No matter how great and how engaging the value of membership, if the price to each member is not reasonably well aligned with that individually perceived value (as a fair share of wallet), the solution is ineffective.
Finding the answer to this crisis is complex, with numerous pieces to be fit together. Many are considering this puzzle and seeking new paradigms, including "membership" -- a more relationship-oriented view of recurring subscription services that focuses on supporting them primarily by member payments (often voluntary payments) -- which requires making these services smarter, more cooperative, and more customer-first.
These efforts have identified many important pieces of the puzzle, but there is a unifying piece missing. I center on
The missing piece is to build a process of co-creation that looks beyond the co-creation of "valuable" journalism as a thing in itself, to
, and to use that to continuously optimize the pieces to be offered to each member. The currency for this economic value of journalism is money. Creators of journalism need fees from their members to survive and continue to co-create journalism with them. Each member is different.
. It is widely
that trust and transparency are key elements of membership services, and I suggest that financial trust and transparency are critical to that.
we need to find a balance of value received and value given -- and to do that by adjusting the amount of any monetary payments made.
This question of individual value underlies all the decisions of what journalistic value to create, who to deliver it to, and how to manage that.
While much is changing as journalism seeks to reinvent itself for the digital era, this division is deeply entrenched -- both in large established publishers, and in newer "membership"-oriented publishers.
Large news publishers are beginning to take a more business-like view of value, but often not in a very customer-first or relationship-oriented way. Directions such as those outlined by David Skok's astute
-- and being pursued by many large publishers -- view journalism as a product to be priced using a dynamic meter, at a transactional level (often per article), drawing on the lessons of analytics-based dynamic consumer-goods pricing. While effective in many contexts, this zero-sum game is antithetical to trust and transparency, and a dead end for journalism. It may help bring in revenue from a diversity of very occasional readers, but does not build real relationships with the regular readers who are the main reservoir of sustaining support.
The membership model moves toward a more member-first, relationship-centered, co-creative view of the value proposition, but does not yet give that a necessary grounding in the core issue of member-specific value exchange. Much attention is being given to what pieces to offer and how to fit them together, to make them most valuable -- but this key piece seems to be largely missing:
The Membership Puzzle Project -- a social contract based on trust and transparency
The Membership Puzzle Project (MPP) is a new and important effort to solve the problem of finding a sustainable path for journalism. It seeks to learn from a growing body of success stories in which publishers seek deeper relationships with their readers by becoming "customer first" and seeking new, more cooperative, and more individualized ways to co-create value. I have exchanged emails with the MPP team (an extract is below), and hope to meet with them soon. I have volunteered to contribute to that effort because my work on advanced, adaptively win-win forms of subscription/membership models is very relevant to the project objectives.
The MPP is a laboratory project led by
Jay Rosen's team at NYU (along with
De Correspondent, an innovative Dutch publication looking to create a US edition) -- supported by $515,000 in funding from three prominent foundations. While this project is specific to journalism, I expect it to provide lessons relevant to digital content services of all kinds.
As stated on the project's
about page,
So where is the sustainable path? It seems increasingly likely that readers who value a public service press are going to have to sustain it themselves – by contributing money, sharing knowledge, and spreading the word. A good term for this is membership. But membership won't work if it's just begging for cash. There has to be a social contract between journalists and members. Working out what that contract should say is the core challenge of the Membership Puzzle Project.
In a more recent
report, "Members made a moral decision: this is something I should support."
Notice this "social contract between journalists and members." Much of what I see discussed about this social contract involves aspects of the substance and process of collaborative journalism (as outlined in
this MPP post) that I am no expert in. But Jay Rosen's
NiemanLab article makes it clear that a core aspect of that social contract is the "'pay' model" and whether it works "to maximize trust in a 'readers pay the freight' model." This blog, and my
book, are focused on emerging strategies for doing just that.
Trust is not enough -- trust depends on value
Membership projects rightly make much of the importance of trust and transparency as central to the relationship of journalists to readers/members. A
recent update by Jay Rosen, on their interviews of De Correspondent members, reports that "Trust through transparency is almost universally seen as a key principle...It shows respect for the reader, and it invites their participation, not just their attention."
That is vital, but trust in the journalistic reporting/creation process is not enough -- trust depends on value. Misaligned value weakens trust. Conversely, trust enables the transparency, responsibility, and fairness needed to agree on value. Seemingly arbitrary pre-set prices detract from perceived value and compromise trust. Even when such prices are voluntary, the process of setting prices and framing the value in the value proposition can add or detract from trust and transparency -- and from revenue.
Other current membership/patronship efforts -- in journalism ...and more broadly
The MPP builds on numerous ongoing efforts to develop membership/patronship models, both relating to journalism and more broadly. NiemanLab features
Shan Wang's reports on a variety of them, including the
News Revenue Hub's efforts to help news organizations in such efforts. Even well-established major publications like the
Guardian are trying membership models (a voluntary, but pre-set, $84/year). Other similar ideas are being applied to a wide variety of other kinds of content.
Notably, some are supported by widely used platform services, such as those offered by
Patreon and
IndieGogo.
Ben Thompson's Stratechery adds perspective, and expands on the importance of platforms to simplify and pool the mechanics of the back-end tasks needed. Much of the mechanics of FairPay that I describe here could be similarly offloaded to a platform (and some platform providers have shown interest), but whatever the back-end, the fundamental focus on member value remains core to journalists or other creators.
Valuing the pieces of the puzzle
What should the price of membership be, and how insistent should a publisher be about that? The
recent update on member interviews by Jay Rosen notes that while De Correspondent charges €60 for its voluntary membership, many members said they would pay much more, €100 to €150, even though they acknowledged that asking for that much up front might have kept them from signing up.
Wiktribune takes a more discretionary approach, allowing members to pay what they want. But in any case, the question is how to entice members to pay their fair share -- and to make them feel good and trusting about it, so they continue to do so.
Some of these efforts recognize the diversity of member needs by providing for multiple tiers of membership (or similar forms of patronship), often with different rewards. That is smart in recognizing that different members seek different value propositions. But it gets very complex, and the problem of individual variation is that managing this diversity (both from member to member and from time to time) gets intractable (and just leaving it to member whim risks erratic results). I addressed some examples of that in a
previous post, and an interesting NiemanLab review of public media membership efforts by
Melody Kramer shows just how complex this can get, (and how far afield of the core value propositions of a service -- tote bags, T-shirts, and coffee mugs -- it can devolve). Pre-set tiers are just not very workable. We need a more dynamically personalized and continuously adaptable approach.
Operationalizing member feedback -- continuing dialogs about value
Think of the membership puzzle as analogous to a jigsaw puzzle that is different for each member -- and so must be solved anew for each member. A puzzle that does not picture value (as seen by the member in question) is like a jigsaw puzzle turned upside down, so that we cannot see the desired pattern of value we seek to solve for. Not being able to see the picture makes solving the puzzle extremely hard.
Another recent post from
Emily Goligoski of the MPP highlights the challenges of understanding these value propositions:
Many membership program details are treated ad hoc and roughly benchmarked to competitors’ offerings (a line of thinking that goes if the other station in town costs X per month for members and if subscribing to Spotify costs Y, then we can charge…). Most media companies don’t carefully plan the details of their social contract, including pricing and participation asks.
And this is not just a static problem. Keep in mind that that the puzzle for a given member
this month may be very different from the puzzle for the same member
last month. The reporting and features change, and the member's needs, attention, and desires change. To really solve this puzzle, we must evaluate the value proposition more or less continuously. Periodic member surveys (such as those being done as part of the MPP as a project effort) are an excellent start, and are current best practice. But I suggest that is just a start.
This is something that FairPay seeks to make routine, and to operationalize it into an ongoing feedback control process that is integrated with the payment request process and the creation process (in an adaptively lightweight way), in the form of
ongoing dialogs about value. This ongoing operational feedback from members integrates not only with financial operations data, but also with the core operational data and analytics about member usage. This combination of data and analytics enables ongoing optimization of what services are offered (journalistic and more broadly), to what members, when.
Solving for Value -- A new social contract based on an invisible handshake
FairPay provides strategies for setting pricing and value propositions that can form the core of a new social contract for journalism. While this new logic can be approached in stages, the full form of it is that the publisher offers this social contract:
- We seek true partners in sustaining the co-creation of journalism for you and our other readers.
- We will seek to involve you in what we co-create with and for you, to provide you the services you most value.
- We will permit you to participate in setting prices that correspond to that value -- considering what you get from us, what you contribute to us, and your ability to pay (and how those factors may change over time) -- in order to support our continuing work.
- We expect you to be fair about that, at whatever level makes sense for you and is fair to us.
I call this social contract an
invisible handshake, because unlike the
invisible hand of traditional economics (that allocates scarce resources, in this case, news stories, to match demand at a given time), this social contract is about
an agreement to find and maintain an equitable relationship:
- Digital news stories (and subscriptions to them) cost almost nothing to distribute, so are not scarce and cannot be priced by the invisible hand.
- What is scarce is the fair share of a reader's wallet that is needed to continue to co-create more news stories.
- Any social contract that does not address payments is un-moored from the economic reality of sustaining journalism.
- Because individual members vary widely (and over time), a social contract that expects all members to pay the same price (and a constant price) is bound to be unfair to either the member or the publisher in most cases.
The challenge to this social contract (the invisible handshake) is that different readers (members/subscribers) perceive
very different value propositions, and the fair price of membership will vary from person to person (and from time to time) in ways we currently do not get data on. While much of the information needed to assess actual value (as realized in use) can be
inferred passively, key aspects of value perception can only be obtained from the beholder. The fair price depends on
the nature of their experience, their willingness to pay, and their ability to pay. A publisher can seek to influence these personal aspects, but the final reckoning is best done:
- after each cycle of experience, when value is most fully known, and
- with the input of the customer, who has unique knowledge of the value as experienced.
FairPay offers a new strategy for enabling publishers to estimate these fair pricing factors through individual dialogs with members about value -- and for doing so repeatedly over the course of the relationship. An explanation of how this can be done in the context of journalism is in my post,
Patron-izing Journalism -- Beyond Paywalls, Meters, and Membership. More on the mechanics of the core process, and how it builds cooperation to converge on fair pricing, is in my post,
FairPay Changes the "Game" of Commerce. (These posts present the full form of FairPay that balances the pricing power of members with controls by publishers that seek to ensure minimum fairness to the publisher -- but for membership programs that prefer the greater openness and trust of a purely voluntary pricing regime, there is a simplified variant of FairPay that supports a
Voluntary Payment Mode. That variant uses similar strategies for nudging members toward fairness, but without enforcing any minimum fairness level.)
Don't panic!
While FairPay may seem complex, it can readily be simplified and reduced to habit, to the point that it becomes largely automatic except when adjustments are needed, as outlined in
Profiting from Habit -- Seamless Monetization. It may also seem that consumers may be inclined to be uncooperative and seek to game the system, but FairPay can be initiated for just those segments who will be most amenable, and even eager to cooperate (which is where membership models work best anyway), and then expanded from there, as outlined in
Finding Good and Fair Customers -- Where Are the Sweet Spots?
Proven success with value-based pricing -- and value-based relationships
FairPay draws on the concepts of
value-based pricing that have already proven very successful in many B2B businesses. It combines three key aspects that are essential to proper estimation of fair prices for individual readers:
- Post-pricing: Delaying final price-setting until after the experience, to enable the price to reflect the actual nature of the experience (what stories are read and engaged with, at what level and intensity, with what results).
- Participatory pricing: Involving the reader in assessing the perceived and personal aspects of the value exchange (value perceptions, outcomes, interests, objectives, priorities, tastes, as well as willingness and ability to pay).
- Bi-directional value propositions: The flow of value is not uni-directional (value to the reader and cash to the publisher). Often value flows in reverse (as Jeff Jarvis suggested), from the reader to the publisher, in the form of participation in journalistic creation, user-generated content, attention to ads (if any), use of personal data, and the many other forms of reader value contribution that are now increasingly recognized as part of the membership puzzle.
To the extent that a pricing process factors in all these aspects, it enables what I call
value differentiation. Related to the traditional economic ideal of
price discrimination, value discrimination seeks to find the right value proposition for each customer.
- Price discrimination theoretically leads to an economically optimal price that maximizes revenue -- but it does that in ways that are are narrowly zero-sum and often secret and manipulative, and not reflective of the broader co-creative interests of both the publisher and the reader (detracting from trust and transparency).
- FairPay shows how the broader objective of value discrimination leads toward prices that seek cooperatively to optimize the value exchange in a much larger sense -- enabling us to factor in individual human and social values (to the extent mutually agreeable). This brings into the equation the social value of journalism and the need to sustain it, as well as the broader and more personal values of the reader, and solves it in a win-win, cooperative way that builds trust and transparency.
The key point to remember is that
we are not paying for current stories -- we are paying for a relationship that will continue to bring us stories -- doing investigative journalism, and providing other ongoing services in the future. That is the social contract, and its pricing must reflect that.
FairPay is a flexible architecture that a publisher can apply with any of a wide range of policies. Negotiated levels of fairness can be achieved under policies that give the publisher more or less control, using as strong or light a hand as desired. In any case, the strategy is for the publisher to seek to nudge members toward fair (or even generous) levels of sustaining support.
- At one extreme member payments can be entirely voluntary (pay what you want -- or, more accurately, pay what you think fair) -- and at the other extreme strict fairness minimums can be enforced (mandated prices).
- The right choice will depend on the nature of the service and of its membership (and on the sophistication of the system implementation, which can start simply and be enhanced over time).
- For journalism, a balanced soft touch is likely to be best, with significant member discretion, but reasonable levels of individualized nudging for each member to to price fairly (for them).
Climbing the ladder of value
The full FairPay process applies rich dialogs about value -- but we need not apply all of its methods (post-pricing, participatory pricing, and bi-directional pricing) to see improvements in value propositions. All pricing methods can be ranked along a "ladder of value," based on the degree to which they apply these three aspects of value differentiation to find the right value proposition. By working our way up the ladder, we can improve our social contract incrementally. Some thoughts on how conventional pricing strategies can be ranked on this ladder of value are in my post,
Finding Value in The Subscription Economy (I plan a more nuanced update that addresses all three aspects).
JaaS -- Journalism as a service, not a product
As is highlighted by membership models, many are coming to realize that journalism is not a product but a service, and that those services are not created by journalists alone (to be thrown over the transom at readers, for a price), but must be co-created with readers (at least in part). This parallels a broader awakening in modern marketing.
- Many marketers are simply applying better technology to old ways of thinking, to apply old logics more efficiently (such as dynamic pricing, as set unilaterally by sellers). Unfortunately, that is a zero-sum logic that that kills trust.
- The more seminal trend in modern marketing is a shift to a new logic. Many scholars and forward-thinking businesses have recognized that our traditional Goods-Dominant Logic (in which goods are produced by producers and then sold to consumers) is no longer relevant, and a that a Service-Dominant Logic (in which services are co-created, in a win-win process) is far more relevant and powerful. As noted above, membership models take a perspective that is very aligned with Service-Dominant Logic. I propose that value is central to this (Value-Dominant Logic).
Journalists would do well to understand this new logic of services that are co-created -- to see how broadly it can re-shape their view of their profession -- and lead to sustainable success.
Adding value to The Membership Puzzle Project
I hope the MPP team -- and others dealing with these problems (in journalism, and in other fields) -- will take a good look at these economic, business model issues -- issues of personalized value. I stand ready to assist in that.
FairPay is an open architecture, not a product, and I am working on this as a pro-bono project (in collaboration with eminent marketing scholars who can assist with trials). As noted above, even when the full FairPay strategy is not used, understanding the ladder of value can help chart the path toward solutions that get closer to the efficient value differentiation that is needed to make journalism (and other content creation enterprises) broadly sustainable in this new digital era.
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More about FairPay
(FairPay is an open architecture, in the public domain. My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)
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Background on how the FairPay relationship pricing strategy can transform the sustainability of journalism:
FairPay is unique in bringing new operational approaches to content businesses in a way that deeply aligns with emerging principles of marketing strategy, with strong foundations in behavioral economics. It is a new approach to setting value-based prices for digital content (“experience goods” that are really services, not products). This brings a deeply “member-first” approach to the operational basis of customer/member relationships.
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Addendum
An extract from my 3/20/17 email to Jay Rosen on the Membership Puzzle Project:
FairPay is fully aligned with, and can extend, the principles that have motivated De Correspondent -- and can point the way for others.
- It solves the “membership puzzle” with a personalized, adaptive architecture that coexists with set-price models and encourages free viral spreading.
- It enables memberships to be automatically customized to the interests and values of each member, founded on trust, value, fairness, and ability/willingness to pay.
- It is driven by ongoing “dialogs about value” with each customer that take De Correspondent’s ideas about dialog to the core of the value exchange. These include dynamically personalized value propositions (with reverse metering options to factor in the broad range of member contributions to value such as UCG, story leads, feedback, etc., and a rich concept of value that includes broad journalistic values).
- The dialogs about value directly link members’ financial support to value -- what journalists do, in what domains, and what else is offered -- in a way that drives sustainability of the publication and deepens engagement -- at a fine granularity that optionally can be a factor in individual journalist compensation and their relationships with their “fans.” It focuses on real value, not T-shirts.
This enables membership fees to be adaptively customized to reflect each member’s situation, as it varies over time: how much they read, how much they support costly journalism, what they contribute back, and their ability and willingness to pay. FairPay seeks to approximate optimal price discrimination, so that some members might pay much less that average, while others might pay much more, but with transparent agreement that it is a fair value exchange (and contribution to sustainability) for them. This can broaden the reach of membership to a wider population of casual readers, and deepen it for “superfans.”
