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Reisman on FairPay Win-Win Relationships at ISSIP Speaker Series 10/14/15

Teleshuttle Corporation
Teleshuttle Corporation

Reisman on FairPay Win-Win Relationships at ISSIP Speaker Series 10/14/15. For future updates, find the latest slide deck at http://www.slideshare.net/rreisman/reisman-fairpay-overview.

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Adaptively Seeking Win-Win Customer Relationships for the Digital Era FairPay Richard Reisman, Teleshuttle Corporation fairpay [at] teleshuttle [dot] com 1Copyright 2015, Teleshuttle Corp, all rights reserved Speaker Series 10/14/15
Tomorrows Logic The greatest danger in times of turbulence is not the turbulence, it is to act with yesterday's logic. --Peter Drucker FairPay -- a logic for tomorrow (not a product) Reisman Background Pioneering digital services for people since 1960s Diverse businesses and roles B2B and B2C ~50 patents, licensed to >200 companies Steeped in disruption business model crisis in content industries Saw a new way forward simple concept deep implications A whole new logic centered on value propositions Changes the entire focus of customer relationships from price to value Mission Change the world Save news, music, video, e-books, other content industries Create new value Work on a pro-bono basis with business and academic partners on research, trials, and applications seeking collaborators, evangelists and offer free consultation. (More information at FairPayZone.com) 2
A Thought Experiment Imagine an all-knowing Economic Demon* Read buyers & sellers minds to learn value-in-use, in-context Know how used, liked, value obtained, WTP, ATP Know economic value surplus Arbitrate fair sharing of surplus Set personalized and fair prices --- Practice: Better strategies** Theory: Better insights (*Like Maxwells Demon and Laplaces Demon in physics) (**Like B2B value/performance/outcomes-based pricing need lightweight analog for B2C) 3
4
5
Monetizing Digital Offerings in Networked Markets A Radical Re-framing Dilemma: Pricing for information Information wants to be free (infinite replication) Information also wants to be expensive (creation) Answer: Re-think our value exchange process Not allocating scarce resources (no invisible hand) Still need to sustain producers Balance value, ability to pay, cost, profit How?... 6
Adaptive, Win-Win Value Propositions How?: Build value exchange relationships Exploit new power of computer-mediated relationships Co-operatively build relationships on perceived value Learn the right price for each customer each time An invisible handshake with each consumer Emergent approximation of economically ideal pricing Share more value, with more customers - sustainably Better business profit, market reach, lifetime value More value for society 7
Set Prices Are So Last Century! (Taken for granted, but wrong!) Historically: Prices personalized Personal negotiation human buyer and seller Personal contexts, needs, bargaining powers, relationships Communal norms (caring, fairness, even generosity) Mid-1800s: Price tags / institutions Institutional sellers to mass market consumers Scalable: simple, operationally efficient Buyer take it or leave it exchange norms, bargain hunting E-commerce: Mass-personalization? 1:1? Why not price? End race to the bottom personalize a fair price for value How to do it effectively, efficiently??? (See set-price blog post) 8
Digital Problem=Opportunity #1 The Long Tail of Price Sensitivity Customers are not the same! Customer experience is not the same! (increasing price sensitivity) Green revenue: capped at set price Red head: lost surplus Amber tail: lost sales Dynamic and context-dependent (see Long Tail blog post) 9
Post-Pay Separate the Sale from the Price! Why not price the experience after it is known?* Unlike typical up-front offers (Pay What You Want, etc.) Remove the consumers risk discount (or rejection) Signal suppliers value and trust _________ *= post-pay = ex-post pricing = pay in arrears = pay as you exit = price it backwards 10 Thanks to John Blossom, Shore Communications (ContentBlogger) Pay as You Exit: FairPay Explores New Content Pricing Discovery Regimes
Digital Problem=Opportunity #2 A digital product? Near-zero replication cost (Free) Not a discrete, scarce product Access, entitlements, usage Valued as an experience good a service Personalized variations (items, time, intensity, volume, ) all measurable rich instrumentation in use New data on value for each consumer (see data blog post) Free as a selling tool trials, freemium, pay what you want, Better: Embrace dynamic variability, control risk 11
Accept/buy/use (before pricing) (Buyer) Set fair price (after buy and use) (Buyer) Track price (Seller) Fair to seller??? (Seller) Gated FP Offer (Seller ) FairPay Dialog Cycle Ongoing adaptation, continue indefinitely Price it BackwardExtend it Forward (after trial)(limit FairPay credit) 12
FairPay Value Discovery Engine Frame/nudge and track continuing adaptation Seller- gated Premium FairPay Offer Seller- gated Basic FairPay Offer Buyer Accepts FairPay Offer ? Buyer Tries Product /Service Buyer Sets FairPay Price Seller Tracks Fairness of Price High -Fair Low- Fair Un- Fair Buyer Seller Sets Price (take or leave it) Buyer Accepts Set-Price Offer ? Buyer Uses Product /Service FairPay Zone (revocable privilege) Conventional Set-Price Zone 13 Value/FairnessOffers
Seller Control and Predictability? Frame/nudge and track Managed dialog choice architecture fully personalized Seller reports usage provides a suggested price personalized to that buyers usage frames the pricing rationale, and nudges with incentives (+, -) Buyer sets FairPay prices (as a differential from suggested price) states reasons for their differential (multiple choice) Seller evaluates fairness of reasons reciprocal value proposition frames new offers manages FairPay credit and incentives Nudge buyers toward suggested prices as fair exchange Test/review value propositions, offers, framing, incentives 14
A new twist of the Invisible Hand Creating Shared Value over relationship 15(see invisible hand post, and invisible handshake post)
Aligning Price with Value Pricing for the Co-Creation of Value Intuitive blend of diverse factors, emerging over the relationship From provider to consumer Value-in-use / experience / outcomes Other Soft value Service / support Participation / listening / responsiveness Social value / triple bottom line From consumer to provider Monetary payments Other currency -- Consumer as provider of value to provider Attention to ads / Personal data to exploit User-Generated Content Promotion / virality / leads to others Up-sell/cross-sell revenue potential Can extend through the ecosystem value chain Designations of value share to creators/suppliers (vs. intermediaries) 16
Key Evidence and Enablers Behavioral Economics People are not heartless profit maximizers (eg: PWYW generosity) Traits: Fairness, reciprocity, altruism, self-image, acceptance, Situations: Social/communal norms vs. economic/exchange norms Treat me as a patron, make me want to be a patron Computer-mediated dialog Facilitate automated dialog about what I value, on what basis and act on it Engage me as a patron, show you hear/understand me Big Data + Predictive analytics Use data to validate customer dialogs on value, incentivize honesty Customize offerings and how they are framed Show that you recognize and respect my desires as a patron Adaptive, cooperative relationships 1. Nudge buyers toward fairness, perception of value, sharing value surplus 2. Foster social/communal norms (participation and dialog) 3. Segment based on fairness traits (social values) and value propositions 17
FairPay can be tested, phased in Toe-in-the-water examples for News Subscriptions Acquisition =Fuzzy Freemium Paywall balkers? special limited usage trial versions, tie-ins, gamification, membership club Retention (Saves) low usage, low price Premium club/patron segments curated, early access/new releases, quality, downloads/offline use, added features Usage /style segments Limited usage? low/high usage, low/high cost, song frequency, Content segments: Long-tail / genre indies, back-list, genres Device segments phones, embedded systems Family Plans seats, concurrent use Deserving sellers compensation to artist/creator Trials, sampling, coupons, specials limited offers Special branding distinct from conventional Acquisition =Fuzzy Freemium (Revenue from day one) versions, tie-ins, gamification, membership club Retention (Saves) (Revenue recapture) low usage, low price Premium club/patron segments (Eg: NY Times Premier/Insider) curation, early access, journalist access, archives, downloads/offline, extra features Usage /style segments low/high usage, low/high cost, alerts acted on Content segments: Long-tail / genre investigative journalism, analysis, financial insight, sports insight, crosswords Device segments phones, embedded systems Family Plans seats, concurrent use Deserving sellers compensation to journalists, field reporting Trials, sampling, coupons, specials limited offers Distinct branding separate from conventional offering 18
Change the Game with FairPay! From invisible hand to invisible handshake 19 From: set prices shop for lowest price commoditization To: FairPay participative value exchange shop for value, relationship engagement, loyalty Analogous to tipping Easy, intuitive, with rich multi-dimensional nuance Often happily pay more than you need Free is an option, not a price Delight your customers, give them pricing freedom, focus on value, gain their loyalty Treat me as a patron; make me want to be a patron Engage me as a patron; show that you understand what I care about Emergent strategy Pricing legitimacy Higher profits + deeper market penetration (+ad $) (See Handshake post)
Thank You Call to Action Questions? Follow on ISSIP talks? Spread the word Test FairPay in use FairPayZone.com Extensive information E-mail Reisman: fairpay [at] teleshuttle [dot] com ---------- Additional Commentary Follows 20
Value-Based Pricing for Consumer Markets! Prices based on actual performance/outcomes Used very effectively in some B2B markets* Win-win: Buyer and seller agree to share in the actual product value surplus High economic efficiency But: high pricing cost for custom analysis FairPay: a simplified, intuitive, highly- automated analog for mass consumer markets *See this 2014 HBR article, and this 2002 HBS article. 21 Advanced Economics:
Usage/Value Pricing - Buyer-friendly Deadweight loss of all you can eat unlimited subscriptions (See deadweight blog post) No ticking meter / No usage shock Price considering usage, but Buyer factors in: Usage history Volume discounts (with seller guidance) Soften the extremes averaging out Price tracks to value (with affordability) Warm and fuzzy, good feelings 22 Advanced Economics:
Price Discrimination - Buyer-accepted Economic optimum: price tracks to value Buyer self-discrimination Legitimacy Engages buyers a rewarding process, centered on personalized value propositions Infinite segmentation, in all dimensions Context, ability-to-pay, usage, time, devices, users, Price discrimination can be good! 23 Advanced Economics:
Business Contexts Ongoing relationships Subscriptions / ongoing services Aggregation (iTunes, Amazon, App stores, ) Experience goods Low marginal cost, perishables, promotions Deserving sellers/producers 24
Product / Service Category Examples Anything with low marginal cost Long-tail / low-demand products (expand market / gain revenue) Short-head / high-demand products (expand market / gain revenue) Digital content / products /services (by item or by subscription) News / information / magazines Music Video Games E-Books Apps / Software Other Digital Services Real products /services (especially experience goods) Low marginal cost (primary product or extras/support) Sampling / trials /coupons (eg: Groupon) Perishable excess (eg: hotels, transport, performances) 25
Platform and Database Opportunities Single vendor internal process solutions Cross-vendor added leverage, information Shared infrastructure and processes = Pricing as a Service (PaaS) New: FairPay Fairness Reputation Database Across vendors and contexts (fairness ratings + details) Use like credit rating database (FairPay credit line) Detailed value perception data Database asset, first mover advantage Interest by potential platform vendors (Zuora) Plug-ins / SaaS 26
Engage Customers in Real Dialog Real-time, Real-life Market Research Dynamic pricing and value discovery Real willingness to pay Specific to actual product/buyer/context/usage New kinds of Big Data at a micro level Ongoing trials of mutual value discovery Focused, flexible value propositions Match to customer perceptions, specific contexts, times Sell value: a positive experience (not focus on price) Build a relationship - get not just customers, but patrons 27
A Flexible, Extensible Architecture Coexist with conventional pricing (segment by fairness) Tunable parameters (choice architectures) Gating, nudging, warning, dispute-resolution Up-selling, down-grading Liberal or tight control Analogs of conventional methods, plus new ones, in any combination Freemium, Paywalls (metered/soft) Tiers, segments, dynamic/usage pricing Custom mix of customer revenue and advertising Phasing: Survey mode, Simple Pay What You Want 28
Phasing in Can limit to a contained niche offering Can build and apply in incremental stages 1. Free survey mode (free, for value feedback only no fairness gating process) 2. Simple Pay What You Want As You Exit (pricing unrestricted by fairness no fairness gating process) (post-pay as you exit makes PWYW more meaningful) 3. Full FairPay (gated by fairness, by seller most of the cost, complexity) 29

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Reisman on FairPay Win-Win Relationships at ISSIP Speaker Series 10/14/15

  • 1. Adaptively Seeking Win-Win Customer Relationships for the Digital Era FairPay Richard Reisman, Teleshuttle Corporation fairpay [at] teleshuttle [dot] com 1Copyright 2015, Teleshuttle Corp, all rights reserved Speaker Series 10/14/15
  • 2. Tomorrows Logic The greatest danger in times of turbulence is not the turbulence, it is to act with yesterday's logic. --Peter Drucker FairPay -- a logic for tomorrow (not a product) Reisman Background Pioneering digital services for people since 1960s Diverse businesses and roles B2B and B2C ~50 patents, licensed to >200 companies Steeped in disruption business model crisis in content industries Saw a new way forward simple concept deep implications A whole new logic centered on value propositions Changes the entire focus of customer relationships from price to value Mission Change the world Save news, music, video, e-books, other content industries Create new value Work on a pro-bono basis with business and academic partners on research, trials, and applications seeking collaborators, evangelists and offer free consultation. (More information at FairPayZone.com) 2
  • 3. A Thought Experiment Imagine an all-knowing Economic Demon* Read buyers & sellers minds to learn value-in-use, in-context Know how used, liked, value obtained, WTP, ATP Know economic value surplus Arbitrate fair sharing of surplus Set personalized and fair prices --- Practice: Better strategies** Theory: Better insights (*Like Maxwells Demon and Laplaces Demon in physics) (**Like B2B value/performance/outcomes-based pricing need lightweight analog for B2C) 3
  • 4. 4
  • 5. 5
  • 6. Monetizing Digital Offerings in Networked Markets A Radical Re-framing Dilemma: Pricing for information Information wants to be free (infinite replication) Information also wants to be expensive (creation) Answer: Re-think our value exchange process Not allocating scarce resources (no invisible hand) Still need to sustain producers Balance value, ability to pay, cost, profit How?... 6
  • 7. Adaptive, Win-Win Value Propositions How?: Build value exchange relationships Exploit new power of computer-mediated relationships Co-operatively build relationships on perceived value Learn the right price for each customer each time An invisible handshake with each consumer Emergent approximation of economically ideal pricing Share more value, with more customers - sustainably Better business profit, market reach, lifetime value More value for society 7
  • 8. Set Prices Are So Last Century! (Taken for granted, but wrong!) Historically: Prices personalized Personal negotiation human buyer and seller Personal contexts, needs, bargaining powers, relationships Communal norms (caring, fairness, even generosity) Mid-1800s: Price tags / institutions Institutional sellers to mass market consumers Scalable: simple, operationally efficient Buyer take it or leave it exchange norms, bargain hunting E-commerce: Mass-personalization? 1:1? Why not price? End race to the bottom personalize a fair price for value How to do it effectively, efficiently??? (See set-price blog post) 8
  • 9. Digital Problem=Opportunity #1 The Long Tail of Price Sensitivity Customers are not the same! Customer experience is not the same! (increasing price sensitivity) Green revenue: capped at set price Red head: lost surplus Amber tail: lost sales Dynamic and context-dependent (see Long Tail blog post) 9
  • 10. Post-Pay Separate the Sale from the Price! Why not price the experience after it is known?* Unlike typical up-front offers (Pay What You Want, etc.) Remove the consumers risk discount (or rejection) Signal suppliers value and trust _________ *= post-pay = ex-post pricing = pay in arrears = pay as you exit = price it backwards 10 Thanks to John Blossom, Shore Communications (ContentBlogger) Pay as You Exit: FairPay Explores New Content Pricing Discovery Regimes
  • 11. Digital Problem=Opportunity #2 A digital product? Near-zero replication cost (Free) Not a discrete, scarce product Access, entitlements, usage Valued as an experience good a service Personalized variations (items, time, intensity, volume, ) all measurable rich instrumentation in use New data on value for each consumer (see data blog post) Free as a selling tool trials, freemium, pay what you want, Better: Embrace dynamic variability, control risk 11
  • 12. Accept/buy/use (before pricing) (Buyer) Set fair price (after buy and use) (Buyer) Track price (Seller) Fair to seller??? (Seller) Gated FP Offer (Seller ) FairPay Dialog Cycle Ongoing adaptation, continue indefinitely Price it BackwardExtend it Forward (after trial)(limit FairPay credit) 12
  • 13. FairPay Value Discovery Engine Frame/nudge and track continuing adaptation Seller- gated Premium FairPay Offer Seller- gated Basic FairPay Offer Buyer Accepts FairPay Offer ? Buyer Tries Product /Service Buyer Sets FairPay Price Seller Tracks Fairness of Price High -Fair Low- Fair Un- Fair Buyer Seller Sets Price (take or leave it) Buyer Accepts Set-Price Offer ? Buyer Uses Product /Service FairPay Zone (revocable privilege) Conventional Set-Price Zone 13 Value/FairnessOffers
  • 14. Seller Control and Predictability? Frame/nudge and track Managed dialog choice architecture fully personalized Seller reports usage provides a suggested price personalized to that buyers usage frames the pricing rationale, and nudges with incentives (+, -) Buyer sets FairPay prices (as a differential from suggested price) states reasons for their differential (multiple choice) Seller evaluates fairness of reasons reciprocal value proposition frames new offers manages FairPay credit and incentives Nudge buyers toward suggested prices as fair exchange Test/review value propositions, offers, framing, incentives 14
  • 15. A new twist of the Invisible Hand Creating Shared Value over relationship 15(see invisible hand post, and invisible handshake post)
  • 16. Aligning Price with Value Pricing for the Co-Creation of Value Intuitive blend of diverse factors, emerging over the relationship From provider to consumer Value-in-use / experience / outcomes Other Soft value Service / support Participation / listening / responsiveness Social value / triple bottom line From consumer to provider Monetary payments Other currency -- Consumer as provider of value to provider Attention to ads / Personal data to exploit User-Generated Content Promotion / virality / leads to others Up-sell/cross-sell revenue potential Can extend through the ecosystem value chain Designations of value share to creators/suppliers (vs. intermediaries) 16
  • 17. Key Evidence and Enablers Behavioral Economics People are not heartless profit maximizers (eg: PWYW generosity) Traits: Fairness, reciprocity, altruism, self-image, acceptance, Situations: Social/communal norms vs. economic/exchange norms Treat me as a patron, make me want to be a patron Computer-mediated dialog Facilitate automated dialog about what I value, on what basis and act on it Engage me as a patron, show you hear/understand me Big Data + Predictive analytics Use data to validate customer dialogs on value, incentivize honesty Customize offerings and how they are framed Show that you recognize and respect my desires as a patron Adaptive, cooperative relationships 1. Nudge buyers toward fairness, perception of value, sharing value surplus 2. Foster social/communal norms (participation and dialog) 3. Segment based on fairness traits (social values) and value propositions 17
  • 18. FairPay can be tested, phased in Toe-in-the-water examples for News Subscriptions Acquisition =Fuzzy Freemium Paywall balkers? special limited usage trial versions, tie-ins, gamification, membership club Retention (Saves) low usage, low price Premium club/patron segments curated, early access/new releases, quality, downloads/offline use, added features Usage /style segments Limited usage? low/high usage, low/high cost, song frequency, Content segments: Long-tail / genre indies, back-list, genres Device segments phones, embedded systems Family Plans seats, concurrent use Deserving sellers compensation to artist/creator Trials, sampling, coupons, specials limited offers Special branding distinct from conventional Acquisition =Fuzzy Freemium (Revenue from day one) versions, tie-ins, gamification, membership club Retention (Saves) (Revenue recapture) low usage, low price Premium club/patron segments (Eg: NY Times Premier/Insider) curation, early access, journalist access, archives, downloads/offline, extra features Usage /style segments low/high usage, low/high cost, alerts acted on Content segments: Long-tail / genre investigative journalism, analysis, financial insight, sports insight, crosswords Device segments phones, embedded systems Family Plans seats, concurrent use Deserving sellers compensation to journalists, field reporting Trials, sampling, coupons, specials limited offers Distinct branding separate from conventional offering 18
  • 19. Change the Game with FairPay! From invisible hand to invisible handshake 19 From: set prices shop for lowest price commoditization To: FairPay participative value exchange shop for value, relationship engagement, loyalty Analogous to tipping Easy, intuitive, with rich multi-dimensional nuance Often happily pay more than you need Free is an option, not a price Delight your customers, give them pricing freedom, focus on value, gain their loyalty Treat me as a patron; make me want to be a patron Engage me as a patron; show that you understand what I care about Emergent strategy Pricing legitimacy Higher profits + deeper market penetration (+ad $) (See Handshake post)
  • 20. Thank You Call to Action Questions? Follow on ISSIP talks? Spread the word Test FairPay in use FairPayZone.com Extensive information E-mail Reisman: fairpay [at] teleshuttle [dot] com ---------- Additional Commentary Follows 20
  • 21. Value-Based Pricing for Consumer Markets! Prices based on actual performance/outcomes Used very effectively in some B2B markets* Win-win: Buyer and seller agree to share in the actual product value surplus High economic efficiency But: high pricing cost for custom analysis FairPay: a simplified, intuitive, highly- automated analog for mass consumer markets *See this 2014 HBR article, and this 2002 HBS article. 21 Advanced Economics:
  • 22. Usage/Value Pricing - Buyer-friendly Deadweight loss of all you can eat unlimited subscriptions (See deadweight blog post) No ticking meter / No usage shock Price considering usage, but Buyer factors in: Usage history Volume discounts (with seller guidance) Soften the extremes averaging out Price tracks to value (with affordability) Warm and fuzzy, good feelings 22 Advanced Economics:
  • 23. Price Discrimination - Buyer-accepted Economic optimum: price tracks to value Buyer self-discrimination Legitimacy Engages buyers a rewarding process, centered on personalized value propositions Infinite segmentation, in all dimensions Context, ability-to-pay, usage, time, devices, users, Price discrimination can be good! 23 Advanced Economics:
  • 24. Business Contexts Ongoing relationships Subscriptions / ongoing services Aggregation (iTunes, Amazon, App stores, ) Experience goods Low marginal cost, perishables, promotions Deserving sellers/producers 24
  • 25. Product / Service Category Examples Anything with low marginal cost Long-tail / low-demand products (expand market / gain revenue) Short-head / high-demand products (expand market / gain revenue) Digital content / products /services (by item or by subscription) News / information / magazines Music Video Games E-Books Apps / Software Other Digital Services Real products /services (especially experience goods) Low marginal cost (primary product or extras/support) Sampling / trials /coupons (eg: Groupon) Perishable excess (eg: hotels, transport, performances) 25
  • 26. Platform and Database Opportunities Single vendor internal process solutions Cross-vendor added leverage, information Shared infrastructure and processes = Pricing as a Service (PaaS) New: FairPay Fairness Reputation Database Across vendors and contexts (fairness ratings + details) Use like credit rating database (FairPay credit line) Detailed value perception data Database asset, first mover advantage Interest by potential platform vendors (Zuora) Plug-ins / SaaS 26
  • 27. Engage Customers in Real Dialog Real-time, Real-life Market Research Dynamic pricing and value discovery Real willingness to pay Specific to actual product/buyer/context/usage New kinds of Big Data at a micro level Ongoing trials of mutual value discovery Focused, flexible value propositions Match to customer perceptions, specific contexts, times Sell value: a positive experience (not focus on price) Build a relationship - get not just customers, but patrons 27
  • 28. A Flexible, Extensible Architecture Coexist with conventional pricing (segment by fairness) Tunable parameters (choice architectures) Gating, nudging, warning, dispute-resolution Up-selling, down-grading Liberal or tight control Analogs of conventional methods, plus new ones, in any combination Freemium, Paywalls (metered/soft) Tiers, segments, dynamic/usage pricing Custom mix of customer revenue and advertising Phasing: Survey mode, Simple Pay What You Want 28
  • 29. Phasing in Can limit to a contained niche offering Can build and apply in incremental stages 1. Free survey mode (free, for value feedback only no fairness gating process) 2. Simple Pay What You Want As You Exit (pricing unrestricted by fairness no fairness gating process) (post-pay as you exit makes PWYW more meaningful) 3. Full FairPay (gated by fairness, by seller most of the cost, complexity) 29