FairPayPatron-izing Journalism:

Beyond Paywalls, Meters, and Membership

Richard Reisman, Teleshuttle Corporationfairpay [at] teleshuttle [dot] com

1Copyright 2015, Teleshuttle Corp, all rights reserved

9/20/16

”Entrepreneurial Journalism” • Your mission? – a dilemma?

– Quality journalism – to a wide audience– To be sustainable – not to get rich(?)*

(*But if you do want to get rich, see the Platform and Database slide…)

• My mission is aligned– Introduce a new logic for content businesses– Save journalism, expand value – Pro-bono

• A new logic– Sustain quality, beyond clickbait and crowdsourcing– Adaptively integrate soft/metered paywalls, freemium,

ads/reverse meters, crowdfunding, membership, …

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”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) • The FairPay Story

– Pioneering digital services for people since 1960’s• Diverse businesses and roles – B2B and B2C, content and services• ~50 patents, licensed to >200 companies, for billions of users

– Steeped in disruption – business model crisis in content industries– Saw a new way forward – simple new logic – deep implications– Changing the entire focus of customer relationships from price to value

• Mission: Change the world – Save industries + Create new value (journalism, music, video, e-books, other) – Work on a pro-bono basis with business and academic partners

on research, trials, and applications …seeking collaborators, evangelists…and offer free consultation

– You can help: spread the word, prove the concept(More information at FairPayZone.com)

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Toward the Revolution…• Extensive conceptual development– online, book• Extensive discussions with businesses

– Vendors (such as NYTimes, News Corp, Rhapsody, IBM, Verizon, and a leading market research firm working with major newspapers) and industry experts

– Platform providers (such as Zuora, Salesforce)

• Key elements validated by behavioral economicsand emerging marketing theory

• Eminent academic collaborators to assist in trials– Marco Bertini, Associate Professor and Department Chair, Marketing, at ESADE

(via Dan Ariely and Ayelet Gneezy) – HBR Blog, SSRN paper pending publication– Adrian Payne, Professor of Marketing, University of New South Wales

Pennie Frow, Associate Professor, University of Sydney Business School– Naples Forum on Service, Paper in preparation

– Heather Caruso, Director, Center for Decision Research, Booth School of Business, University of Chicago (via Richard Thaler)

• Trials? Behavior change – Find the sweet spots– Limit risk and investment – Low-hanging fruit – early adopters (begging for change)– Delight (and profit from) some – then build from there

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Monetizing Digital Offerings in Networked Markets

• 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 producersBalance value, ability to pay, cost, profit …How?...

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Set Prices Are So Last Century!Now taken for granted, but unnatural!

• 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 (department stores)– 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, commoditization – personalize a fair price for value– How to do it effectively, efficiently at scale???

(See Set-Price blog post)

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The Long Tail of CustomersCustomers are not the same!

Customer experience is not the same!

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• Green revenue: capped at set price• Red head: lost surplus• Amber tail: lost sales

…Dynamic and context-dependent(see Long Tail blog post)

A digital “product”?

• Valued as an “experience good” – a service– Not discrete, scarce “product”– Access, entitlements, usage – Personalized variations (items, time, intensity, volume, …) – …all measurable – rich instrumentation in use – Cloud of ValueNew data on value for each consumer

• Near-zero replication cost ( “Free”)• “Free” as a selling tool

– freemium, pay what you want, tipjars, trials …

Better: Embrace dynamic variability, control risk

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A key part of the answer…Separate the Sale from the Price!

Post-Pricing

Why not price the experience after it is known?*• Unlike typical up-front offers (Pay What You Want, etc.)• Remove the consumer’s risk discount (or rejection)• Signal supplier’s value and trust_________*= post-pricing = ex-post pricing = price in arrears = price as you exit = price it backwards

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–Thanks to John Blossom, Shore Communications (ContentBlogger)“Pay as You Exit: FairPay Explores New Content Pricing Discovery Regimes”

– Watch the episode

A Thought ExperimentImagine an all-knowing Economic “Demon”*• Read buyers’ & sellers’ minds

to learn value-in-use, value-in-context• Know how used, liked, value obtained,

willingness/ability to pay• Know cost, economic “value surplus”• Arbitrate fair sharing of surplus

Set personalized and fair prices---

• Practice: Better strategies** • Theory: Better insights(*Like Maxwell’s Demon and Laplace’s Demon in physics)(**Like B2B value-/performance-/outcomes-based pricing – need lightweight analog for B2C)

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Accept/buy/use(before pricing)

(Buyer)

Set “fair” price(after buy and use)

(Buyer)

Track price

(Seller)

Fair to seller???

(Seller)

Gated FP Offer(selective privilege)

(From Seller)

Price it BackwardExtend it Forward?(after trial)(limit FairPay credit)

FairPay Dialog CycleContinuous journey of adaptation – a new balance of powers – a “repeated game”

1. Set the rules 2. Set the price

3. Repeat the game?

FairPay Value Discovery EngineContinuous journey of adaptation – Frame/nudge/track

Seller-gated

PremiumFairPay Offer

Seller-gated Basic

FairPay Offer

BuyerAccepts FairPay Offer

?

BuyerTries

Product /Service

BuyerSets

FairPay Price

SellerTracks

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

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Value/FairnessOffers

Seller Control and Predictability?Frame/nudge/track

• Managed dialog – “choice architecture” – fully personalized– Seller: 1. Set the rules

• defines the offer / reports usage• provides a suggested price personalized to that buyer’s usage• frames the pricing rationale, and nudges with incentives (+, -)

– Buyer: 2. Set the price• sets FairPay prices (as a differential from suggested price)• states reasons for their differential (multiple choice)

– Seller: 3. Repeat the game?• 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• Start with those who will be delighted and fair…

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Aligning Price with ValuePricing for the Co-Creation of Value

Intuitive blend of diverse factors, emerging over the relationship

From provider to consumer (soft/fuzzy meter)– Value-in-use / experience / outcomes– Other “soft” value

• Service / support • Participation / listening / responsiveness (comments, access to reporters)• Social values / “triple bottom line” (investigative journalism, community)

From consumer to provider (“reverse meter”)– Monetary payments– Other currency -- “Consumer” as provider of value to “provider”

• Attention to ads (customized levels) / Personal data to exploit • User-Generated Content• Promotion / virality / leads• Volume/loyalty discounts

Can extend through the ecosystem value chain– Designations of value share to creators/suppliers (vs. intermediaries)

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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– Repeated game: Invest in fairness reputation to gain continuing privilege– Treat me as a patron, make me want to be a patron

• Computer-mediated dialog – Customer journeys– 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 + IoT + Predictive analytics – Cloud of Value– Use data to validate customer dialogs about value, incentivize honesty– Customize offerings and how they are framed– Show that you recognize and respect my desires as a patron

Adaptive, cooperative relationships – “dialogs about value”1. Segment based on fairness traits (social values) and value propositions2. Foster social/communal norms (participation and dialog)3. Nudge buyers toward fairness, perception of value, sharing value surplus4. Motivate a repeated game that is win-win

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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 segmentsLimited 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

Retention (Saves)(Revenue recapture)

low usage, low price

Acquisition =“Fuzzy Freemium”(Revenue from day one)

versions, tie-ins, gamification, membership ”club”

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

Changing Consumer Behavior Initial Sweet Spots

Back to the Future – rebuild win-win social/communal norms and values• Small segments – low cost/risk• High generosity

– Superfans – loyal, perceive value – Deserving providers– High service – justify appreciation

• High cooperation– Thrilled to share price responsibility– Willing to bear burdens to do it right

…The thin end of the wedge of behavior change

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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 and willingness to pay dataDatabase asset, first mover advantage

• Interest by potential platform vendors (Zuora)– Plug-ins / SaaS

• Entrepreneurial startups???

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A New Cloud of Value

• Implicit signals of value– Traditional + new IoT data (“E-Books are Reading You” example)

• New: Explicit expressions of value– New, generate from FairPay “dialogs about value”– Validate consistency with implicit signals

Adaptively win-win customer journeys• Focused, flexible value propositions

– Match to customer perceptions, contexts, times– Sell value: a positive experience (not focus on price)– Build a relationship (not just customers, but patrons)

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Change the Game with FairPay!From invisible hand to invisible handshake

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• From: set prices shop for “bargains” commoditization

• To: FairPay participative value exchange shop for value, relationship engagement, loyalty

• Analogous to tipping – Easy, intuitive, with rich multi-dimensional nuance– Happily pay more than you “need,” often generously

• Delight your customers– give pricing freedom, focus on value, gain loyalty

• Start with those who will be delighted and fair Emergent strategyPricing “legitimacy”Higher profits + deeper market penetration (+ad $)

(See Handshake post)

Thank YouCall to Action

• Questions?• Strategic cooperation? Trials?• Spread the word…

(leads to publishers, platforms)

• FairPayZone.com– Overview, Details– “Patron-izing Journalism -- Beyond Paywalls, Meters, and Membership”– LinkedIn Group

• Book (discount for ISSIP members)

• E-mail Reisman: fairpay [at] teleshuttle [dot] com

----------Additional Commentary Follows…

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Value-Based Pricing for Consumer Markets!

• Prices based on actual performance/outcomes• Proven effective in big-ticket B2B markets*

– Win-win: Buyer and seller agree to share in the actual “value surplus”

– High economic efficiency– But: high pricing cost for custom analysis

• FairPay: a simplified, intuitive, automated analog for mass consumer markets

*See this 2014 HBR article, and this 2002 HBS article.

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Advanced Economics:

Usage/Value Pricing - Buyer-friendly

• Deadweight loss of “all you can eat” unlimited subscriptions (See deadweight blog post)

• Soften the “ticking meter” / no shocking usage bill• Price considering usage, but…

– Buyer decides, factors in:• Usage history• Volume discounts(…with seller guidance)

– Soften the extremes – average out

Price tracks to value (with affordability)Warm and fuzzy, good feelings

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Advanced Economics:

Price Discrimination - Buyer-acceptedEconomic 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!

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Advanced Economics:

Adaptive, Win-Win Value Propositions

• How?: Build value exchange relationships– Exploit new power of computer-mediated relationships

• Co-operatively build relationships on perceived value• Ongoing customer journeys with post-sale interaction• Learn the right price for each customer …each time

– An invisible handshake …with each consumer(a “repeated game” – win over multiple cycles)

Emergent approximation of economically ideal pricingShare more value, with more customers - sustainablyBetter business – profit, market reach, lifetime valueMore value for society

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A new twist of the Invisible Hand…Creating Shared Value over relationship – a repeated game

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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– …

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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

2. Simple Pay What You Want + Post-Pricing• Pricing unrestricted by fairness – no fairness gating process• Post-pricing (“as you exit”) makes PWYW more meaningful

3. Full FairPay • “Gated” by fairness, by seller – most of the cost, complexity• A “repeated game” – invest in reputation as fair, to keep playing

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