Versioning and Bundling

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Versioning and Bundling

• David Kleinman
• Lecture 5
• January 22, 2002

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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.

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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.

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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?

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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.

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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.

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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.

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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.

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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?

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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.

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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.

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Questions?