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How does FairPay work?
FairPay works through a very simple
balancing dynamic:
1. Selectively
empower the buyer to unilaterally set
whatever value-based price the buyer considers fair
-- after the sale, when the real value is experienced and known (= Fair Pay What
You Want).
2. Track that buyer value-based price and determine whether
the seller agrees that is fair, and use that information
to empower the seller to decide whether to make further offers of that kind to that buyer in the
future. (Unfair buyers are downgraded to lesser offers or
fixed-price.)
3. Continue for future transactions, to build a relationship
based on fair value exchange, that adapts and evolves over time.
This
gives buyers a strong incentive to price fairly -- and enables
sellers to limit their future exposure to those who do not.
See diagram at
sidebar (click for
diagram explanation) |
FairPay finds the right price for each buyer in
the context of an ongoing relationship.
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FairPay looks beyond
individual transactions to work over the course of an ongoing
buyer-seller relationship (and is generally used in combination with
conventional pricing alternatives).
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FairPay is based on an
ongoing dialog about the fairness of value exchanged in each transaction
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to lead to a fair exchange, and to adapt to variations in value and in
opinions about value.
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FairPay offers are treated
as a privilege. Buyers who engage in fair cooperative behavior can
find this process to be liberating, flexible, and highly productive --
and a natural form of communication and teamwork toward a common
objective of fair exchange.
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Buyers who are judged by the
seller to fail to set and explain prices in a responsible way may find
that privilege revoked. They will then be limited to a conventional fixed
pricing relationship. It is incumbent on buyers to give reasonable
explanations for their pricing, especially when prices are set below
suggested levels...and on sellers to give reasonable consideration to
such explanations from buyers.
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This FairPay privilege can
be framed as a "FairPay Zone" or "FairPay Club" that buyers are
privileged to join, and for which they must remain in good standing.
This may best be done as a complement, not a complete replacement to,
conventional pricing plans.
What that enables
Instead of a fixed price (which is rarely
"right" for that buyer), this process generates a cooperative and
adaptive series of pricing actions, each based on feedback on how fairly the
buyer sets his prices.
Using this buyer reputation feedback process enables sellers to go
beyond freemium to offer adaptive hybrids of free and paid service that
converge on the fairest price for each transaction. Those who pay
fairly, rise above the pay wall -- those who do not, must face it.
This win-win collaboration on value exchange can
lead to more and happier customer relationships, and higher profits. It enables dynamic price differentiation that works for both buyers and
sellers. It is applicable to almost any continuing buyer-seller
relationship (whether discrete transactions or subscription-based).
Making Pay What You Want ready for prime time
FairPay builds on the idea of Pay What You
Want (PWYW), but uses Internet feedback to add a strong incentive to pay
fairly. Conventional PWYW is great for buyers, but often leads to free-riding and
low prices that are unfair to sellers. FairPay manages that
problem.
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By adding FairPay
feedback, the seller gains reduced risk and indirect control.
The buyer develops a history--a FairPay reputation--that affects his
future opportunities.
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That gives the seller the
control needed to make FairPay offers only where his expected
risk/reward profile is attractive. Instead of static pay walls and
freemium schemes, this process supports seamless and dynamic hybrid
models.
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Also, because FairPay
improvements on PWYW set prices after the sale, the buyer can have the product, use it, and verify its
value, with no risk -- and then pay whatever he thinks fair, with
confidence he will not have buyer's remorse.
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The result is that the buyer
is given a strong incentive to pay fairly.
Why it changes the
game
FairPay creates a win-win
dynamic that can make both buyers and sellers much happier, and the
economy much more productive.
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Sellers can profitably sell
to everyone who sees a potential value, at a price corresponding to
the perceived value to that individual buyer.
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Some will pay well, some
will not. But sellers can expect that many more people will buy,
and they will pay a fair price because their FairPay reputation and
privilege is at stake.
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FairPay can be
structured to ask buyers to set prices in terms of a differential
from a suggested price (and to justify such differentials, and thus
facilitate automated seller evaluation of fairness with respect to
that differential) -- to give buyers pricing freedom, while giving
sellers a reasonable degree of control and predictability.
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FairPay can take many forms,
and can enable free sampling and blends of free and paid that are
more dynamically adaptive and effective than ordinary “freemium”
models.
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All of this can be
done using automated processes that support mass customization of
this new kind of pricing, with little or no human intervention.
The result is that total
revenue, and total profit, might be significantly higher than with a
fixed price (at least for products with low marginal cost, as with
digital products and services) -- and that total value created can be maximized.
The FairPay Reputation
Database and The FairPay Platform Opportunity
FairPay tracking processes build a
Fairness Reputation Database on customers (much like a credit rating
database) that becomes a valuable asset. This database can range from simple
forms to very rich collections of multivariate transaction-level data on
many aspects of usage, price sensitivity, value perception, and willingness
to pay. This can be applied within any selling organization to greatly
enhance all aspects of providing the right product to the right customers in
the right context at the right price.
Fairpay can be applied by individual vendors at
widely varying levels of scale and sophistication, but an even larger
opportunity is as a platform service to multiple vendors. This could
be in the form of a specialized "Pricing as a Service"
offering, or integrated into a full function merchant platform, such as one
serving multiple sellers (or a content/service aggregator serving multiple
content/service creators).
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The obvious benefit of
a platform offering is to spread the cost of developing and operating
the back-end processes in support of FairPay transactions.
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The less obvious
benefit of a platform offering is that the Fairness Reputation Database
on customers becomes even more valuable. Much like a credit rating
database, it is valuable to advise vendors of the reputation of buyers
who are new to them, but not to the database -- so that they can
immediately make well-targeted, low-risk offers to new customers knowing
which ones pay well for what. In such an environment, this database can
offer a powerful first-mover advantage.
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To learn more about FairPay, please read
FairPay: The
Future of a Radical Pricing Process |
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Seeing the full power of FairPay, and how
it works, takes a step outside conventional thinking.
...Please contact us
for free consultation
...on how it can work for your business:
fairpay@teleshuttle.com
Teleshuttle is working on a
pro-bono basis with industry and academic partners on
research, trials, and applications of FairPay. |
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