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FairPay presentation by Richard Reisman, Teleshuttle Coprporation at MIT Enterprise Forum of NYC "Better Strategies for Monetizing Digital Offerings" 12/1/11.
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Monetizing Digital Offerings …A Radical Re-thinking
FairPay Customer Dialogs about Value
Richard Reisman, Teleshuttle Corporation fairpay [at] teleshuttle [dot] com
1 December 1, 2011
“Better Strategies for Monetizing Digital Offerings”
Copyright 2011, Teleshuttle Corp. All rights reserved. / Patent pending
Digital Problem=Opportunity #1 The Long Tail of Price Sensitivity
(less to more price sensitive)
• Green revenue: (capped at set price)
• Red head: lost • Amber tail: lost
…Dynamic, context-dependent 2
Digital Problem=Opportunity #2 A digital “product”?
• Near-zero marginal cost • Selling entitlements to access
– By time, volume, devices, users, … – Unlimited variations …all measurable
• “Free” as a selling tool
3
Embrace the opportunities!
…Partial steps already taken:
• Free trials • Freemium • Pay What You Want
…What else?
4
View Pricing Holistically!
A value discovery process – Optimize price over the relationship
• Risk a few transactions to seek a win-win relationship
– Re-integrate discovery and testing • Continuous tracking • Rich usage instrumentation • Dialog
5
6
--Thanks to John Blossom, Shore Communications (ContentBlogger) “Pay as You Exit: FairPay Explores New Content Pricing Discovery Regimes”
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
Price it Backward Extend it Forward (after trial) (limit FairPay credit)
7
To Customers
• Pay only what seems fair to you -- after you try it • Agree to set price fairly -- in your own judgment
…and explain why it is fair – Predefined reasons (+ free-form comments)
• A privilege that is revocable
8
Seller Control and Predictability? Frame/nudge and track
• Managed dialog -- “choice architecture” – Seller
• reports usage • provides a suggested price schedule
– Buyer • sets FairPay prices, in terms of differential from suggested • states reasons for their differential
– Seller • evaluates fairness of reasons • frames new offers -- manages FairPay credit and incentives
• Nudge buyers toward suggested prices • Test/review value propositions, offers, framing, incentives
9
FairPay Value Discovery Engine Frame/nudge and track
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
10
Value/Fairness Offers
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
• Profile-based offer model • Trials of mutual discovery Higher margins + deeper market penetration
11
Business Contexts
• Subscriptions / ongoing services • Other ongoing relationships
– Aggregation: iTunes, Amazon, App stores, …
12
Platform and Database Opportunities
• Single vendor – internal process solutions • Cross-vendor – added leverage
– Shared infrastructure and processes = “Pricing as a Service” (PaaS)
– New: FairPay Reputation Database • Across vendors and contexts (ratings + details) • Use like credit rating database Database asset, first mover advantage
13
Usage/Value Pricing - Buyer-friendly
• No ticking meter / No usage shock • Price “considering” usage, but…
– Buyer factors in • usage • volume discounts (with seller guidance)
– Soften the extremes – averaging out
Price tracks to value
14
Price Discrimination - Buyer-accepted Economic optimum: price tracks to value
• Buyer “self-discrimination” • Engages buyers -- a rewarding process • Infinite segmentation, in all dimensions
– Context, ability-to-pay, usage, time, devices, users, …
15
Where to start? (Examples for Music Subscriptions)
Acquisition =“Fuzzy Freemium” versions, tie-ins, gamification, membership ”club”
Retention Low usage, low price
Premium “club” segments curated, early access, downloads, added features
Usage /style segments Low/high usage, low/high cost, …
Content segments: Long-tail / genre indies, back-list, genres
Device segments phones, embedded systems
“Deserving” sellers compensation to artist
Trials, sampling, coupons, specials
16
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 Continuing Feedback – Balance – Convergence – Inclusion
Price it Backward Extend it Forward (in arrears) (limit FairPay credit)
17
FairPay
Customer Dialogs about Value
Richard Reisman Teleshuttle Corporation
fairpay [at] teleshuttle [dot] com 212-673-0225
Teleshuttle.com/FairPay Blog: FairPayZone.com
18
SUPPLEMENTARY SLIDES
19
The Not-So-Crazy World of “Pay What You Want”
• Real Successes (mostly special offers, customer acquisition) – Radiohead – Humble Indie Bundle $6.2MM, $4.2MM funding – Music, games – Restaurants: Panera, Kish – Hotels
• Emerging Behavioral Economics – Social norms, fairness, reciprocity, altruism, framing, …
FairPay expands on it (feedback/tracking, pay it backward),
to retain the benefits, and solve the problems
See: Resource Guide to Pricing Wikipedia entry on Pay What You Want
20
Publicity Value to Early Adopters of FairPay
• Pay What You Want offers generate dramatic publicity (Radiohead, Panera Bread, Humble Indie Bundle, …)
• FairPay sellers can play the same card (as a form of “Pay What You Want”)
[Added 1/3/12] 21
FairPay Development Status
• Patent filings (published by USPTO 12/1/11)
– High level s/w architectures, rich functionality
• Public: June, 2010 – Web / Blog
• Many positive responses from varied sectors • 1st commercial use – ennovent.com (begun 4Q11)
• Free consults on use
22
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 Services
• Real products /services – Low marginal cost – Sampling / trials /coupons – Perishable excess
23
Process Automation and Control Integration with existing systems
• Offer management / merchandising / CRM • Gated PWYW offer – framing the terms
• Payment request / reminder – framing the terms
• Buyer pricing explanations – situational fairness
• Tracking prices Fairness rating • FairPay Reputation Database • Value-at-risk management -- FP “credit line” • Seller guidance: Framing, framing, framing
(effective choice architecture to nudge behavior)
24