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

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Embrace the opportunities!

…Partial steps already taken:

• Free trials • Freemium • Pay What You Want

…What else?

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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

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--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)

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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

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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

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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

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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

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Business Contexts

• Subscriptions / ongoing services • Other ongoing relationships

– Aggregation: iTunes, Amazon, App stores, …

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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

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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

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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, …

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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

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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

(Seller )

FairPay Dialog Continuing Feedback – Balance – Convergence – Inclusion

Price it Backward Extend it Forward (in arrears) (limit FairPay credit)

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FairPay

Customer Dialogs about Value

Richard Reisman Teleshuttle Corporation

fairpay [at] teleshuttle [dot] com 212-673-0225

Teleshuttle.com/FairPay Blog: FairPayZone.com

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SUPPLEMENTARY SLIDES

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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

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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

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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

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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)

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