I’ll Pay When I’m Cured
What can modern businesses learn from ancient Chinese medicine?
Traditional Chinese medicine (TCM) has over 2,500-years of history that far predates the “connected world”. Part of the model was a doctor-patient relationship that turns modern business-models upside down…
I’ll Pay When I’m Cured
During the Zhou Dynasty, Doctors were paid at the end of each year according to their “medical performance”; for example, the highest payment to those who had 100 percent cure rate, second highest payment for those with 90 percent cure rate, and so on.
Furthermore, you could actually get paid when you did fall ill… “Believing that it was the doctor’s job to prevent disease, Chinese doctors often paid the patient if that patient lost their health.”
Call me crazy, but I see a few areas where this customer-centric model just might work today. Think about 3 things you have in your life — a telephone subscription, a gym subscription, and an entertainment (music/video) subscription.
1. Do you always get $100 of value out of your gym membership each month? What if they paid me back for the time I wasn’t there?
2. Do you listen to $9.99 worth of songs on Spotify each month? Can I pay only for the songs I listen to?
3. What happens to the cell phone data I don’t use? Will I be reimbursed for that each month?
How much do you pay for services you don’t use?
Of course there are companies that allow you to pay-by-consumption (for example, electric companies), but I wonder … What stops companies from implementing models whereby you pay for the value of services received, and not a flat fee? Two things come to mind — confidence and complexity.
Confidence — Many companies today have trouble measuring the usage component of their business, which in turn leads to a lack of confidence. What happens if a company pivots to a usage-based model, and average revenue per user significantly decreases? What insight do companies need to ensure this won’t happen?
Complexity — Don’t forget about the back office. When moving to a usage-based model, operational complexities form such as billing, invoicing and revenue recognition. Do current systems support the recurring nature of these transactions? How do we present the true value of our services in a single invoice?
If companies are able to tackle the complexity of usage-based offerings, and are confident that they will be able to keep high average revenue per user when pivoting to this model, they have the ability to reach a wide range of new customers. These customers may have been hesitant to pay for a full monthly subscription, or to lock into a contract, but now have the ability to use services as they need.
Remember to keep your customers at the heart of your business model. Just as those practicing TCM, your success is based on the value you bring to your customers.
Source: Daqing Zhang and Zhifan Cheng, “Medicine Is a Humane Art: The Basic Principles of Professional Ethics in Chinese Medicine”, The Hastings Center Report, July-August 2000.