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Versioning and Bundling

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... time reduction in pricing, coupons, they all impose some ... Earlier example Amazon, please enter your coupon code. Dell has this also on their home page. ... – PowerPoint PPT presentation

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Title: Versioning and Bundling


1
Versioning and Bundling
  • David Kleinman
  • Lecture 5
  • January 22, 2002

2
How Many Versions
  • As any true economist will tell you it depends.
  • One is too few because it does not segment the
    market.
  • - Dell has almost an unlimited amount.
  • There are costs to maintaining several different
    versions.
  • - supply side monetary costs, demand side
    user confusion.

3
How many versions
  • Some people believe in two versions.
  • High end, low end.
  • Design high end product first and then remove for
    low end. Airlines
  • Goldilocks Pricing
  • If it can not be decided have three versions.
  • Standard, professional, and gold.
  • The middle version is usually priced towards the
    higher end. More people will buy the middle range
    product if there is a high range product added
    into the mix.
  • Most people do not like to choose too big, or too
    small they like just right.

4
Analyze the Market
  • Are there companies who have too much/little
    versioning in their product line?
  • Are there examples of companies that we feel that
    have perfected the versioning process?

5
Bundling
  • Bundling is a form of versioning in which two or
    more distinct products are offered as a package
    at a single price.
  • The main example that comes to mind is Microsoft
    office.
  • They combine a spreadsheet, word processor, a
    database and web design tool.
  • There are also other versioning tactics with this
    product.

6
Why is MS Office So successful
  • They have captured over 90 of the market of
    office suites.
  • The products are guaranteed to be compatible with
    each other.
  • - You can cut from one program and paste in
    another.
  • The component parts use shared libraries so that
    the Office applications take up less disk space
    and work together more effectively than would be
    the case if you installed separate versions of
    the application.

7
Bundling Sales!
  • Total of the bundled product is usually less than
    that of the products bought separately.
  • You would likely offer a target discount on one
    product to customers who would purchase the other
    product anyway?
  • Look for the people that would only buy one of
    the two products in order to bundle the product.

8
More benefits of bundling
  • Option Value is where you buy a product with the
    possibility of using it in the future.
  • Bundling is often used to introduce new products
    to consumers.
  • Information bundles, such as subscriptions to
    magazines, read some articles in some magazines.
  • Customized Bundles, music is sold as bundles.
    Music Maker. Mass customization of information.
  • Personalized Newspapers-Avant-Go. Create your own
    bundle of articles.

9
Bundling your thoughts
  • Besides MS office what products work well
    bundling?
  • What products do not work well bundling?
  • Which products would you like to see bundled?

10
Promotional Pricing
  • Limited time reduction in pricing, coupons, they
    all impose some inconvenience cost on the
    consumer.
  • Earlier example Amazon, please enter your coupon
    code. Dell has this also on their home page.
  • Lets congratulate Amazon, for after losing 3
    billion they announced today that they made a
    profit for the 4th quarter of 1 cent a share.
  • -Bargain finder-finds coupons, Deal-time, and My
    Simon.
  • Cost to consumers. For example coupons, first
    find coupons, then cut out coupon, and then
    remember to take it in, the value of time.
  • Promotional pricing is valuable only if it
    segments the market. Grab customers early and
    make them feel comfortable with your product.
  • WSJ is doing this currently. Sharing
    arrangements.
  • Libraries pay more for journals than individuals.

11
Summary
  • Controlling the browser helps adjusts the way the
    information is shown. This will assist in
    versioning and pricing the product.
  • Bundling is also logical if it takes away the
    disparity in readiness for customers to make a
    purchase.
  • - Joining complementary products will
    increase the revenue stream if it takes away the
    diversity across customers in their inclination
    to pay.
  • Different pricing can also be given to the
    customer to build his/her own product line.
  • - Quantity discounts is an example that can
    increase usage and revenues together.
  • Design the promotions to get diverse reactions
    from various types of customers.

12
Questions?
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