Viral Persuation Pricing

Robert Caldini discovered six persuation principles that seem to be universal for human beings. It is said that all of us are more vulnerable to three of them at any given situation and this will be used in marketing.

Besides making people buy things, virality is very important with Internet products. So, I developed Viral Persuation Pricing model to tap the best parts of existing business models in order to create the best and most viral checkout process!

How It Plays Out
You start by building authority; this is the pre-marketing effort, you can't monetize this. First wave of sales should happen with preview / advance sales auction; even better, make it easy to use CrowdFunding model so that groups of people are competing instead of individuals. Second wave of sales would be Pay-What-You-Want; give the first product for free and ask for fair compensation after the user has received the product. First wave will consist of early adopters and opinnions leaders with money, the second wave consists of the same people who are less willing to pay money for the product.

All early adopters should be provided with easy instructions about how to help you spread the world of your great product. Auction pretty much does this automaticall with the CrowdFunding aspect, with Pay-What-You-Want model, the people who paid fairly are very likely to do you also some promotional favors. For people who didn't pay fairly (or at all) you should make it very clear, that their behavior was unfair and they could compensate it by doing a promotional favor.

Now you should have a good viral buzz going on. Third wave of people will arrive because someone in the social media liked about what you do. The fourth wave, and the final tipping point, happens when people are buying from you, because so many other people do the same. After that you have to make sure people come back to you.

The mechanisms are the same, you should offer Pay-What-You-Want and FairPay models ("donation" payment model) for users that are not frequent users and try to transform frequently paying users (transaction payment model) to subscription users (subscription payment model). Asking promotional favors with well designed communication can actually improve your customer relationships more than hurt them; people are committed to co-operation partners.

Authority
It all starts with authority. If you are launching a new product you need to use existing reputation networks, which people follow. Before launch you need to create some buzz at the blogosphere. Blogosphere is less driven by competitive pricing networks than they are driven by reputation-appreciation networks. If a person of authority sees that you are contributing to the community back to the community, they are much more likely to write positive ideas about you, than they would if they were doing it for the highest bidder. Movie critics are a good example of authority figures and persuation.

I haven't figured out a safe way to monetize upon this; building authority is always going to be pre-marketing. Actually trying to monetize the authority figures is a very dagnerous for long-term business. Music industry tried to monetize the authority figures (musicians are the biggest authority figures for the fans) to support the classic business model (record labels), which ended up in situation, where authority figures transformed from supporters to competitors. This is something you don't want to do. Ever.

Scarcity
Best way to monetize on scarcity is auction. When there is a limited supply of something, some of us will go crazy. When they see others getting crazy, they get even more crazy. There are several types of scarcities: special offers with a deadline; preview and advance sales; special editions and other limited supply products.

However, when individuals auction against each other, it doesn't get very viral. You need to make preview auctions a group effort. CrowdFunding would be a perfect fit for auctions; there could be one or more leaders, who would use one's own money and the CrowdFunded money to win an auction. In the end, the bounty would be shared.

In case of huge volumes there could be a smooth algorithmic mechanism which would keep the scarcity as long as there are willing people to auction. When auction pace gets low, the preview period is over. Scarcity is usually good persuation tactic for opinion leaders with money, who strive for status enhancements. Second wave is the early adopters with less money...

Reciprocity
People have natural tendency for fairness, due to this fact a new pricing model has emerged: Pay-What-You-Want. When combined with FairPayment you can create a system where early adopters get to try your product for free and pay later. If you don't understand the concepts of Pay-What-You-Want and FairPayment, read this.

Basicly users are offered more Pay-What-You-Want offers if they pay fairly and if they don't, the system will try to persuade them with fair value driven communication. Both groups are offered the chance to spread the word about the service in order to earn more Pay-What-You-Want offers. This way the second wave of early adopters also create effective viral buzz.

Liking
After the early adoption waves have established some viral buzz, the early majority will arrive, mostly due to the recommendations of friends. For these you should be able to provide transaction and subscription based business models, but you shouldn't forget about the preview auctions and FairPayments, instead use a friend recommendation methods to get the users persuable by Liking to take part on preview auctions and FairPayment offers.

Social Proof & Commitment
The late majority will come after the numbers match. They are the traditional consumers, who like to do easy shopping with accustomed payment methods. They want things as easy and convenient as possible.

Each new product launch is in a sense a new wave of opinnion leadership, early adoption and late majority. The more users you get to the early end of the adoption, the more addicted they are to your service, and this is the sweet spot where you want to be. When things start to fade, subscription based users are the ones that will remember your service. With FairPayment mechanism you can offer something for free every now and then for your long-term users, who have been inactive for a shor period of time. Preview auctions are unlikely to be of their insterest.