President and founder, Teleshuttle Corporation
As businesses confront the challenges and opportunities of the digital era, they should look deeply at their assumptions about the basic social
contract and value propositions that drive customer relationships, and how they center on price and value. Businesses still set prices unilaterally, in advance, with little regard for customer differences in needs, usage, or value perceptions, or to the lifetime value of each
This paper outlines how to find a new logic for customer relationships in mass consumer contexts that centers on personalized value propositions and pricing, and how that can build strong and sustaining relationships that maximize customer lifetime value
(CLV). It shows how this can work as a repeated game that builds cooperation and enables high economic efficiency to co-create value at multiple levels, through personalized value discrimination over the course of a relationship. It extends the principles of value-based
pricing to mass B2C markets in a radically simple and scalable way, and explores a range of promising use cases.
The digital era has brought disruptive challenges and great new opportunities — often, as two sides of the same coin. Peter Drucker observed that “The greatest danger in times of turbulence is not the turbulence, it is to act with yesterday’s logic.” Here we outline a new logic, starting from the “groundzero” of digital disruption in consumer content services. News, music, TV/video, and the like are facing extreme disruption because consumers know that this content can be distributed at almost no cost, and so, question why they should pay for it (and often feel it is fair to steal it, based on a “Robin Hood” justification).
At the same time, the B2B world has begun transforming business relationships by recognizing the power of digital to facilitate “value-based pricing.” That provides a basis for far more effective co-creation of value – and real competitive advantage. Unfortunately, these methods have been too unwieldy to apply to mass-consumer markets (and so have been largely ignored in the B2C world).