Payoffs and payments

Payoffs

Enhancement

Enhancing an artifact improves its potential for being more useful and valuable. Making changes to the artifact increase its economic and social value. It gives the artifact a new glow. For example, a building passes inspection and receives an occupancy certificate. A flight plan is approved making it possible for a pilot to execute it.

Protection

Protecting an artifact helps maintain its potential for being useful and valuable. Preventing damage, depreciation, or theft that impair full and proper use of the asset is one way to keep the glow. Recovering, restoring, and repairing the artifact is the way to bring back the glow.

Coverage

Providing coverage is in effect covering customer events with resources for a particular a timing and duration. In that sense, the events are covered for any possible shortfalls, thus avoiding the loss of any opportunity to be more useful and valuable. The assurance of having resources to cover for absent assets allows users to do what they want, and seek additional gains for doing a lot more than otherwise possible.

Leverage

Providing leverage is in effect giving temporary ownership and control over resources to customers who treat them as borrowed assets for a period of time. Customers gain additional leverage using these resources, with which their assets can accomplish a lot more than they otherwise would. The key aspects that distinguish leverage from coverage are ownership and control over the resources, which can permanently transfer to the customer for a fee.

Payments

Counterflow

The counterflow for payoffs are the payment service provider are entitled to. Payments are almost always financial in nature, made effective through the transfer of funds from the customer to the service provider. Depending on the type of service, and the nature of the relationship between customer and service provider, the payment may be due before, during or after the customer enjoying the outcome. In many services, customers have pre-paid for the service indirectly, as is often the case with services governments provide, or in healthcare where insurance companies are the payers.

Free of charge is not free of cost

Many services are advertised as free. Free means free-of-charge or any direct obligation for customers to pay. Advertisers pay for services such as Google Search, Google Maps, and Facebook. That allows such services to give the hundreds of millions of “users” something that they like. From the perspective of being a platform and agency for advertisers, the users are in fact customer assets from whom the service provider extracts valuable data, information and insight. Which is why it’s very hard to argue that Facebook and others should fully protect the privacy of their users. It does not make any economic sense for them to do so.

Payments in cash or kind

Service providers may also be willing to accept partial payments in the form of loyalty and trust. Accountants will then make allocations and adjustments so the costs are covered by marketing budgets. Frequent flyer miles, check-ins, and rewards points at retailers are examples of non-cash payments. Another popular way in which customers pay is by their willingness to accumulate credit card debt, or accept certain financing options, which can then be packaged and sold on the financial markets.

Third-party payments

In many other cases, a service provider gets paid by third-party benefactors who themselves are selling goods and services. For instance, Google and AT&T have been providing “Free WiFi” at Starbucks stores across the United States, thereby increasing the average amount of time and money people spend at the stores. In yet other cases, the payment is in the form of valuable demand generated for other services. Again, ad-based free services are an example. They drive traffic to retailers who pay platforms such as Google and Facebook to generate new demand. JCDecaux has been providing bus shelters as a service for the express purpose for generating impressions on the advertisements they display within those shelters. People pay by paying attention.

Regardless of exactly how the service provider gets paid, the payments recover costs and close the loop to make the service offering financially viable, so that it gets better and better over time. Capabilities and resources receive additional funding, and are able to deliver superior sets of performance and affordance, which in turn lead to more attractive payoffs and payments.

Some contracts require direct payment. This is quite often the case in services in which the contract is per transaction, even if loyalty, reputation, or lack of competition makes for lasting relationships. Contract with direct payments can be enforceable to a greater degree, because payments are more readily related to payoffs. In other contracts the payment is indirect, as in the case of government, healthcare and IT, or any service that is paid for by taxes, insurance, or budget allocations.

Nothing ever for free, because there will be social obligations in lieu of financial ones. Amazon Prime offers FREE shipping, music, movies and TV shows for a fixed annual fee. In doing so, Amazon secures loyalty driven by the sunk cost fallacy. When a service is FREE, it is often than users, their data, habits and loyalty, are actually the artifacts or the resources in some other frame, that is, as part of some other service. In other words, “if you are not paying for a service then you may be part of the offering”.