This document discusses new strategies for monetizing digital offerings through a concept called FairPay. FairPay allows customers to name their own price for a product after a trial period, within a "FairPay zone" established by the seller. It aims to discover customers' true willingness to pay through dynamic pricing that tracks value over time. FairPay could help sellers maximize profits through price discrimination and expand their markets. It also gives buyers more control and engagement in the pricing process. The document outlines how FairPay might work, potential business uses, and technical requirements for implementation.

1. Monetizing Digital Offerings …A Radical Re-thinking
FairPay
Customer Dialogs about Value
Richard Reisman, Teleshuttle Corporation
fairpay [at] teleshuttle [dot] com
“Better Strategies for Monetizing Digital Offerings”
December 1, 2011
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Copyright 2011, Teleshuttle Corp. All rights reserved. / Patent pending

2. Digital Problem=Opportunity #1
The Long Tail of Price Sensitivity
• Green revenue:
(capped at set price)
• Red head: lost
• Amber tail: lost
(less to more price sensitive)
…Dynamic, context-dependent
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3. 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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4. Embrace the opportunities!
…Partial steps already taken:
• Free trials
• Freemium
• Pay What You Want
…What else?
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5. 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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6. --Thanks to John Blossom, Shore Communications (ContentBlogger)
“Pay as You Exit: FairPay Explores New Content Pricing Discovery Regimes”
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7. FairPay Dialog
Gated FP Offer Accept/buy/use Set “fair” price
(before pricing) (after buy and use)
(Seller ) (Buyer) (Buyer)
Extend it Forward Price it Backward
(limit FairPay credit) (after trial)
Fair to seller??? Track price
(Seller) (Seller)
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8. 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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9. 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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10. FairPay Value Discovery Engine
Frame/nudge and track
Offers Value/Fairness
Seller- High
gated -Fair
Premium
FairPay Buyer
Offer Buyer Buyer Seller
Accepts
Tries Sets Tracks Low-
FairPay Fair
Product FairPay Fairness
Offer
Seller- /Service Price of Price
?
gated Basic
FairPay Un-
Offer Fair
FairPay Zone (revocable privilege)
Seller Sets Price Buyer Accepts Buyer Uses
(take or leave it) Set-Price Offer ? Product /Service
Buyer Conventional Set-Price Zone
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11. 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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12. Business Contexts
• Subscriptions / ongoing services
• Other ongoing relationships
– Aggregation: iTunes, Amazon, App stores, …
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13. 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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14. 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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15. 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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16. 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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17. FairPay Dialog
Continuing Feedback – Balance – Convergence – Inclusion
Gated FP Offer Accept/buy/use Set “fair” price
(before pricing) (after buy and use)
(Seller ) (Buyer) (Buyer)
Extend it Forward Price it Backward
(limit FairPay credit) (in arrears)
Fair to seller??? Track price
(Seller) (Seller)
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18. 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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19. SUPPLEMENTARY
SLIDES
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20. 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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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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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
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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)
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