i><b><i>More about FairPay</i></b></i><br />
<i><b><i><br /></i></b></i></div>
<div style="margin: 0px;">
<i><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>A concise introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>" and the broader perspective in </i></b></span></span></i><b><i><a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">The Relationship Economy -- It's All About Valuing Customer Experiences</a>.</i></b><br />
<i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><br /></i></b></span></span><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>For a full introduction see the </i><a href="http://www.fairpayzone.com/p/overview.html" style="font-style: italic;" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" style="font-style: italic;" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). There is also </i><a href="http://www.fairpayzone.com/p/more.html" style="font-style: italic;" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span></i><br />
<i><i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><i style="background-color: white;"><b><span style="font-family: inherit;"><br /></span></b></i></i></i></div>
<div>
<div style="margin: 0px;">
<i><b><i><b style="background-color: transparent;"><span style="font-style: italic;">And these journal articles, </span><a href="http://rdcu.be/HTfJ" style="font-style: italic;" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b></i><br />
<i><br /></i>
<i><span style="font-family: inherit;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><i>Or, read my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></span></span></i><br />
<i><span style="font-family: inherit;"><i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><br /></b></i></span></i></div>
</div>
<i><i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></i></div>
<i>
</i>Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.comtag:blogger.com,1999:blog-7557842240801039419.post-10568327154496583862019-08-22T10:20:00.005-04:002022-02-04T13:36:17.899-05:00A Platform for Teaching Men to Fish -- "Revenue-as-a-Service" for Non-Profit Impact<b>Fund development of a platform that enables non-profits to sustain themselves</b><br />
<blockquote class="tr_bq">
<i>Give a man a fish and you feed him for a day;</i><br />
<i>Teach a man to fish and you feed him for a lifetime.</i></blockquote>
The same applies one level up:<br />
<blockquote class="tr_bq">
<i>Fund teachers of fishing and you feed their teaching for some days;</i><br />
<i>Fund a platform that supports teaching men to fish and you feed all of them for all of their lifetimes.</i></blockquote>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAxyGThtAzqkebetlPKuffy608bC9Qed54s6n0C-nPqlLYP2SgKEowPTf8dd9mti8mDQxDLMFFBXUX6bJvbTSSHPO8vdAEhuGSIR2nfY6R8YvbWj-ervzRjxvjNeV14hj3lDGPrRHst9N4/s1600/Fishing+platform+giphy.gif" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="250" data-original-width="480" height="163" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAxyGThtAzqkebetlPKuffy608bC9Qed54s6n0C-nPqlLYP2SgKEowPTf8dd9mti8mDQxDLMFFBXUX6bJvbTSSHPO8vdAEhuGSIR2nfY6R8YvbWj-ervzRjxvjNeV14hj3lDGPrRHst9N4/s320/Fishing+platform+giphy.gif" style="cursor: move;" width="320" /></a></div>
This could be a very high leverage opportunity! Making a transformative new tool widely available and affordable.<br />
<br />
Foundations and others who fund charitable service organizations face a huge problem:<br />
<ul>
<li><b>Current strategies for funding non-profit services have yet to exploit the power of digital relationships to transform how they work with their customers and donors</b>.</li>
<li>Digital technology is already enabling transformative tools, especially for businesses on the leading edge of relationship commerce. Businesses are shifting to recurring revenue models, managing customer journeys and loyalty loops, and the most enlightened are engaging in dialog the brings a mutual focus on co-creation of value. The FairPay framework described in this blog and elsewhere supercharges value-centered relationships, and applies to non-profit organizations (NPOs) as well as for-profit businesses.</li>
<li><i><b>But non-profits lack business sophistication and can rarely afford to put resources into developing, testing, and applying similar methods to their relationships</b></i>. <b>The FairPay framework can transform revenue management at a full range of levels, but much of this potential remains out of reach for many organizations</b>. </li>
<li>Meanwhile foundations and others are looking for ways to support worthy non-profit organizations, and for ways to make those services more cost-effective in their funding and operations.</li>
</ul><i><b>***Note that much the same applies to news organizations</b> that struggle to sustain socially valued journalism -- even where there is a for-profit element.***</i><br />
<br />
<b>"Revenue as a Service" for Non-Profits -- platforms as a universal leverage point</b><br />
<br />
Viewing this from a systems perspective, this opportunity appears: <b><i>Fund development of a platform to enable non-profits to sustain themselves by drawing more systematically on support from their community of customers, patrons, and donors</i></b>. This can provide leverage across a broad swath of service organizations.<br />
<ul>
<li>Non-Profit Organizations (NPOs) -- as well as others, such as news providers -- need a systematic, ongoing way to obtain funding to sustain their operations.</li>
<li>That can now be done in very sophisticated ways -- and that sophistication will be constantly increasing -- drawing on advancing technology. </li>
<li>The FairPay framework outlined here suggests a path to transformational improvements in relationship-based revenue models. </li>
<li>Doing that will take skills and resources that may not be economically feasible for small or even mid-sized organizations (even if they would pay back handsomely).</li>
<li>That is just the kind of problem that "Software as a Service" was designed to solve: a platform provider (whether for-profit or non-profit) can develop, operate, and continue to enhance a high quality service that non-profit organizations can outsource to. </li>
<li>This can bring economies of scale and network effects to solving the problem of nurturing revenue relationships with large numbers of patrons. (Venture capitalists love platform businesses because of their scalability and high return on investment.)</li>
<li>The impact of a non-profit platform could be so transformational that such projects should be very attractive to the charitable foundations that support non-profits and/or journalism. (VCs might be concerned that profit potential of such a platform may be limited by the tight budgets of the NPOs that would use it -- all the more reason for foundations to step in.)</li>
</ul>
Such a platform would provide "Revenue as a Service." Just what is that outsourced service?:<br />
<ul>
<li>The platform provides the common base of operational software services (based on marketing and behavioral science, technology, and systems analysis), that can facilitate relationship-based revenue management strategy and execution for each of many organizations. Build it once, use it many times. Spread the cost of research, development, and support across many client organizations.</li>
<li>Each of those client organizations can retain full control -- setting all the key policies and retaining control of all exception handling. Each decides on all the parameters that define how the system works for them (the platform service may offer suggestions to guide that). Each gets to have its people handle all human-to-human contact (but can outsource parts of that as well).</li>
</ul>
<div>
There are some existing models for revenue platforms for NPOs. They range from cooperatives like <a href="https://www.tessituranetwork.com/" target="_blank">Tessitura</a>, to for-profit services like <a href="https://thenewsproject.net/" target="_blank">The News Project</a>, and less structured services for recurring crowdfunding like <a href="https://www.patreon.com/" target="_blank">Patreon</a>. FairPay provides methods for making such services far more powerful, across a far broader range of NPOs. The paths forward are 1) to add advanced FairPay features to existing platforms, or 2) to create new platforms that are clearly focused on FairPay strategies.<br />
<br />
<b>"Impact Data as a Service" -- platforms as instrumentation</b><br />
<br />
Funders not only want to get good results, but to get the data to validate whether they are in fact succeeding in that. Common platforms lead to common data and metrics, and common reporting practices.<br />
<br />
<i>FairPay drives organizations to increase the quality and frequency of their operational dialog with their community, creating a new level of impact data</i>. Platforms that manage and add new layers of communication with an NPOs's customer/donor community will create <i>new kinds of fine-grained data and metrics -- on just what services are consumed by whom, with what outcomes, how those are valued by those individuals, and how they add value to each community member -- interaction by interaction, over the lifetime of the relationship</i>.<br />
<ul>
<li>That creates a new level of rich data on just what services were consumed and the impact they achieved. </li>
<li>That enables the organization to be more dynamically adaptive and self-tuning, to maximize their co-creation of value with their community. </li>
<li>Funders can use that data to manage their funding and maximize their own impact.</li>
</ul>
The following sections explain how this is achieved.<br />
<br /></div>
<div>
<b>The heart of the platform opportunity -- the FairPay framework</b></div>
<div>
<br /></div>
<div>
<div style="text-align: left;">
FairPay is a radically innovative framework for relationship-centered, “customer-value-first” revenue strategies for the digital era. Its varying forms can be adapted across a wide spectrum of business contexts, both for-profit and non-profit. (It is an open architecture in the public domain, not a product, and I am working on this as a pro-bono project.)<br />
<br />
The original focus of FairPay was on advanced strategies for sustaining <i>for-profit</i> enterprises (especially for digital products and services) -- but the framework spans non-profit services as well, and can be even simpler to apply in non-profit contexts. The core strategies of FairPay have gained <a href="https://www.fairpayzone.com/p/more.html" target="_blank">recognition in business and scholarly publications</a>. It has strong foundations in behavioral economics, and sheds light on many knotty issues and perverse incentives that are often poorly understood.<br />
<br />
What can FairPay do for service organizations? FairPay provides a framework for applying elements that can be mixed and matched to provide a powerful solution to engage customers and donors, and build ongoing relationships with them in a way that motivates them to cooperate in sustaining services that they value. (I use the term "<i>customer</i>" in the broad sense, as including <i>those served</i> as wells as <i>those who donate</i>, regardless of whether they are overlapping or distinct sub-groups. The term "<i>patron,</i>" in its broad sense, also conveys that inclusiveness.)<br />
<ul>
<li>Modern <a href="http://www.fairpayzone.com/p/pricing.html" target="_blank">behavioral economics</a> has shown that people want to be fair and even generous when asked in the right way to support a service they find valuable. </li>
<li>Game theory teaches that relationships can operate as <i>repeated games</i>, and that well-designed repeated games that are rewarding motivate cooperation to continue the game. (Subscriptions and memberships are forms of repeated games, sometimes well-designed, sometime not so well-designed.)</li>
<li>Marketers have learned that they can build profitable recurring revenue businesses based on ongoing <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">relationships</a> (a simple form of repeated game) rather than one-shot transactions, and are beginning to apply the lessons of behavioral economics to enhance that process. They are managing customer journeys and loyalty loops, and engaging in dialog the brings a mutual focus on co-creation of value.</li>
<li>FairPay adds more advanced elements to the mix, and combines them to re-align the repeated game to maximize cooperation in creating lifetime value. FairPay builds on <i>transparency </i>and <i>trust </i>to build relationships. It applies <i>empowerment </i>of stakeholders (to show trust), <i>dialog </i>about value given and received (to achieve transparency and motivate willingness to pay to sustain that), and <i>reputation </i>(to sustain trust). </li>
<li>FairPay works best when the business can position itself as a benevolent and fair partner in value co-creation that is worthy of the "price" it needs to sustain the relationship.</li>
<li>Non-profit organizations can apply the same methods, and are more naturally seen as benevolent and fair partners in value co-creation.</li>
<li>Therefore non-profits have more power to motivate fair contributions from their "customers," and therefore they are able to yield more power to their customers than for-profit businesses are. </li>
<li>That enables them to make contributions voluntary (as is already common practice, but not yet effectively managed with modern relationship-building tools). Such voluntary forms of the more advanced methods of FairPay are relatively easy to apply. </li>
<li><i><b>These methods center on regular and ongoing dialogs about value that remind customers of the value co-creation they have benefited from (looking backward to what has been experienced, not just promised for the future), how much they have contributed to sustaining that, and what more can and should be done to add value (in whatever forms are agreed to) in this relationship. That points to what else of value can be done. </b></i></li>
</ul>
<div>
The FairPay framework informs an architecture that can enable NPOs (and journalism organizations) to enhance their revenue-related operations -- to apply the latest business systems, methods, and communications media in a way that optimizes their relationships with their "customers" (again, including donors) to maximize their ongoing sustaining revenue. </div>
<ul>
<li><i><b>This process applies a new kind of leverage -- as a self-adapting engine to create real and valuable impact, measure its perceived value, and adjust the process to do even better.</b></i></li>
<li><i><b>From this perspective, the FairPay framework clarifies how little most businesses and NPOs are currently doing to maximize that, and how much more they could be doing.</b></i></li>
</ul>
<div>
More detail on just how this FairPay framework works follows, but first, what does it take to make it happen? </div>
<div>
<br /></div>
<div>
<b>The platform that supports teaching men to fish</b></div>
<div>
<br /></div>
<div>
A basic platform for bringing these tools to fund-raising and revenue operations could be built in stages. This is a natural candidate for applying an open source strategy (or a cooperative) to become self-funding beyond a certain initial pump-priming:</div>
<div>
<ol>
<li>Do a basic proof of concept. This could demonstrate the synergy of the combined elements and make the case for further investment. It might take something like 1/2 person-year in total, split between technology and business analysis.</li>
<li>Enhance that to a "minimum viable product" level to be a useful service for a large number of organizations.</li>
<li>Facilitate cooperation of that user community to continue further development, and to attract experts to aid in developing and testing more advanced methods.</li>
<li>Build all of that out into a vibrant, self-sustaining platform ecosystem (much as has been done with other platform or SaaS services like Linux, Mozilla, and Wikipedia).</li>
</ol>
</div>
<div>
NPOs (and/or news organizations) could then use this platform to get far more effective and sophisticated in managing their activities as a revenue-generating business, in ways that deepen their social contract with their community.<br />
<br />
(As noted above, existing revenue platforms might also be enticed to take the lead in adding FairPay features.)</div>
<div>
<br /></div>
<div>
<b>The FairPay social contract</b></div>
<div>
<br /></div>
<div>
FairPay works by creating <i>a new social contract </i>for sustaining the creation of desired services.<br />
<br />
Consider this change in the game:</div>
<div>
<ul>
<li><i>From </i>today’s conventional repetition game: “Here is our requested price/donation, take it or leave it. We hope you will take the risk — and be satisfied enough to continue this game.”</li>
<li><i>To the FairPay game</i>: “We will grant you the power to pay/donate what you think fair for you after each period of service — we will remind you of the services you got (or funded for others), and will encourage you to pay/donate accordingly.”</li>
</ul>
This voluntary form of FairPay relies on <i>dialogs about value</i> to frame the value proposition, and to remind patrons of the value they received. It <i>empowers </i>them to determine the "price," engages in transparent <i>dialog</i> about the value that the price should relate to, and tracks <i>reputation </i>to build trust and to know how to nudge fair levels of support.<br />
<ul>
<li>It draws on <i>all available information on when and how services are actually consumed</i> by each patron. Increasing availability of fine-grained usage data will make that increasingly meaningful.</li>
<li>It <i>may seed its dialog with individually-calculated suggested prices based on the value and cost of those services.</i> (Even if services may be offered to some at no charge, it may be fair to gently nudge others who have greater means to pay for those services for themselves (and others) as they can afford.) </li>
<li>It <i>regularly solicits payments</i> to sustain ongoing services in an open and transparent way, <i>framing and managing </i>the dialogs about value to remind patrons of the value they (and others) got, and what and when they have paid in the past to sustain that, why they should now pay again, and what new value to expect. </li>
<li>It <i>learns which patrons are fair or even generous</i> in their corresponding payments, so that they can be most effectively nurtured, and resources can be directed to serving those who most appreciate the value offered. </li>
<li>It <i>can suggest additional benefits (perks, tiers of services) based on how fair or generous the customer is</i>. </li>
<li>In selected uses, it can also withdraw benefits -- for-profit businesses can use that "stick" to enforce fairness, but non-profits might stick to more positive "carrots" (but might still use "sticks" in limited situations).</li>
</ul>
<div>
That is how it drive revenue operations, building on that basic social contract. This is simple in in its core concept, but it is amazing how few organizations engage in <i>real and regular dialogs about value with each customer at this fine-grained level</i>.<br />
<br />
<ul>
<li>Engaging an NPO's community on what it offers each of them, what each of them values, and what it needs in the way of support from each of them is the way to build strong sustaining support, enabling it to co-create the maximum value. </li>
<li>Some managers fear getting customers to think about value and price, and some fear that customers will not be willing to engage in such dialog. But behavioral economics shows that customers are far more responsive to productive dialog about value and price than most businesses realize (<a href="https://doi.org/10.1016/j.ausmj.2019.07.002" target="_blank">my latest journal article</a> cites a number of compelling studies, and the most relevant are listed in my <a href="https://www.fairpayzone.com/p/pricing.html" target="_blank">Resource Guide</a>). </li>
<li>Managers also tend to forget how much their value propositions vary from one community member to another. (A simple <a href="https://www.fairpayzone.com/2017/12/the-ghost-of-pricing-future-thought.html" target="_blank">thought experiment</a> can help recenter on the importance of these individual value propositions.) </li>
<li>That, in turn, enables a funder to leverage its impact -- the value it co-creates with its NPO portfolio and each member of their communities.</li>
</ul>
</div>
</div>
<div>
There is of course much more to how this is done, and it will vary greatly from context to context. Background on these variations is in my previous post, <a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html" target="_blank">The Elements of Next-Gen Relationships and Pricing -- A Unifying Framework</a>. It provides this summary table of the elements, and then comments on each:</div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgrdYHbqzvxhCeLywd7XTAZZpzFb00VQsrax9GM5rSBsQI0JeOLnXAM46wZMkERNW-UYqoKvRK92Wp0BAwepyM06wMGhJKjgeNw2mFNcGDA-0Cqxde1e4UGq1kM2503cdEpGW7tNbw6DrF4OArFIxj0xYjkRwVRw89e14EGKzkYSLUr_zR112vXWHtkkQ=s1099" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="897" data-original-width="1099" height="408" src="https://blogger.googleusercontent.com/img/a/AVvXsEgrdYHbqzvxhCeLywd7XTAZZpzFb00VQsrax9GM5rSBsQI0JeOLnXAM46wZMkERNW-UYqoKvRK92Wp0BAwepyM06wMGhJKjgeNw2mFNcGDA-0Cqxde1e4UGq1kM2503cdEpGW7tNbw6DrF4OArFIxj0xYjkRwVRw89e14EGKzkYSLUr_zR112vXWHtkkQ=w500-h408" width="500" /></a></div><div class="MsoNormal"><div style="text-align: right;"> (with minor updates 10/27/19)</div>
<br /></div>
The columns to the right show that while most of these elements are <i>applicable to both for-profit and non-profit organizations</i>, the details will vary, and it will further depend on the level of trust and cooperation in the customer segments to be addressed.<br />
<br />
As indicated, <i>most non-profits currently use fewer of these elements</i> than for-profit businesses, but <i>greater use could improve their results</i> (including increasing the satisfaction and generosity of their community). This presents a broad opportunity for a platform to make it easy for non-profits of all sizes to gain leverage.<br />
<br />
Again, the clearest difference from how FairPay is used by for-profits is that fairness will often be left as voluntary, to be gently nudged with positive "carrots" rather than enforced with negative "sticks" (such as the revocation of privileges). But motivating fairness should be relatively easy for non-profits, since they can readily point to both the individual value and broader social value of their cause. (And non-profits can generally avoid the most complex element of FairPay, the business logic and policy issues of revocation or other negative incentives.)<br />
<br />
The <i>foundational</i> elements are already used to some degree in many contexts, to build on the power of ongoing relationships. Now the <i>amplifying</i> elements can be added in and combined, to bring new synergy to revenue operations.<br />
<br />
The general implication of the differences across columns is that the more advanced elements of the FairPay framework are most effective when the parties are perceived as holding up their side of the social contract:<br />
<ul>
<li>for service providers who are perceived as offering real value and warranting trust and commitment from customers/patrons for being fair, transparent and responsive to their value creation needs and desires.</li>
<li>for customers who are perceived as fair and honest about communicating their needs and desires, and being fair (even generous) in making contributions to sustain that desired value creation. </li>
</ul>
<b>Concrete use-case examples</b><br />
<br />
If this still seems abstract or unclear, please see my other posts with more concrete details of how FairPay applies in specific use-case examples:<br />
<ul>
<li>This example of membership based on the <a href="https://www.fairpayzone.com/2016/07/a-better-revenue-strategy-for-non.html" target="_blank">Whitney Museum</a>.</li>
<li>This example of membership based on the <a href="https://www.fairpayzone.com/2018/01/making-pay-as-you-wish-more-equitable.html" target="_blank">Metropolitan Museum</a>.</li>
<li>This example of <a href="http://www.fairpayzone.com/2015/08/patron-izing-journalism-beyond-paywalls.html" target="_blank">reader-funded "patronship" for journalism</a> (and many other discussions of journalism are linked to from the Business Use Cases section of my list of <a href="https://www.fairpayzone.com/p/more.html" target="_blank">selected items</a>).</li>
</ul>
<b>Simpler "80/20" solutions with the same platform</b><br />
<br />
Organizations using this proposed Revenue as a Service platform need not use its more advanced features, except as they are ready and wish to. The platform can be configured to deliver just the features each organizations wants. Thus it can provide a service that scales gracefully, from very basic, to very advanced.<br />
<br />
One very important simplification of FairPay can serve as a high-leverage 80/20 solution in both voluntary and payment-required contexts. That is the <i><a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">"risk-free" subscription</a></i> model that relies on <i>post-pricing</i> (after the experience). That can be done without using any of the <i>participative pricing</i> elements of more advanced FairPay solutions (and need not even exploit <i>nudging</i>). That is less of a departure from traditional set-price subscription or membership pricing. But unlike the high hurdle of an all you can eat, fixed price membership paywall, it works as a gentle "pay ramp." (This, too, is explained in my <a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html" target="_blank">Elements</a> post, and the <a href="https://www.fairpayzone.com/2016/07/a-better-revenue-strategy-for-non.html" target="_blank">Whitney</a> and <a href="https://www.fairpayzone.com/2018/01/making-pay-as-you-wish-more-equitable.html" target="_blank">Metropolitan</a> Museum use-case examples listed above.)<br />
<br />
Similarly, the platform, itself, can be built in stages, beginning with the more basic elements, then gradually adding the more advanced ones.<br />
<br />
<b>Crossing the lines between donors and those served</b><br />
<span style="background-color: white;"><br /></span>
<span style="background-color: white;">As explained in <a href="https://www.fairpayzone.com/2016/07/a-better-revenue-strategy-for-non.html" target="_blank">my 2016 post on non-profits</a>, FairPay provides new and better way to address the complex issues of pricing and sustainability across the spectrum from donors to those served. Consider how this works for these two often overlapping constituencies:</span><span style="background-color: white;"><br /></span>
<br />
<div class="MsoNormal" style="margin-left: 0.25in; mso-list: l1 level1 lfo3; tab-stops: list .25in; text-indent: -0.25in;">
<span style="background-color: white;"><span style="font-family: "symbol"; font-size: 10pt;">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><i>Recipients</i> -- <i>direct </i>customers/patrons of direct services (the mission). Here, pricing takes on two interrelated dimensions -- what is the fair value of the service, and what is the fair contribution from the recipient (to both the cost of the service to them, and to the added overheads needed to sustain the organization -- and optionally to the cost of service for those who can less afford it).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: 0.25in; mso-list: l1 level1 lfo3; tab-stops: list .25in; text-indent: -0.25in;">
<span style="background-color: white;"><span style="font-family: "symbol"; font-size: 10pt;">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><i>Benefactors</i> -- <i>indirect </i>customers/patrons of indirect services (the altruistic value of supporting services to others, and the value of being a benefactor, including perks and recognition). Here, the key dimensions are the value of direct services to others enabled by the benefactor’s donations, and the value of the indirect benefits to the benefactor.<o:p></o:p></span></div>
<div class="MsoNormal">
<br />
<span style="background-color: white;">The details will vary with the type of customer/patron and the nature of the organization and mission, but <i>the essential task is the same -- to generate sustaining revenue by cooperatively setting prices (for service or donation) that make the value proposition "win-win." </i>(That also includes recognition of non-monetary contributions by those who give in kind.)</span></div>
<br />
<b>The platform as a universal leverage point for achieving impact</b><br />
<br />
The problem that limits the uptake of these methods is the implementation effort, and the need for ongoing testing and refinement (including "devops," the work of enhancing and maintaining the operation). Fund a platform for that, and many more organizations will be able to teach men to fish -- or give them fish -- or whatever other good works they do. <i>The platform is a universal leverage point.</i><br />
<br />
A platform solution across many organizations also has other kinds of economies of scale and network effects, beyond simply outsourcing that service. <i>FairPay dialogs about value generate valuable data</i> about exactly what <i>each customer</i> values at a fine-grained transaction level, as well as reputation data about the fairness of each customer (and how that varies with context). While that data is sensitive, if managed with care it could potentially be used in win-win ways to help guide service providers to engage with those customers who most value their service (for a single service provider, or across all the service providers that use the platform, subject to appropriate privacy controls). That can lead to more effective co-creation of value for everyone.<br />
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<b>Posts that are specific to non-profits and social welfare</b>:<br />
<ul>
<li><a href="http://www.fairpayzone.com/2016/07/a-better-revenue-strategy-for-non.html" target="_blank">A Better Revenue Strategy for Non-Profits in the Digital Era</a></li>
<li><a href="https://www.fairpayzone.com/2018/01/making-pay-as-you-wish-more-equitable.html" target="_blank">Making "Pay As You Wish" More Equitable -- Sustaining the Met Museum (and Others)</a></li>
<li><a href="http://www.fairpayzone.com/2015/05/an-invisible-handshake-for-digital.html" target="_blank">An Invisible Handshake for The Digital Wealth of Nations</a></li>
<li><a href="http://www.fairpayzone.com/2016/12/how-market-commerce-can-become-more.html" target="_blank">How Market Commerce Can Become More Cooperative, Fair, and Human</a></li>
<li><a href="http://www.fairpayzone.com/2012/03/turning-invisible-hand-to-create-shared.html" target="_blank">Turning the Invisible Hand to Create Shared Value -- The FairPay Strategy</a></li>
</ul>
<b>...and focused on journalism</b>:<br />
<ul>
<li><a href="http://www.fairpayzone.com/2015/08/patron-izing-journalism-beyond-paywalls.html" target="_blank">Patron-izing Journalism -- Beyond Paywalls, Meters, and Membership</a></li>
<li><a href="http://www.fairpayzone.com/2017/01/what-lies-beyond-paywalls-better-way.html" target="_blank">What Lies Beyond Paywalls -- A Better Way</a></li>
<li><a href="http://www.fairpayzone.com/2017/08/the-missing-piece-of-membership-puzzle.html" target="">The Missing Piece of the Membership Puzzle -- Agreeing on Value for Each Member</a></li>
</ul>
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<b><i><br /></i></b>
<b><i>[Update 4/14/20:] </i></b>An excellent article on how one platform service, <a href="https://www.networkforgood.com/" target="_blank">Network for Good</a>, is bringing some of the relationship-building methods I describe here, is <a href="https://www.linkedin.com/pulse/how-nonprofits-doubling-down-relationships-giving-tien-tzuo/" target="_blank">How NonProfits are Doubling Down on Relationships with Subscription Giving</a>. The article is by Tien Tzuo president of Zuora, who wrote the excellent book, <i><a href="https://www.amazon.com/Subscribed-Subscription-Model-Companys-Future/dp/0525536469/ref=tmm_hrd_swatch_0" target="_blank">Subscribed</a></i>, that I <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">reviewed</a> in 2018.<br />
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<div>
<b><i>More about FairPay</i></b><br />
<b><i><br /></i></b></div>
<div style="margin: 0px;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>A concise introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br />
<span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><i><br /></i></b></span></span><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>For a full introduction see the </i><a href="http://www.fairpayzone.com/p/overview.html" style="font-style: italic;" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" style="font-style: italic;" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). There is also </i><a href="http://www.fairpayzone.com/p/more.html" style="font-style: italic;" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span><br />
<i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><i style="background-color: white;"><b><span style="font-family: inherit;"><br /></span></b></i></i></div>
<div>
<div style="margin: 0px;">
<b><i><b style="background-color: transparent;"><span style="font-style: italic;">And these journal articles, </span><a href="http://rdcu.be/HTfJ" style="font-style: italic;" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b><br />
<br />
<span style="font-family: inherit;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><b><i>Or, read my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></span></span><br />
<span style="font-family: inherit;"><i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><b><br /></b></i></span></div>
</div>
<i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></div>
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Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.comtag:blogger.com,1999:blog-7557842240801039419.post-39074487556474966122019-08-01T11:39:00.000-04:002019-09-09T13:50:30.124-04:00Break Through Your Old Biz-Model Blinders! -- Updated Workshop, NYC 9/26I am again leading a workshop that will challenge your foundational ideas -- at <a href="https://summit.nycmedialab.org/workshops" target="_blank">NYCML19</a> (the annual summit of <a href="http://nycmedialab.org/" target="_blank">NYC Media Lab</a>) on Thursday, 9/26. It was very well-received last year, and now updated:<br />
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<b><i><a href="https://summit.nycmedialab.org/workshops" target="_blank">21st Century Customer Relationships, Value Propositions, and Pricing</a></i></b><br />
<b><i><a href="https://summit.nycmedialab.org/workshops" target="_blank">A New Economics for Digital Content and Services.</a></i></b><br />
<br />
"This workshop is an exploratory “think tank” workshop 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. Participants will be shown a promising architecture for a new logic that includes “risk-free subscriptions” (as a pay-ramp rather than a pay-wall), and that customizes prices based on value. We will explore how to chart a strategic path that rethinks conventional approaches and points to incremental steps toward a deepening transformation. This workshop relates to the “relationship economy” in which recurring revenue, subscription, and membership models are becoming mainstream, all driven by the win-win potential of the “post-scarcity” economics of digital media. It will draw on AI, machine learning, and operationalizing ethics in business models."<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdMqKNPfd5CVmrDEaOA6p5kNcEr0XzKsdz8cnL6P1eRMH2Tusi7dMvOUa_KneVVHmXRStYSaO89BlKlmfWwJyFO7VFWGwHyPnMslnXtyUgAFI8kjg6xHL_MwmInyLT1115yTbc0wNJOWNo/s1600/zuora+old+new+business+model+subscribed-nyc-2017-keynote-50-638.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="359" data-original-width="638" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdMqKNPfd5CVmrDEaOA6p5kNcEr0XzKsdz8cnL6P1eRMH2Tusi7dMvOUa_KneVVHmXRStYSaO89BlKlmfWwJyFO7VFWGwHyPnMslnXtyUgAFI8kjg6xHL_MwmInyLT1115yTbc0wNJOWNo/s320/zuora+old+new+business+model+subscribed-nyc-2017-keynote-50-638.jpg" style="cursor: move;" width="320" /></a></div>
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.<br />
<br />
A preview of this perspective is in my posts, <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">The Relationship Economy -- It's All About Valuing Customer Experience</a>, and <a href="https://www.fairpayzone.com/2019/07/the-elements-of-next-gen-relationships.html" target="_blank">The Elements of Next-Gen Relationships and Pricing -- A Unifying Framework</a>. .<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBmiiGw5E7zIUaErvYaD1rjTkhbDuBjGPf6JpEL6nvz1Fq0IDplfNsxYKa9FfP4Fr-jZEvtC_srAvMABjF5Hy3qi5px8bFZ9gqf6xy5fw6ZLJCPM6mwhq99I8sYOVmKSdy0nuZaapanNqW/s1600/NYCML.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="283" data-original-width="1500" height="37" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBmiiGw5E7zIUaErvYaD1rjTkhbDuBjGPf6JpEL6nvz1Fq0IDplfNsxYKa9FfP4Fr-jZEvtC_srAvMABjF5Hy3qi5px8bFZ9gqf6xy5fw6ZLJCPM6mwhq99I8sYOVmKSdy0nuZaapanNqW/s200/NYCML.png" width="200" /></a></div>
<i><b>NYCML'19 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.</b></i><br />
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<b>REGISTRATION</b>: This workshop will be 1-2 pm. <a href="https://summit.nycmedialab.org/workshops" target="_blank">Registration</a> for NYCML19 is required (and includes all workshops). (Sign-up for workshops begins 9/3, but the conference usually sells out, so do register early.)<br />
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<b><i>More about FairPay</i></b><br />
<b><i><br /></i></b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>A brief introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br />
<span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i></i></b></span></span><br />
<ul>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>More in the </i><a href="http://www.fairpayzone.com/p/overview.html" style="font-style: italic;" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" style="font-style: italic;" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). </i></span></b></span></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>There is also </i><a href="http://www.fairpayzone.com/p/more.html" style="font-style: italic;" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><b style="background-color: transparent;"><span style="font-style: italic;">And these journal articles, </span><a href="http://rdcu.be/HTfJ" style="font-style: italic;" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="background-color: transparent;"><b> and </b></span><a href="https://doi.org/10.1016/j.ausmj.2019.07.002" style="background-color: transparent;" target="_blank"><i><b>Pricing in Consumer Digital Markets: A Dynamic Framework</b></i></a><b style="background-color: transparent;">. </b></i></b></span></span></li>
<li><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><b style="font-family: inherit;"><i>Or, my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></i></b></span></span></li>
</ul>
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<i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></div>
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Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com18tag:blogger.com,1999:blog-7557842240801039419.post-4470905758138573162019-07-03T16:14:00.007-04:002023-09-13T11:56:02.487-04:00The Elements of Next-Gen Relationships and Pricing -- A Unifying Framework<div class="separator" style="clear: both; text-align: center;">
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<i>[Updated 9/2/19, see notes at end]</i></div><div style="text-align: right;"><i><br /></i></div>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieCCKd27DDKhyK1KLjxsJqVJTOHFKDw1Xg40T7wtKh8aXiVLPkPB-gpSu9nf5Ni0dPqGmJtpQPUuDMm0P0VayBjKA5Tg4i9B6UZyWpaVWUW2wsOaHvb_bb84_tznXRGjCEfnIP6ywswIHL/s1099/Elements+Ladder+crop.png" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="897" data-original-width="1099" height="181" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieCCKd27DDKhyK1KLjxsJqVJTOHFKDw1Xg40T7wtKh8aXiVLPkPB-gpSu9nf5Ni0dPqGmJtpQPUuDMm0P0VayBjKA5Tg4i9B6UZyWpaVWUW2wsOaHvb_bb84_tznXRGjCEfnIP6ywswIHL/w223-h181/Elements+Ladder+crop.png" width="223" /></a></div>FairPay is a new and transformative way to think about how businesses market and price consumer services -- it points to ways to dramatically improve many businesses and satisfy many more customers. It is a framework that combines many important elements, some familiar, some not so familiar.<br />
<ul>
<li>Advanced versions combine all or most of those elements, but useful solutions may apply only some of them. </li>
<li>Many of these elements are already used in conventional pricing, at least to some degree. </li>
</ul>
There is a clear opportunity to do much better. The original focus of FairPay was on specific new business model strategies for sustaining for-profit enterprises (especially for digital products and services) -- but the framework spans non-profit services as well, and can extend to subsume conventional strategies as well.. These core strategies of FairPay have gained <a href="https://www.fairpayzone.com/p/more.html" target="_blank">recognition in business and scholarly publications</a>.<br />
<ul>
</ul>
I often struggle to explain what FairPay is -- as it applies at different levels, and in different business contexts. Without a full perspective of all the elements, this can be hard to pin down, and it can shift from one context to another. In a narrow sense, FairPay is a way of applying advanced methods used in combination. But in its broader sense, FairPay is an architectural framework that spans the full range of value-exchange styles and business contexts, and points to ways to move up the rungs of a <a href="https://www.fairpayzone.com/2017/04/finding-value-in-subscription-economy.html" target="_blank">ladder of value</a>,<br />
<br />
I am reminded of the familiar parable of <a href="https://en.wikipedia.org/wiki/Blind_men_and_an_elephant" target="_blank">The Blind Men and the Elephant</a>. Even when I seek to explain the whole elephant of FairPay -- which seems to be a new kind of beast -- it can be challenging. But when I try to explain intermediate forms, and how these forms relate to various conventional approaches to business relationships and pricing, that adds to the challenge.<br />
<br />
This post is an attempt to list the elements -- the trunk, the ear, the leg, and the side -- and outline how they fit together to take various forms (whether an elephant, anteater, or tapir). First, a discussion of the elements, then brief examples of important combinations that can move us up the ladder of value.<br />
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<b>The Elements</b><br />
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This following table summarizes the elements and how they can be mixed and matched to fit a given context. These elements have a synergy, so that more can often be far more powerful that few. However, some may not be applicable in some contexts -- depending on the nature of business, product/service element, and the customer segment. Each of these elements are discussed below.<br />
<br />
Check marks indicate elements that are likely to be desirable in most contexts, question marks are more case-dependent. (But just how each of the elements is used is very case dependent.) The "trust" factor is meant to address the varying levels of mutual trust and expectation of fairness in an individual business-customer relationship -- trust-based strategies can work with many consumers, but may not work for others:<div><br /></div><div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiroEFLl9oK58wyG7vKsRz9w25Z0Rd_iyD-94Rvsxy8_8hCXAca5yCNztJK4nAvWIk4zQkv03nn63eyjvez4dJ2l_lV1vlk9RQegyPhXNItR6XKcfYXqN8Cg9oAUGex-QkTT11jksHPnF6M/s1099/Elements+Ladder+crop.png" style="margin-left: 1em; margin-right: 1em; text-align: center;"><img border="0" data-original-height="897" data-original-width="1099" height="402" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiroEFLl9oK58wyG7vKsRz9w25Z0Rd_iyD-94Rvsxy8_8hCXAca5yCNztJK4nAvWIk4zQkv03nn63eyjvez4dJ2l_lV1vlk9RQegyPhXNItR6XKcfYXqN8Cg9oAUGex-QkTT11jksHPnF6M/w493-h402/Elements+Ladder+crop.png" width="493" /></a><br /><div style="text-align: center;">(with minor updates, 10/27/19)</div>
<br />
<b>A thought experiment about value -- Reisman's Demon</b><br />
<b><br /></b>
Before digging in to the elements, let's consider our objective. Imagine a supernatural demon that might power a system of commerce. <a href="https://www.fairpayzone.com/2017/12/the-ghost-of-pricing-future-thought.html" target="_blank">This demon</a> has a "god's-eye" view, a perfect ability to observe activity and read the minds of buyers and sellers to determine individualized "<i>value-in-use</i>:"<br />
<br />
<ul style="margin-top: 0in;" type="disc">
<li class="MsoNormal">The demon knows how each buyer uses the product or service, how much they like it, what value it provides them, and how that relates to their larger objectives and willingness/ability to pay. It understands that the value of a given item or unit of service depends on when and how it is experienced. It is also aware of broader/external value impacts.<o:p></o:p></li>
<li class="MsoNormal">This demon can determine <i>the economic value surplus</i> of the offering -- how much value it generates beyond the cost to produce and deliver it.<o:p></o:p></li>
<li class="MsoNormal">The demon can go even farther, to arbitrate <i>how the economic value surplus can be shared fairly</i> between the producer and the customer. How much of the surplus should go to the customer, as a value gain over the price paid, and how much should go the producer, as a profit over the cost of production and delivery, to sustain their ability to continue those activities.</li>
</ul>
Even if we lack such a demon, we can internalize it as an ideal, and design relationships and pricing methods that seek to approximate what it knows. This demon would apply all of the elements described below. Advanced forms of FairPay apply all or most of them. Keep this demon, and its sense of value and fairness in mind as you think about which elements you can apply now, and which you might add in over time.<br />
<br />
<b>Foundational Elements</b><br />
<b><i><br /></i></b>
These elements are often used (to some degree) in some forms of conventional pricing -- they support finding value and serve as a a foundation for the less conventional elements described in the next section.<br />
<br />
<b>Relationship-centered</b>. Modern commerce is increasingly moving to <a href="https://www.fairpayzone.com/2018/05/the-relationship-economy-its-all-about.html" target="_blank">a relationship focus</a>, whether the loyalty loops of repeat purchases, or more explicitly in the form of subscriptions. This shifts the entire focus of business from <i>one-shot games of transactions and short-term profit</i>, to <i>repeated games of lifetime value</i>. Well-structured repeated games build cooperation, trust, and loyalty. They exploit <i>the economy of scale over time </i>-- keeping customers is usually far more profitable than finding new ones. Subscriptions and other conventional models exploit this, and online services facilitate relationship-building, but other elements of FairPay can <a href="http://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html" target="_blank">change the structure of the game</a> to make it far more cooperative. This is actually a reversion to traditional norms of commerce, the village markets where buyers had ongoing personal relationships with sellers. All of the other elements relate to this core element.<br />
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<b>Individual value-centered</b>. Business is of course a matter of value exchange. Value-based pricing is often <a href="http://www.fairpayzone.com/2017/03/value-based-pricing-is-transforming-b2b.html" target="_blank">best practice in B2B businesses</a>, but is harder to do in B2C. It is a basic principle that both sides are best served when prices map to the value actually received. Few question that this is desirable, but if it is done at all in B2C, it is usually just <i>typical value</i> (for some "persona" segment). It is increasingly recognized that <i>individualized value-based pricing is most effective</i> -- and <a href="https://www.fairpayzone.com/p/pricing.html" target="_blank">studies of pay what you want</a> (PWYW) pricing support that for consumer markets. FairPay <a href="http://www.fairpayzone.com/2017/04/finding-value-in-subscription-economy.html" target="_blank">points to ways</a> to do that much more effectively. (When conventional subscriptions are <i>usage-based</i>, such as for cellular data megabytes, that offers a very basic level of value-based pricing.)<br />
<br />
The question of how to measure individual value is complex and multidimensional -- much of it is founded on the fundamental value of fairness in our business relationships. There are questions of value to the customer and to the business, and of broader aspects of value, such as externalities, ESG values, and triple or quadruple bottom lines. There are also questions of fairness in dividing the value surplus (among the direct parties, and along the value chain). [Related to this is "reverse metering" -- considering that value can also flow from the customer to the business, and providing credits accordingly, such as credits for ad attention and data (see 9/2 update comments below).] My demon defines value primarily in terms of the buyer and seller's perceptions, experience, and outcomes, but has awareness of larger aspects of value as well. The FairPay repeated game seeks to do much the same. This largely comes down to fairness -- the idea is that all aspects of value can be internalized by the two parties and used as a basis for pricing whatever aspects of value they agree are fair to consider.<br />
<br />
It must be emphasized that it is <i>customer </i>value that is paramount here. Of course equity (my demon) requires that both sides share in the value -- but the motivation that drives customers is <i>value to the customer</i>.<br />
<ul>
<li>Businesses increasingly see that <i>Customer Lifetime Value</i> (CLV) is how they make money, but usually fail to realize that they are measuring <i>the value of the customer to the vendor</i>.</li>
<li>What really motivates the relationship is <i><a href="https://www.fairpayzone.com/p/chapter-23-competing-on-vendor-lifetime.html" target="_blank">Vendor Lifetime Value</a></i> (VLV), <i>the value of the vendor to the customer</i>. This clearly deserves much more attention!</li>
</ul>
<div>
And, in delivering value to the customer, smart businesses know that this comes back to the values of human relationships. Even economists are beginning to recognize that "<a href="https://www.jstor.org/stable/40752468" target="_blank">Not Only What, but Also How Matters</a>." (That can even extend to <a href="https://www.nytimes.com/2019/06/27/well/mind/is-customer-service-the-new-therapy.html" target="_blank">call centers</a>.) </div>
<div>
<b><br /></b></div>
<div>
<b>Post-pricing / "Risk-free" pricing</b>. We have gotten into the habit of thinking that prices must be set before consumption, but in our digital world, that is <a href="http://www.fairpayzone.com/2014/12/so-last-century-its-time-to-end-tyranny.html" target="_blank">often not necessary</a>. There is <a href="https://www.fairpayzone.com/p/pricing.html" target="_blank">evidence </a>(from B2B value based pricing, and from PWYW consumer pricing) that <a href="https://www.fairpayzone.com/2011/11/consultant-john-blossom-pay-as-you-exit.html" target="_blank">setting prices after the consumption</a> can be more effective. Customers no longer face <i>risk </i>of disappointment or <i>uncertainty </i>about what they are paying for, and so are willing to pay more, especially for experience goods which can only be valued after the experience, or in situations where prices can be contingent on performance or outcomes. The "<a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">risk-free" subscription</a> model I have proposed is an important example of an advanced form of post-pricing. (Again, when conventional subscriptions are usage-based, that offers a basic level of post-pricing.)</div>
<br />
A simple way to get a limited post-pricing effect is by permitting <a href="http://www.fairpayzone.com/2016/03/how-blendle-could-do-much-better-with.html" target="_blank">post-<i>adjusted</i> pricing</a>, in which prices are pre-set, but can then be adjusted after the experience to reflect a revised understanding of value. Money-back guarantees are a simple form of this, but because they are all or nothing, they tend to be underused -- disappointment is often just partial, and so a full refund is seen by both sides as unfair. Enabling a post-priced discount (or bonus) at whatever percentage corresponds the the degree of value non-delivery (or of positive surprise) could make this two-stage method work well on both sides. That is a strategy that could easily be introduced in almost any payment context.<br />
<br />
<b>Framing and nudging, plus trust and transparency (generic)</b>. These are all important tools in relationship building that are often neglected. <a href="http://www.fairpayzone.com/2012/02/thinking-fast-and-slow-about-fairpay.html" target="_blank">Behavioral economics</a> has demonstrated <i>the <b>framing </b>effect: how you frame questions and offers</i> has dramatic effect on how people understand and respond to them (see the classic book, <i><a href="https://www.fairpayzone.com/2015/11/how-consumers-can-nudge-corporations.html" target="_blank"><b>Nudge</b></a>)</i>. Smart marketers (and pollsters) have long understood this, but the science is maturing. It is amazing how many businesses (and <a href="http://www.fairpayzone.com/2016/07/a-better-revenue-strategy-for-non.html" target="_blank">non-profits</a>) utterly fail to apply this powerful tool. FairPay focuses on how this can be customized to the individual (or just a persona/segment) to boost potential customers' willingness to buy, and to pay (as expanded on below), but the basic principles apply very broadly. When these techniques of behavioral psychology and economics are unilaterally abused to gain zero-sum advantage, that is toxic to the larger goals of the relationship -- but when done openly and transparently, they can build trust and help establish fairness.<br />
<br />
That brings us to the basic values of <b><i>transparency </i></b>and <b><i>trust</i></b>. Transparency is a prerequisite to trust, and trust is prerequisite to a constructive and lasting relationship. Old-fashioned mass-market customer relationships are often shaped by an intentional lack of transparency, leading to mutual distrust. Hardly a way to grow CLV!<br />
<br />
<i><b>Applying the foundational elements.</b></i> As indicated in the above table, the above four elements of FairPay are broadly desirable and should generally be used wherever practical. Some highly successful <a href="http://www.fairpayzone.com/2017/03/value-based-pricing-is-transforming-b2b.html" target="_blank">B2B pricing models</a> already apply all four. An example of a new pricing model that is suggested by this FairPay framework is the what I have called "<a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">risk-free subscriptions</a>." While I would not call that a full form of FairPay, it is a good example of how other important new ideas can be suggested by the FairPay framework. This risk-free model promises to provide many of the benefits of a full FairPay model, in a more simple and conventional way.<br />
<br />
<b>Amplifying Elements</b><br />
<b><br /></b>
These further elements are not widely used in pricing to consumers because the synergies of using them together have not been understood. But as we will see, they can significantly amplify the power of the fundamental elements, especially when used in combination. This new synergy derives from the basic structure of the FairPay repeated game. Consider this change in the game...<br />
<ul>
<li><i>From </i>today’s conventional repetition game: “Here is our monthly price, take it or leave it. We hope you will take the risk — and be satisfied enough to continue this game.”</li>
<li><i>To </i>the FairPay game: “We will grant you the power to pay what you think fair for you after each month’s use — but we will continue that game (beyond a few trial cycles) only if we agree that you are being reasonably fair.”</li>
</ul>
Here are the key amplifiers that make that repeated game converge on cooperation -- on value, dialog, trust, and transparency -- to seek to do what the demon would suggest:<br />
<b><br /></b>
<b>Participation</b>. Participation in pricing is the element that underpins FairPay, and is gaining recognition as widely applicable in many models. We are all accustomed to fixed-pricing that is set by the seller -- but that was actually <a href="http://www.fairpayzone.com/2014/12/so-last-century-its-time-to-end-tyranny.html" target="_blank">rare </a>before the mid-1800s, when the "price tag" was invented to enable scaling in newly emerging department stores. <i>Joint participatory pricing</i> (bargaining in which both parties negotiate a price) was the norm in traditional village marketplaces, and still used in auctions. <a href="https://www.fairpayzone.com/p/pricing.html" target="_blank">PWYW</a> is considered "participatory pricing," but it still involves one-sided participation: price setting is entirely controlled by the buyer instead of the seller. We can view <i>participation as a continuum</i>, from full seller control (set-price) to full buyer control (PWYW), with various forms of joint participation in between.<br />
<ul>
<li>Joint participation enables the <i>complementary value perceptions of both the provider and the customer</i> to be considered, and so provides the most complete understanding of actual value. That brings us closest to the god's-eye view of my value-pricing demon. (Joint participation was the norm in traditional marketplaces, and is still applied in auctions.) </li>
<li>Full forms of FairPay create <i><a href="http://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html" target="_blank">a new participatory balance of power over time</a></i>, in which the buyer sets the price after the experience. That is done knowing that the seller may chose to end the repeated game and not make future offers, if the price is judged to be consistently unfair (after some number of cycles of purchases and price settings). That is what I call <i><a href="http://www.fairpayzone.com/2015/05/an-invisible-handshake-for-digital.html" target="_blank">the invisible handshake</a> -- </i>not agreement on a price, but <i>agreement on how to price</i>.</li>
<li>The breadth of the FairPay framework becomes evident when one considers that the extremes of participation are just variations in the policy of how FairPay is applied -- conventional fixed pricing is the case where seller constraints on the buyer are total, and PWYW is the case where buyer control is absolute (FairPay privileges are never revoked.)</li>
<li>There is also considerable flexibility in just how pricing participation is shared. For example, a minimum "floor" price can be imposed to require that buyers pay at least that much. Such restrictions might sometimes be desirable when providing services which have high marginal cost (and/or are scarce).</li>
</ul>
<b>Individualized nudging based on reputation tracking</b>. The heart of the of FairPay game is in how it exploits one-to-one computer-mediated dialog to build a relationship centered on value and trust. It centers on ongoing <i>dialogs about value -- </i> in which information about perceived value, and why a suggested price is or is not fair, is regularly exchanged between the buyer and seller. That enables mutual learning and understanding of value propositions, perceptions, and desires, with opportunities for each party to nudge the other, and to develop a fairness reputation with the other. This builds on the basics of framing and nudging, and can be supercharged by big data and predictive analytics. This reputation tracking and nudging is what makes FairPay powerful as a way for each party to better understand the value exchange and to seek jointly to <i>converge on a common understanding of value over the course of the relationship</i> -- what would the demon have us do?<br />
<ul>
<li>The most basic form is simply to communicate value and nudge customers to appreciate the value provided. When pricing is participative, this enables nudging toward more desirable levels of fairness and generosity, but it can always be beneficial (when done well).</li>
<li>The converse basic form is to solicit ongoing feedback from the customer on their perception of value received. Few companies make it easy to provide feedback. (They seem to fear getting customers to think about value...and to have to listen and maybe respond to what they think.) But doing that well yields fine-grained, real-time value data -- and makes the customer feel valued.</li>
<li>Advanced forms of FairPay build on this to conduct <a href="http://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html" target="_blank">the full FairPay repeated game</a> -- to give more pricing power to the customer, and to learn exactly what product/service elements each one values, to nudge them to recognize the provider's efforts to deliver that value, to obtain reasons for customer pricing above or below suggested values, to assess the customer's fairness in their pricing, and to track that as a reputation for fairness that warrants trust (or not). [<i>Update</i>: for a detailed use case, see <a href="http://www.fairpayzone.com/2015/08/patron-izing-journalism-beyond-paywalls.html" target="_blank">Patron-izing Journalism -- Beyond Paywalls, Meters, and Membership</a>.]</li>
<li><a href="https://www.fairpayzone.com/2011/08/fairpay-free-trialsurvey-mode-easing.html" target="_blank">Voluntary forms of FairPay</a> can limit nudging to positive incentives, such as premiums and perks to motivate more generous pricing.</li>
<li>FairPay can also apply negative incentives, limiting access to premium offers and perks to those who have demonstrated that they price generously enough to warrant such offers.</li>
<li>In extreme cases of free riding, the ongoing privilege of future FairPay offers may be limited or revoked. Unfair customers may be relegated to a fixed-price paywall, or even excluded from all service offers. This may or may not be useful depending on context -- and so revocation is discussed as a separate element in the next section.</li>
</ul>
<div>
<b>Enforced Fairness / Revocable FairPay privileges (if unfair) -- Gated FairPay</b>. This just-noted aspect of nudging and reputation tracking deserves special attention. It provides the most powerful tool for enforcing fairness in the FairPay game -- but one that can be counterproductive by reducing trust and cooperation. "You catch more flies with honey than with vinegar." For the most part, the "carrots" of positive incentives will motivate customers far better than the "sticks" of negative incentives.<br />
<ul>
<li>FairPay is an architecture, not a single rigid method -- and there are a variety of decision parameters that determine how strictly or liberally fairness policies are enforced. </li>
<li>At the extremes are the strictness of seller-set fixed pricing that gives the customer no ability to adjust pricing, and the looseness of PWYW in which the seller has no power to limit unfair, free riding customers. </li>
<li>"Gating" of FairPay by selectively limiting who is offered FairPay privileges -- and by revoking future privileges for those who abuse them -- is important for enforcing fairness in for-profit contexts where trust in the customer's fairness has not been established or is questionable. The privilege of a FairPay relationship can only be sustained for those who honor the invisible handshake -- the agreement to be fair about doing what the demon would have them do.</li>
<li>Once a good fairness reputation is established, a forgiving policy is likely to be best, keeping the stick of revocation out of sight unless signs of growing unfairness suggest a reminder or probationary warning is required. </li>
<li>Where wide market reach is desired (much as with freemium) similar liberality may be desirable. </li>
<li>And in non-profit contexts, payment may be entirely voluntary, and no revocation or even negative incentives may be appropriate at all. </li>
</ul>
</div>
<b>Flexible adjustment for Ability to Pay (ATP)</b>. This is an opportunity to dramatically improve pricing for both providers and customers that can now be applied far more widely. Student discounts and senior discounts already benefit customers and bring added revenue to businesses. Price discrimination is recognized as bringing economic efficiency, but often in ways that exploit customers. But the above elements of FairPay enable the customer's ability to pay to be factored in to the dialogs about value in ways that are transparent and fair -- <i>what I call <a href="https://www.fairpayzone.com/2017/05/partners-not-suckers-from-price.html" target="_blank">value discrimination</a></i>. The delicate issues here may argue for ATP adjustments in some contexts but not others. Great care must be taken to do this fairly, in responsible and privacy-sensitive ways. But FairPay creates a platform that can get very smart and nuanced about ability to pay.<br />
<br />
<b>Using the elements to climb the ladder of value -- a sampling of notable combinations</b><br />
<br />
As we combine more and more of these elements, we generally tend to climb up <a href="https://www.fairpayzone.com/2017/04/finding-value-in-subscription-economy.html" target="_blank">the ladder of value</a>, toward relationships, value propositions, and prices that center on actual value to the user. This brings us closer to what my value demon would suggest. Organizations that do that well are more likely to thrive, serving more customers, over longer lifetimes, and sharing more value surplus -- thus sustaining revenue and/or profit. The rationale for this is more fully explained in <a href="https://www.fairpayzone.com/p/more.html" target="_blank">my publications and and blog posts</a>. A wide range of use-case examples are given on this blog (but not always using the terms used here to identify the relevant elements). Here a few representative examples, along with a table showing which elements are applied in each. (Remember that my value demon would want to apply all of the elements.)</div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRqXqIazeoj68b1CYyLKbhkd0S6pgTQzdTNBaRmM1_KeU2nc7ojT2Xjflav0FUFqVlSBs-Id3fv2ZcSAVVEzDLGbHBionuExblMEAbR3Q9yCMXf-ODRR7-4Td1zrTnf182-bgpjLO6nzf7/s1097/Elerments+Variations+Screenshot+crop.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="896" data-original-width="1097" height="410" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRqXqIazeoj68b1CYyLKbhkd0S6pgTQzdTNBaRmM1_KeU2nc7ojT2Xjflav0FUFqVlSBs-Id3fv2ZcSAVVEzDLGbHBionuExblMEAbR3Q9yCMXf-ODRR7-4Td1zrTnf182-bgpjLO6nzf7/w502-h410/Elerments+Variations+Screenshot+crop.png" width="502" /></a></div><div><div style="text-align: center;">(with minor updates, 10/27/19)</div>
<div>
<br /></div>
<a href="http://www.fairpayzone.com/2016/11/game-change-fairpay-and-customer-loyalty.html" style="font-weight: bold;" target="_blank">Full, gated FairPay</a><b> -- the ultimate value-based subscription</b>. Many of my posts, especially the earlier ones, and my journal articles, are focused on full embodiments of FairPay that apply most or all of these elements, including the enforcement of a minimal level of fairness using negative incentives, up to and including revocation of FairPay privileges. I believe that will ultimately be the most effective pricing strategy available for many for-profit contexts. It can be done in basic forms with moderate effort, but will take more effort to build, validate, and refine than the simpler variations that do not use gating to enforce fairness. Even in contexts where this may not apply well, such as for <a href="http://www.fairpayzone.com/2015/12/fairpay-what-you-want-for-costly.html" target="_blank">high marginal cost items</a>, it may still be applicable for value-added service components.<br />
<br />
<b><a href="https://www.fairpayzone.com/2011/08/fairpay-free-trialsurvey-mode-easing.html" target="_blank">Voluntary FairPay</a> -- all "carrot;" no "stick</b>." This is much simpler to implement and manage than full, gated FairPay -- and can be more appropriate in non-profit settings, and in for-profit settings for products with low marginal cost where wide uptake is desired. Even with full, gated FairPay, the most basic tier of service might allow for voluntary payments with no enforcement of fairness. This works much like <a href="https://www.fairpayzone.com/2014/04/beyond-freemium-free-paid-freemium.html" target="_blank">freemium</a>, but can generate some revenue from happy customers even for the "free" tier. This form of FairPay is more closely related to PWYW and crowdfunding, but emphasizes regular dialogs about value, including use of framing and "carrots" to nudge for fairness and generosity.<br />
<br />
<b><a href="https://www.fairpayzone.com/2019/03/risk-free-subscriptions-to-celestial.html" target="_blank">Risk-free subscriptions</a> -- an 80/20 solution that omits participation</b>. This is a very important simplification of FairPay that can serve as an 80/20 solution. It relies primarily on post-pricing -- without using any of the participative elements of more advanced FairPay solutions -- and need not exploit nudging. Thus it is less of a departure from conventional subscription pricing. Unlike the high hurdle of an all you can eat, fixed price paywall, it works as a gentle "pay ramp." Instead of the direct customer participation in pricing for full forms of FairPay, the provider retains full unilateral control of <i>price schedules</i>, but applies a price discount schedule that is value-based -- ramping from zero for no usage in a given period, upward based on value actually received -- with increasing volume discounts, until limited by a price cap to avoid risk of overuse (similar to that for an unlimited plan).<br />
<br />
<b>FairMicroPay -- simple, relationship-value-based adjustments to micropayments</b>. With resurgent interest in micropayments, partly fueled by blockchain, simplified forms of FairPay might be applied to make micropayments more flexibly value-based. There are <a href="https://www.fairpayzone.com/2018/11/the-case-against-micropayments-from.html" target="_blank">fundamental problems</a> with most forms of micropayments, but relationship-value-based adjustments can be overlaid on micropayment models. The idea is to add a FairPay layer that identifies the user, and that allows the user to modify a standard base price within limits permitted by a smart contract -- downward as a volume discount, or as a refund/discount for lack of desired value -- or upward as a value-based bonus or sustaining contribution.<br />
<br />
<b>Climbing the ladder of value</b><br />
<br />
Once you understand these elements, the framework becomes a tool for climbing the ladder of value toward more value-based pricing models -- toward what my demon would have us do. Wherever you are in current practice, you can begin to better apply these elements to chart a path to improve market reach, share of wallet, loyalty, and customer lifetime value, to better sustain your business.<br />
<br />
Not all of these elements are applicable in all contexts -- but with time and maturity in better ways of doing business (and of sustaining non-profit services), more of these elements can be effective in more and more contexts. Keep in mind that these methods are not all or nothing.<br />
<ul>
<li>They can apply to offers for some products/services, but not others. That may depend on the nature of the product/service, including such factors as fixed costs that must be covered, or scarcity that must be rationed, which may cause providers to restrict the pricing power of customers.</li>
<li>What we may now think of as a single product/service can often be re-factored to separate high-marginal-cost elements, where pricing must be controlled, from low-marginal-cost elements, where customers can be given more freedom (such as for value-added services and support services).</li>
<li>They can be applied to selected customer segments who are expected to be cooperative, fair, and even generous, but not to others who might not buy into the social contract of the invisible handshake.</li>
<li>They can be introduced to selected test populations as limited time tests to allow key parameters of the offering to be tested and refined before wider and more permanent use.</li>
</ul>
<div>
Some of these elements will drive a shift in mind-set on both sides -- from zero-sum to win-win games, and toward more cooperative norms of behavior -- and some people and organizations will adapt more quickly than others. But over time, the players will learn how to play this game in a way that becomes attractive for more and more products/services, and for broader and broader segments of customers.</div>
<br />
<b>"Revenue as a Service" -- the power of platforms</b><br />
<br />
The more advanced elements of this framework -- and increasingly nuanced variation of each of the elements -- will take effort to implement and operate, including software development and operations. <i>That suggests an opportunity for platforms to provide these services</i>, along with expertise in how to apply them, for the many organizations that might otherwise have difficulty doing that for themselves. That is just the kind of problem that "Software as a Service" was designed to solve. This can bring huge economies of scale and network effects to solving the problem of nurturing revenue relationships. Expanding a suite of services across this entire framework presents a significant opportunity for new or existing platform service providers.<br />
<br />
A platform solution across many organizations also has other kinds of economies of scale and network effects, beyond simply outsourcing that service. FairPay dialogs about value generate valuable data about exactly what each customer values at a transaction level, as well as reputation data about the fairness of each customer (and how that varies with context). While that data is sensitive, if managed with care, it could potentially be used in win-win ways to help guide service providers to engage with <a href="https://www.fairpayzone.com/2011/03/reinventing-subscription-platforms-with.html" target="_blank">those customers who most value their services</a>. That can lead to more effective co-creation of value for everyone.<br />
<i><br /></i>
<i>That pool of data holds much of what my demon knows.</i></div><div><i><br /></i></div><div><i><span style="font-family: inherit;">[Update: See much more on platforms in </span></i><span style="background-color: white; color: #222222; font-family: inherit;"><i><a href="https://www.fairpayzone.com/2019/08/a-platform-for-teaching-men-to-fish.html" target="_blank">A Platform for Teaching Men to Fish -- "Revenue-as-a-Service" for Non-Profit Impact</a> -- which applies to for profit use as well.]</i></span><i><span style="font-family: inherit;"><br /></span></i>
<span style="font-family: inherit;"><br />
-----</span><br />
<b><i>[Update 8/5/19] Table revisions</i></b><br />
<br />
The above tables and element descriptions have been updated slightly to add clarity and completeness.<br />
<br />
The first change is to add transparency and trust as foundational elements (listed in combination with framing and nudging). I was reminded by <a href="https://www.linkedin.com/in/stevenforth/" target="_blank">Steven Forth</a> that, while I had these in mind as part of the relationship-centered element, they were important enough to deserve explicit mention. I combined them with the other important elements that reinforce relationships, framing and nudging, as not dissimilar enough to warrant listing as separate elements.<br />
<br />
The second change is just a minor wording change, adding "enforced fairness" as a broader, and perhaps more meaningful, description for selective granting and revocation of FairPay privileges.<br />
<br />
-----<br />
<b><i>[Update 9/2/19] An added element? -- </i></b><i><b>Broad value factors, with "reverse metering</b>." </i><br />
<br />
<i>I am considering making this a separate element in my table, but unsure to what extent it fits as part of the "Individual value-centered" element, as noted above, and whether to categorize this largely ignored aspect of value as foundational or amplifying. </i><br />
<br />
FairPay seeks to focus both the business and the customer on <i>all aspects of value that they agree are relevant</i>. This deserves emphasis, and an important aspect of that is that value goes not just from the business to the customer, but often in significant ways <i>from the customer to the business</i>. This can be called "reverse metering" (much the way that electricity generated by a customer is metered to determine credits from the electric utility). Drawing on an older post about <a href="http://www.fairpayzone.com/2015/08/patron-izing-journalism-beyond-paywalls.html" target="_blank">journalism</a> as an example, consider how broad value really is, and how far this goes beyond what we think of as the "product:"<br />
<br />
<i>From the provider to the consumer</i><b>,</b> FairPay focuses on the total value of all kinds, as actually delivered to each particular consumer -- the value-in-use for exactly what is consumed and how (what items, how many, how intensely), not only content, membership perks, etc. -- the value of that experience and potentially even the outcomes that result (enjoyment, appreciation, and the results enabled -- did our advice improve your health or your stock market returns?). This can also include "soft" values, such as:<br />
<ul>
<li>service and support</li>
<li>participation, listening, and responsiveness (comments, access to the journalists) </li>
<li>events and merchandise</li>
<li>the social value of investigative journalism, community services, and good corporate citizenship.</li>
</ul>
<i>From the consumer to the provider</i>, FairPay considers not just monetary payments (subscription or membership fees, or pay-per-use), but other currencies. Thus it factors in credits (the "reverse meter") for:<br />
<ul>
<li>attention to advertising (including the possibility of customized levels of ad loads) and </li>
<li>personal data that can be used or sold (again with possible customization)</li>
<li>the value of user-generated content</li>
<li>the value of viral promotion and leads</li>
<li>up-sell/cross-sell revenue potential</li>
<li>volunteer-provided services to the provider </li>
</ul>
<br />
------------------------<br />
<div>
<b><i>More about FairPay</i></b><br />
<b><i><br /></i></b></div>
<div style="margin: 0px;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>A concise introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br />
<span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><i><br /></i></b></span></span><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>For a full introduction see the </i><a href="http://www.fairpayzone.com/p/overview.html" style="font-style: italic;" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" style="font-style: italic;" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). There is also </i><a href="http://www.fairpayzone.com/p/more.html" style="font-style: italic;" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span><br />
<i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><i style="background-color: white;"><b><span style="font-family: inherit;"><br /></span></b></i></i></div>
<div>
<div style="margin: 0px;">
<b><i>The </i><span style="background-color: transparent;">Journal of Revenue and Pricing Management</span><span style="font-style: italic;">, "</span><a href="http://rdcu.be/HTfJ" style="font-style: italic;" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="font-style: italic;"><b>" provides a scholarly but readable overview. </b></span><br />
<span style="font-family: inherit;"><i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><b><br /></b></i></span><span style="font-family: inherit;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><b><i>Or, read my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></span></span><br />
<span style="font-family: inherit;"><i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0); text-size-adjust: auto;"><b><br /></b></i></span></div>
</div>
<i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em><br />
<div>
<em><br /></em></div>
</div>Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.comtag:blogger.com,1999:blog-7557842240801039419.post-50186895075807651402019-06-20T15:56:00.002-04:002019-07-31T16:47:29.577-04:00Invited Journal Article on FairPay - "Pricing in Consumer Digital Markets: A Dynamic Framework"<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQ6DpZEl6IHmkSR8n2H0d4vK5elu4F2PeYj281TXSisnxniHjgZdh_lyNq_lgQdvsk5yOiapEwe2bh4JMdNyc5Q7qRWs4tOuNL6ky3RxZiZBg05TxAngb1ofIf_5M3SlxAB8pVMT8Ed3RD/s1600/AMJ.PNG" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="481" data-original-width="1189" height="129" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQ6DpZEl6IHmkSR8n2H0d4vK5elu4F2PeYj281TXSisnxniHjgZdh_lyNq_lgQdvsk5yOiapEwe2bh4JMdNyc5Q7qRWs4tOuNL6ky3RxZiZBg05TxAngb1ofIf_5M3SlxAB8pVMT8Ed3RD/s320/AMJ.PNG" width="320" /></a>This new invited paper on FairPay has been accepted to appear in the <i>Australasian Marketing </i><i>Journal</i>.<br />
<strike><br /></strike>
<b><i>Update 7/31:</i></b> <a href="https://doi.org/10.1016/j.ausmj.2019.07.002" target="_blank">now published, and freely available to download</a>. <strike>A pre-print of the full article is now available online.</strike><br />
<br />
This complements my previous journal paper -- providing a more complete review of how FairPay builds on participatory pricing methods like <i>pay what you want </i>(and avoids weaknesses in their current forms) -- and expands on how it provides a flexible framework for better pricing that can move the exchange between seller and buyer from the transactional to the relational in a wide range of contexts.<br />
<br />
This paper is co-authored with Pennie Frow and Adrian Payne. (The previous paper was co-authored with Marco Bertini, and was published in the <i><a href="http://link.springer.com/article/10.1057/s41272-018-0143-3" target="_blank">Journal of Revenue and Pricing Management</a> in 2018, </i>also available online, and free to all under open access.)<br />
<br />
The abstract:<br />
<blockquote class="tr_bq">
<i>Supplier firms are increasingly seeking new ways to personalize their offers and differentiate their products, especially in contested digital markets. One approach that shows promise involves encouraging customers to participate in pricing decisions using schemes such as “pay-what-you-want” where the customer has an input into determining the price. These approaches can benefit both the customer in terms of paying a reasonable price and reducing risk, and the supplier in terms of increasing sales and generating deep customer insights that can assist in relationship development. However, extant research shows limitations associated with these pricing approaches and, despite some qualified successes, there has not been widespread adoption in businesses. This study extends consideration of existing participative pricing schemes and proposes a new conceptual framework, termed FairPay. This framework overcomes many of the limitations of previous approaches, while addressing important challenges, especially those faced by many digital product suppliers. The framework offers an attractive pricing solution for both customers and suppliers, ensuring an equitable exchange that is based on value-in-use. We discuss the application of this framework in the context of digital products, where the approach has special promise.</i></blockquote>
We think FairPay has immediate potential to radically change business practices in a way that puts a powerful new form of dynamic and emergent pricing at the forefront of digital content businesses (as described throughout this blog). Likely initial applications are for digital offerings to consumers in markets such as journalism, e-books, music, video and other content, as well as games and other apps -- both directly between service providers and consumers, and via aggregator/distributor platforms. But as this paper suggests, "FairPay may be a unifying framework that bridges the gulf between purchases for profit and non-profit donations" (as currently emerging with crowdfunding platforms).<br />
<br />
We hope you will read the paper, and find it helpful -- and will let us know what you think.<br />
<br />
---<br />
<a href="https://business.sydney.edu.au/staff/pennie.frow" target="_blank">Pennie Frow</a> is Professor of Marketing at the University of Sydney. <a href="https://www.business.unsw.edu.au/our-people/adrianpayne" target="_blank">Adrian Payne</a> is Professor of Marketing at the University of New South Wales. My collaboration with them began when I contacted Adrian about his pioneering book on <a href="http://www.amazon.com/Relationship-Marketing-Chartered-Institute/dp/0750648392" target="_blank">Relationship Marketing</a>, with the idea that FairPay was very aligned with his thinking. That led to discussions of his more recent work (see <a href="http://www.amazon.com/Strategic-Customer-Management-Integrating-Relationship/dp/1107649226" target="_blank">Strategic Customer Management</a> by Adrian and Pennie), and an early result of our collaboration was presented at the <a href="https://www.fairpayzone.com/2015/07/the-naples-forum-on-service-co-creation.html" target="_blank">Naples Forum on Service</a>.<br />
<br />
My background is as a practitioner in online media and e-commerce, and the technologies that drive that (<a href="http://www.fairpayzone.com/p/reisman-bio.html">bio</a>).<br />
<br />
---<br />
<b>Resource Guide to Pricing</b><br />
<br />
Drawing on the research in this paper, I have updated my <a href="https://www.fairpayzone.com/p/pricing.html" target="_blank">Resource Guide</a> with recent references. The guide is intended to be relevant and accessible to managers and entrepreneurs, as well as to scholars and researchers.<br />
<br />
------------------------<br />
<div>
<b><i>More about FairPay</i></b><br />
<b><i><br /></i></b></div>
<div style="margin: 0px;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>A concise introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br />
<span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><br /></i></b></span></span><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>For a full introduction see the </i><a href="http://www.fairpayzone.com/p/overview.html" style="font-style: italic;" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" style="font-style: italic;" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). There is also </i><a href="http://www.fairpayzone.com/p/more.html" style="font-style: italic;" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span><br />
<i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><i style="background-color: white;"><b><span style="font-family: inherit;"><br /></span></b></i></i></div>
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<b><i>The </i><span style="background-color: transparent;">Journal of Revenue and Pricing Management</span><span style="font-style: italic;">, "</span><a href="http://rdcu.be/HTfJ" style="font-style: italic;" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="font-style: italic;"><b>" provides a scholarly but readable overview. </b></span><br />
<span style="font-family: inherit;"><i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><br /></b></i></span><span style="font-family: inherit;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><i>Or, read my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></span></span><br />
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<i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em><br />
<em><br /></em>Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com8tag:blogger.com,1999:blog-7557842240801039419.post-3916087311353434832019-05-29T20:33:00.001-04:002019-05-30T14:11:40.162-04:00Podcast: FairPay as a New Logic for a More Human Economics - a Wide-Ranging Conversation<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfnyqiI0gQkwPqlixj73NyPIywmyZxWuPFD0UTErnnPcHRDgrDRt7Yj6MzbVdLvWv6iMh0bv2agQcs_u6lBTY_CR-65y0sKNlaxJW9EBcIL0RoeJ5lcycTOUwOZtqn0rr2hT4lX7OI_JUB/s1600/handshake.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="242" data-original-width="366" height="131" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfnyqiI0gQkwPqlixj73NyPIywmyZxWuPFD0UTErnnPcHRDgrDRt7Yj6MzbVdLvWv6iMh0bv2agQcs_u6lBTY_CR-65y0sKNlaxJW9EBcIL0RoeJ5lcycTOUwOZtqn0rr2hT4lX7OI_JUB/s200/handshake.jpg" width="200" /></a></div>
<a href="https://interconnectedindividuals.com/reisman-fairpay/" target="_blank">A podcast</a> of a very wide-ranging interview of me by Jeff Saperstein is now online. Jeff nicely steered our conversation to briefly highlight not only the basic ideas of FairPay and how it can change business-to-consumer relationships, but also how this bears on many broad issues of current concern about how market capitalism works for people -- as customers, workers, and citizens.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiXnTo7XBR3Fqw6IEQV_NQxi4348OklyG99oZSx2-UtfNj3gCI9mBf1V30idK-MYZW-lCIqCa41efmTKOkz7J2ZQKbI2wlKCpzY3DV5a8NOdmUeskpso6N4XNsScxmGDix5BmfK1MXEgNvo/s1600/Saperstein+ii-flat-cover.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="500" data-original-width="333" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiXnTo7XBR3Fqw6IEQV_NQxi4348OklyG99oZSx2-UtfNj3gCI9mBf1V30idK-MYZW-lCIqCa41efmTKOkz7J2ZQKbI2wlKCpzY3DV5a8NOdmUeskpso6N4XNsScxmGDix5BmfK1MXEgNvo/s320/Saperstein+ii-flat-cover.jpg" width="212" /></a></div>
(<a href="https://www.jeffsaperstein.com/" target="_blank">Jeff </a>is co-author of <a href="https://interconnectedindividuals.com/" target="_blank"><i>Interconnected Individuals</i> and a companion Web site</a> that hosts a series of podcasts. He is a career coach with a background in communications and marketing and a focus on values. Our discussion was on 4/22/19, and we covered a lot in 38 minutes!)<br />
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<i><b>Here is a sampling of <a href="https://interconnectedindividuals.com/reisman-fairpay/" target="_blank">what we covered</a> ...from the basics:</b></i><br />
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There is growing unease with how market capitalism is failing society and workers. FairPay begins with a focus on unrecognized issues in how conventional economics no longer works for digital content and services. That leads to new perspectives on business more generally.<br />
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The invisible hand flails: "information wants to be free," but it also "wants to be expensive." Current pricing models for content -- all you can eat subscriptions -- increasingly fail to serve all but the most voracious consumers. Digital services companies fail to see that "artificial scarcity" is a short-sighted response, in direct conflict with the overarching shift of commerce from isolated transactions to recurring revenue relationships based on value and loyalty.<br />
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FairPay and related value-based solutions offer a practical new logic for creating and sharing value. The full, customized, participative FairPay solution leads to consideration of true value in its fullest aspects, combining the complementary perceptions of both the provider and the customer over the course of a developing, evolving relationship -- but still fitting within the familiar context of individual business to customer relationships.<br />
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"Risk-free" subscription models build on the same value-centered principles, but are even simpler to understand and apply. While not as fully risk-free to the customer, they leave the provider in full control of pricing -- so may be more readily adopted by businesses, while still providing significant benefits on both sides.<br />
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This perspective also casts light on the good and the bad of "dynamic" pricing -- as currently done secretly by providers in ways that customers view as manipulative, compared to more cooperative and transparent new forms.<br />
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<i><b>...to the broader implications and potentials:</b></i><br />
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The FairPay perspective also sheds new light on how our platforms and social media have lost their way, with perverse incentives to serve advertisers to the detriment of their users. It points to how better business models can refocus them to serve what their users value. One part of that is giving users credit for their attention and data, making ads more win-win for consumers, advertisers, and publishers/platforms.<br />
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We explore how shifting to value and fairness-based pricing can harmonize fair exchange <i>down the value chain --</i> to more fairly compensate the people who work to create the value we consume.<br />
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We also talk about how this can work <i>across the value chain --</i> to let provider-direct and aggregated offerings coexist harmoniously to serve varying needs without perverse economic conflicts.<br />
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On the broad logic of capitalism, we speak about how the logic of FairPay can better align shareholder profit with customer and community value -- to incentivize businesses to create value in the broadest senses. Businesses will find reason to focus on <i>lifetime value to the customer</i> (not just the long-term but self-serving metric of "customer lifetime value" <i>to the business</i>).<br />
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We speak of empathy for customers as an intrinsic element of this broad logic of value, and how capitalism can refocus entrepreneurs and investors on creating wealth for all of us. Behavioral economics and related research shows that people are wired to cooperate in creating value. Market economics can be the most effective way to do that once we re-learn how to build on that at scale -- "to re-mold it nearer to the heart's desire."<br />
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<b><i>More about FairPay</i></b><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s1600/new+FP+cover.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9W-b4fHc5cnnOITGK4Dmmc0ROZExjqXICOj0vtKPkwL-MOZKfgHhANc1VZLEul2rZ_hrX_HMvke_WmFeBatzwLjdsoe1NyOBn4Cgwmc51ZnVL3LP_UOa12oCLkQGGA7-fkZqO8tYWN6bs/s200/new+FP+cover.jpg" width="133" /></a><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>A concise introduction is in </i>Techonomy<i>, </i></span></b></span></span><b><i>"<a href="https://techonomy.com/2018/11/information-wants-free-consumers-may-want-pay/" target="_blank">Information Wants to be Free; Consumers May Want to Pay</a>"</i></b></span></span><br />
<span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><i><br /></i></b></span></span><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><span style="background-color: white;"><b><span style="font-family: inherit;"><i>For a full introduction see the </i><a href="http://www.fairpayzone.com/p/overview.html" style="font-style: italic;" target="_blank">Overview</a><i> and the </i><a href="http://www.fairpayzone.com/p/landing.html" style="font-style: italic;" target="_blank">sidebar</a><i> "How FairPay Works" (just to the right, if reading this at FairPayZone.com). There is also </i><a href="http://www.fairpayzone.com/p/more.html" style="font-style: italic;" target="_blank">Selected items</a><i> (including links to videos and decks). </i></span></b></span></span><br />
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<b><i>The </i><span style="background-color: transparent;">Journal of Revenue and Pricing Management</span><span style="font-style: italic;">, "</span><a href="http://rdcu.be/HTfJ" style="font-style: italic;" target="_blank">A Novel Architecture to Monetize Digital Offerings</a></b><span style="font-style: italic;"><b>" provides a scholarly but readable overview. </b></span><br />
<span style="font-family: inherit;"><i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><br /></b></i></span><span style="font-family: inherit;"><span style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><i>Or, read my highly praised book: </i><a href="https://www.fairpayzone.com/p/fairpaybook.html" target="_blank">FairPay: Adaptively Win-Win Customer Relationships</a><i>.</i></b></span></span><br />
<span style="font-family: inherit;"><i style="-webkit-text-size-adjust: auto; background-color: rgba(255, 255, 255, 0);"><b><br /></b></i></span></div>
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<i style="background-color: rgba(255, 255, 255, 0); font-family: inherit;">(FairPay is an open architecture, in the public domain. </i><em>My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)</em></div>
<i><br /></i>Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com8tag:blogger.com,1999:blog-7557842240801039419.post-27754297881456432792019-05-16T16:40:00.000-04:002019-05-18T10:45:45.483-04:00FairPay Relationships Presentation at 2nd Global Conference on Creating Value, NYC, May 14-15, 2019<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgP1PHI2G3NFlCnqVgzs4eHFbgoaaiuHOUm_Owv5nqVtwi19VOBqv-fFw06gbYXeNxVfMWTc28Ma5R7__KEytQ_VgzzRMBiQQ6mCXeQunYBKrecex9Kbgwpvgd5akO1tQH4p9BCfaPptf1P/s1600/Creating-Value-Green-Logo.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="102" data-original-width="152" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgP1PHI2G3NFlCnqVgzs4eHFbgoaaiuHOUm_Owv5nqVtwi19VOBqv-fFw06gbYXeNxVfMWTc28Ma5R7__KEytQ_VgzzRMBiQQ6mCXeQunYBKrecex9Kbgwpvgd5akO1tQH4p9BCfaPptf1P/s1600/Creating-Value-Green-Logo.png" /></a></div>
<b><a href="https://www.researchgate.net/publication/332544330_Dynamic_Value_Discrimination_in_Recurring_Consumer_Relationships_Re-centering_Business_on_Human_Values_in_the_Digital_Era" target="_blank">Dynamic Value Discrimination in Recurring Consumer Relationships: Re-centering Business on Human Values in the Digital Era</a>.</b><br />
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I gave this invited presentation at the <a href="http://www.creatingvalue.co/conference/" target="_blank">Second Global Conference on Creating Value</a>, in NYC on 5/14.<br />
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My deck (which contains extensive links to further background), as well as the extended abstract and full conference program is now online at <a href="https://www.researchgate.net/publication/332544330_Dynamic_Value_Discrimination_in_Recurring_Consumer_Relationships_Re-centering_Business_on_Human_Values_in_the_Digital_Era" target="_blank">ResearchGate </a>and <a href="https://www.slideshare.net/rreisman/dynamic-value-discrimination-in-recurring-consumer-relationships-recentering-business-on-human-values-in-the-digital-era" target="_blank">SlideShare</a>.<br />
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The conference was attended by some of the world's leading figures in the study of value creation and value-based revenue models.<br />
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I was gratified by the very positive response, praising this presentation as transformative, and an innovative synthesis that builds on, provides new context for, and significantly extends a wide range of emerging ideas in business management, behavioral economics, and the creation of value.<br />
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The deck for this presentation is <a href="https://www.researchgate.net/publication/332544330_Dynamic_Value_Discrimination_in_Recurring_Consumer_Relationships_Re-centering_Business_on_Human_Values_in_the_Digital_Era" target="_blank">as linked to above</a>, but unfortunately there was no recording. This presentation was a highly compressed and slightly updated version of <a href="https://www.fairpayzone.com/2019/04/rethinking-revenue-models-for-digital.html" target="_blank">a recent presentation which was recorded</a>.<br />
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[This is an update of a 4/20/19 post]</div>
Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.comtag:blogger.com,1999:blog-7557842240801039419.post-7726766605060212552019-04-02T10:11:00.001-04:002019-04-25T17:16:22.260-04:00Rethinking Revenue Models for Digital Services -- Video, Deck, Now OnlineMy thanks to <a href="http://newyorkangels.com/" target="_blank">New York Angels</a> for hosting this <a href="https://www.meetup.com/NY-Angels/events/258764869/" target="_blank">Webinar</a>, and to all who participated and their excellent questions. The <a href="http://bit.ly/NYARethinkingRevenue" target="_blank">video</a> and the <a href="https://www.slideshare.net/rreisman/rethinking-revenue-models-for-digital-services-32819-ny-angels" target="_blank">deck</a> are now online.<br />
<br />Richard Reisman - Independent Media-Tech Innovatorhttp://www.blogger.com/profile/13489008496062293188noreply@blogger.com