Title: Versioning Information
1CHAPTER 3
- Versioning Information
- (Product Differentiation)
2Chapter Overview
- How to design a product line
- Capturing greatest profit
- Profits
- Depends on total value created and fraction
extracted - Two principles
3Chapter Overview
- Principle One
- Offer versions tailored to the needs of different
customers - Principle Two
- Design these versions to accentuate the needs of
different groups of customers - Self-selection
4Designing Your Product Line
- Identify dimensions that induce self-selection.
- Dimension(s) selected may be
- highly valued by some customers
- unimportant to others.
- Offer notably different versions designed to
appeal selectively to each type of customer.
5Dimensions Delay
- Strategy
- Control information/product release time
- Example
- Information
- Streaming stock quotes
- 20 minute delay
- Service
- Fed Ex next day by 10 a.m.
- Next day
6Dimensions User Interface
- Strategy
- Build 2 access modes
- Diversify appeal across user classes
- Example Database search engine
- Power User professional researcher, advanced
user - Interface- multiple refinement options
- Casual User beginner, occasional user
- Interface- simple search textbox, how to
links
7Dimensions Convenience
- Strategy
- Restrict/enhance access to product
- Example Retailing
- Enhancement on-line shopping
- Restriction availability only at bricks and
mortar location to stimulate foot traffic -
-
8Dimensions Quality of Product
- Strategy
- Variation in quality of product/service
- Example Booksellers
- Highest Quality newest release
- Good Quality selection of current titles
- Value Quality discounted/used books
9Dimensions Speed of Operation
- Strategy
- Develop varying capabilities in product/service
- Example Internet Access Providers
- Broadband
- Enhanced Dial-up
- Dial-up Modem
10Dimensions Format
- Strategy
- Limit accessibility, duplicate, or print
information - Example Professional Journals
- Abstracts of articles are available
- Require subscription
- Require purchase for full version
11Dimensions Capability
- Strategy
- Create discernible differences to target market
segments - Example Voice Recognition Software
- 20,000 word vocabulary 79
- 50,000 word vocabulary 595
- Legal vocabulary 1,195
- Medical vocabulary 6,000
- Orthopedic medical vocabulary 8,000
12Dimensions Features and Functions
- Strategy
- Add attractive features to basic product
- Example Intuit Quicken
- Basic version
- Electronic checkbook
- Deluxe version
- Investment Module
- Financial Calculators
- Asset Management
-
13Dimensions Comprehensiveness
- Strategy
- Offer varying detail levels
- Example
- On-line Consulting Industry
- Fees are structured on level of detail/expertise
14Dimensions Annoyance
- Strategy
- Distribute free limited version with special
screens - Encourage full version registration
- Example
- ZoneAlarm
- Spybot
15Dimensions Support
- Strategy
- Offer technical support as pricing strategy
- Example Security Software Vendors
- Basic version offers known virus protection
- Additional subscription fee offers automatic
updates and technical support
16Pricing and Quality
- Adjusting Pricing Quality
- Avoid making low-end product too attractive
- Reduce price of high-end product
- Reduce quality of low-end product
17Pricing and Quality
- Goldilock Pricing
- Use 3 versions of product
- Value
- Middle
- Deluxe
- Extremeness Aversion
- Middle version decision
- Importance of offering product at the level
18Pricing and Quality
- Promotional Pricing
- Different forms
- Sales
- Coupons
- Rebates
- Some inconvenience for users
- Valuable only if it segments the market
19Pitfalls
- Degrading products serves low-willingness-to-pay
- Cheaper products allow more customer choice
- Low-end product sales reveal value
20On-line or Off-line
- On-line info available off-line
- Off-line info easier to read
- Sell off-line while on-line is free
- National Academy of Science Press
21Bundling
- Definition
- A special form of versioning in which two or more
distinct products are offered as a package at a
single price. - Example Microsoft Office
- Word Processor
- Spreadsheet
- Database
- Presentation Tool
22Bundling
- Tying
- Individual products are offered only in the
package - Bundling
- Individual products are offered in package and
individually - Price of the bundle is less than the sum of the
component prices - Two components 70/each
- Bundle 100
23Bundling
- Determine whether or not to offer a targeted
discount - On-line Wall Street Journal
- Offers a discount to subscribers of the paper
version - Dispersion in customer value
- Reduces dispersion in customers willingness to
pay - Significantly increase the value extracted from
customers
24Bundling
Willingness to Pay Willingness to Pay Willingness to Pay
Word Processor Spreadsheet
Mark 120 100
Noah 100 120
If price _at_ 120 each only buy one product
240 If price _at_ 100 each buy both products 400
25Bundling
- Other reasons for bundling
- Option value
- Consumer may find Microsoft Office an attractive
purchase - Consumer may use other programs in future
- Use bundling to introduce new products to
consumers
26Bundling
- Information Bundles
- Magazines are bundles of articles
- Subscriptions are bundles of magazines
- Bundling will reduce the dispersion in
willingness to pay, thereby reducing revenue.
27Bundling
- Customized Bundles
- Pop music sold on CDs
- Create your own CD
- Personalized newspapers
- Customized textbooks
- Mass customization of information
- Quantity discounts can play same role as bundling
28Bundling
- Lesson
- Bundling makes sense if it reduces variation in
willingness to pay. - Combining complimentary goods increases revenue
if it decreases the variation across customers in
their willingness to pay.
29BASIC
PREMIER
DELUXE
30Additional Software Offered
TurboTax for the Web 1040EZ
Its Deductible
STATE
31Product Line Comparison
Feature Basic Deluxe Premier
Free Electronic Filing (after rebate)
Step-by-step guide checks for mistakes
Imports IRS Forms and data from Quicken, Microsoft money
Includes free download of 1 state product
Year to year deduction comparison
Expert Tax Advice and future planning
Help for sales of stocks, bonds, mutual funds and employee stock plans
Schedule C guidance (prepares W-2s and 1099-MISC forms)
Rental property depreciation and other deductions
32On / Off Line Versions
- All versions offered online
- All versions offered offline except 1040EZ
- Its Deductible offered in CD ROM and book form
33Pricing
Online CD ROM Promotions
Premier 69.95 69.95 39.95 online
Deluxe 39.95 39.95 19.95 online
Basic 24.95 29.95 N/A
State 29.95 29.95 9.95 online
1040 EZ 9.95 N/A N/A
Additional 9.95 to file state with purchase
of federal software
34Promotional Pricing
- Download online and begin using product today
20 off - Rebates for ordering and completing online
- Free to try, charge when you decide to print or
e-file
35iPod iTunes
36iPod Shuffle
- Two versions
- 512 MB
- 120 songs
- 99
- 1 GB
- 240 songs
- 149
37iPod Mini
- Two versions
- 4 GB
- 1,000 songs
- 199
- 6 GB
- 1,500 songs
- 249
- available in four colors
38iPod Versions
- iPod 299
- 20 GB
- 5,000 songs
- Special U2 Edition iPod 349
- Jet black with a red Apple Click Wheel
- U2 band autographs on the back
- Exclusive U2 poster
39iPod Photo
- 30 GB
- 7,500 songs
- 349
- 60 GB
- 15,000 songs or 25,000 photos
- 449
- Art on Display iTunes 4.7 auto syncs the
Album cover art for songs downloaded
40iTunes Music Store
- Buy music individual tracks or albums
- 99 per song
- 9.99 per CD
- No subscription required - free download
- Different purchase methods
- iTunes account
- Gift certificates
- Allowance accounts
- AOL wallet/accounts
41iTunes
- Mass customization of information
- Customize CDs and playlists
- Allows users to burn individual songs onto
multiple CDs for personal use - Listen to songs on an unlimited number of iPods
- Play songs on up to five Macintosh computers or
Windows PCs
42iTunes Features
- Open 24/7 on Macs and Windows PCs
- Legal way for consumers to discover, purchase,
and download music online - Over 1,000,000 songs from major music companies
- More than 100,000 new tracks from independent
artists and record labels - More than 150 exclusive to iTunes tracks from
numerous artists - Dozens of out-of-print Motown singles and jazz
albums available digitally for the first-time
43iTunes Features
- Free 30-second preview of every song
- Free Single of the Week download
- Artist Alerts notify you when Apple adds music
from your favorite artists to the iTunes Music
Store - View movie trailers
- Watch music videos
- Share music with up to 5 Macs and PCs
- Find out whats playing on more than 1,000 radio
stations - Publish an iMix on the iTunes
- Over 9,000 audio books
44Versions of iTunes
- iTunes 4.0 iTunes 4.7.1
- Each version offers improvements and additional
features - V 4.0 add and view album artwork, burn DVD
archives of your music, and share music within
the same household - V 4.1 audiobooks now available, drag and drop
links from iTunes into emails, Instant Messenger,
or web pages, allowance accounts, and gift
certificates - V 4.2 - sign in and buy music using either an
AOL or Apple Account
45Versions of iTunes
- V 4.5 Post your iMix, print CD inserts, find
out what is playing on over 1,000 radio stations
around the U.S., download a free song, get music
and audiobooks related to a movie, and watch a
music video - V 4.7 Support for copying photo in an iPod
photo and the ability to show duplicate songs in
your library - V 4.7.1 Support for iPod shuffle
46QUESTIONS??