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Business Model

The Respect Network is based on the same four-party business model as the credit card networks. The credit card version of this model is illustrated below:

credit-card-biz-model

In this model, merchants pay interchange fees reflecting the value of the transactions facilitated by the network. These fees are split between the merchant bank, the network, and the issuing (cardholder) bank. The advantages to this four-party model include:

  • Both parties to a transaction are represented by a service provider on the network (in this case a bank) that is aligned with that party’s interests.
  • All parties are members (directly or indirectly) of a trust network where they are strongly incented to maintain a good reputation or risk losing business or credit.
  • Every cardholder and merchant is free to choose their own service provider (in this case, a bank).
  • Because it is a vendor-pays system, credit card services are typically free to consumers, which eliminates a significant barrier to broad adoption.

The result is the near-ubiquity today of credit and debit cards as a universal form of payment.

Respect Network is applying this same four-party model to the customer-controlled exchange of information instead of money. This exchange takes place directly between the customer’s own personal cloud and the business’s cloud over a new form of customer-controlled communications connection called a personal channel.

However instead of interchange fees, which are based on the value of a transaction facilitated by the network, businesses on the Respect Network pay relationship fees, which are based on the overall value of a customer relationship facilitated by the network. Components of this value include:

  • The value of the intimate customer profile, preference, and intention data that a customer is willing to share over a trusted, customer-controlled channel.
  • The value of the bi-directional trusted messaging that can flow over the personal channel.
  • The value of the automated event processing handled by the channel (see our paper on personal channels).
  • The customer acquisition and retention value of the channel.

This model is called “Relationship-as-a-Service” because a business is outsourcing an extension of its own CRM system directly to the customer. This new form of customer-managed relationships is called VRM (Vendor Relationship Management). For a full explanation of VRM and the shift to a customer-driven economy, read Doc Searls’ new book, The intention Economy.