Abstract
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 relationship.
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.
Introduction
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.”
